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Asia Pacific Equity Research
18 March 2008
MCB Bank Ltd Overweight
Consumer lending leads the way in FY07; maintain
OW
PKR400.00
17 March 2008
Price Target: PKR490.00
Pakistan
Banks

Sunil Garg
(852) 2800-8518
sunil.garg@jpmorgan.com
250
350
450
PKR
Mar-07 Jun-07 Sep-07 Dec-07 Mar-08
Price Performance
MCB.KA share price (PKR)
KSE-100 (rebased)
YTD -1M -3M -12M
Absolute 4.6% -2.0% -3.1% 49.4%
Relative -5.8% -7.6% -6.7% 16.8%
Source: RIMES, Reuters.
www.morganmarkets.com J. P. Morgan Pakistan Broking (Pvt.) Ltd
See page 6 for analyst certification and important disclosures, including investment banking relationships.
JPMorgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm
may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in
making their investment decision. The analysts listed above are employees of either J. P. Morgan Pakistan Broking (Pvt.) Ltd or another non-
US affiliate of JPMSI, and are not registered/qualified as research analysts under NYSE/NASD rules, unless otherwise noted.
• MCB maintained its strong spreads and ROE in FY07: MCB
delivered strong spreads (6.7% NIM) and a strong ROE (31.4%
against 25% sector average) in its FY07 results. We remain
positive on MCB based on its above-industry average spreads. We
maintain our Overweight rating on MCB with a Dec-08 price
target of PKR490.
• Shift of strategic direction visible: MCB saw a change in top
management during the year, and this has resulted in a shift in the
bank’s strategic direction. MCB’s consumer lending portfolio rose
72% Y/Y during FY07, and now accounts for 14.7% of the bank’s
gross loans. Growth has been evident mainly in auto loans,
personal loans, and credit cards. This has also allowed the bank to
take in a few expensive deposits, pushing cost of funds up to
2.59% in FY07. However, low-cost deposits continue to account
for 85% of total deposits.
• Pension write-back continues to support earnings: MCB’s
reported results show a decline in costs. This decline is caused by
a write-back of pension liability that MCB factors into its profit
and loss statement. The write-back during FY07 was PKR5.5B,
which accounts for 26% of pre-tax profits. MCB also factored in
higher provisions, as the NPL ratio increased (from 4.1% to 4.7%
Y/Y) and general provisioning requirements for consumer lending
were also higher in line with a bigger portfolio.
• Dec-08 PT of PKR490; maintain OW: We maintain our DDMbased,
Dec-08 PT for MCB Bank at PKR490, and our OW rating.
Key risks to our PT include a late entry into consumer lending, and
higher competition due to increased presence of foreign banks.
MCB Bank Ltd. (Bloomberg: MCB PA, Reuters: MCB.KA)
PKR in millions, YE Dec. FY06 FY07 FY08E FY09E FY10E
Operating profit 17,127 17,405 23,782 28,281 34,696 52-week range PKR 261.7-480.5
Net profit 12,539 15,265 17,144 19,577 23,268 Market cap (PKRMM) 251,311
EPS (PKR) 19.96 24.30 27.29 31.16 37.03 Market cap (US$MM) 3,995
Diluted EPS (PKR) 19.96 24.30 27.29 31.16 37.03 Shares outstanding (MM) 628
DPS (PKR) 7.50 12.50 14.02 15.55 17.08 Fiscal year-end Dec
EPS growth (%) 40.5% 21.7% 12.3% 14.2% 18.9% Price (PKR) 400.00
ROE (%) 38.4% 31.4% 28.9% 28.6% 29.3% Date of price 14-Mar-08
P/E (x) 20.0 16.5 14.7 12.8 10.8 Avg daily value (PKRMM) 1,279
BVPS (PKR/ share) 67.14 87.73 101.00 116.61 136.57 Avg daily value (US$MM) 20.4
P/BV (x) 6.0 4.6 4.0 3.4 2.9 Avg daily volume (MM shares) 3.7
Div yield (%) 1.9% 3.1% 3.5% 3.9% 4.3% Exchange rate (PKR/US$1) 62.90
Source: Company reports, Bloomberg, JPMorgan estimates.
2
Asia Pacific Equity Research
18 March 2008
Khalid Iqbal Siddiqui
(92-21) 5635033
khalid.i.siddiqui@jpmorgan.com
Quarterly progression snapshot
Table 1: MCB—Quarterly progression
PKR in millions, year-end December
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 % Y/Y % Q/Q
Share price 400
Market Cap 251,200
PE 20.9x 22.9x 21.6x 18.3x 16.8x 16.0x 17.5x 15.6x
P/B 9.2x 8.6x 8.2x 6.0x 5.7x 5.3x 5.2x 4.6x
P/PPOP 15.3x 14.5x 14.2x 14.8x 12.1x 10.3x 11.6x 85.5x
Mkt. Cap/Deposits 103.7% 98.1% 100.0% 97.7% 89.5% 83.5% 87.2% 86.0%
NII 4,968 5,135 5,408 5,765 6,047 5,795 6,096 5,982 4% -2%
Non-interest Inc. 990 973 1,157 1,222 1,071 1,101 1,298 1,041 -15% -20%
Fees 596 515 568 646 573 757 644 661 2% 3%
Dealing 142 252 109 189 221 191 140 141 -25% 1%
Dividend 140 36 367 203 164 31 383 55 -73% -86%
Others 112 169 112 185 113 122 131 184 0% 41%
Revenues 5,958 6,108 6,565 6,986 7,118 6,897 7,394 7,023 1% -5%
LLP (233) 92 (145) (730) (193) (995) (253) (1,518) 108% 499%
Pre-tax 4,214 4,495 4,295 5,451 5,229 5,872 5,280 4,927 -10% -7%
Tax (1,211) (1,757) (1,393) (2,029) (1,502) (1,936) (1,696) (909) -55% -46%
Net income 3,003 2,738 2,902 3,423 3,727 3,936 3,584 4,018 17% 12%
EPS 4.78 4.36 4.62 5.45 5.93 6.27 5.71 6.40 17% 12%
BVS 43.7 46.3 48.6 67.2 70.1 74.8 76.6 87.8 31% 15%
Net Loans 174,916 185,357 183,582 198,237 186,819 193,916 190,524 218,961 10% 15%
IEA 278,010 306,874 307,396 331,493 329,347 350,242 345,826 365,820 10% 6%
Deposits 242,339 256,011 251,092 257,186 280,730 300,915 287,922 292,098 14% 1%
Assets 301,373 316,475 317,608 343,178 361,394 383,800 382,594 410,486 20% 7%
Equity 27,422 29,080 30,541 42,185 43,995 46,964 48,129 55,120 31% 15%
NPL Ratio 5.0% 4.2% 4.3% 4.1% 4.9% 5.1% 5.3% 5.2%
Coverage 96% 95% 97% 100% 99% 100% 100% 100%
NPLs 8,354 8,174 8,143 8,571 8,693 9,405 9,546 10,725 25% 12%
LLR 8,053 7,726 7,876 8,608 8,591 9,405 9,546 10,772 25% 13%
L/D Ratio 72.2% 72.4% 73.1% 77.1% 66.5% 64.4% 66.2% 75.0%
Loans/Assets 58.0% 58.6% 57.8% 57.8% 51.7% 50.5% 49.8% 53.3%
Deposits/Liabilities 95.1% 94.7% 93.9% 91.0% 93.8% 94.7% 92.3% 88.0%
Margins (% of IEA) 7.16% 7.02% 7.04% 7.22% 7.32% 6.82% 7.01% 6.73%
IEA/Assets 92.5% 94.7% 96.9% 96.7% 93.8% 91.2% 90.8% 89.7%
NIM 6.62% 6.65% 6.82% 6.98% 6.87% 6.22% 6.36% 6.03%
Non-IR Contribution 16.6% 15.9% 17.6% 17.5% 15.0% 16.0% 17.6% 14.8%
Revenue/Assets 7.94% 7.91% 8.28% 8.46% 8.08% 7.40% 7.72% 7.08%
LLP/Loans -0.55% 0.21% -0.30% -1.47% -0.40% -2.20% -0.55% -3.12%
Loans/Assets 56.5% 58.3% 60.6% 60.3% 54.7% 48.7% 47.7% 49.1%
Others/Assets 0.4% 0.1% 0.0% 2.4% 0.3% 0.8% 0.1% 5.8%
Pre-tax ROA 5.6% 5.8% 5.4% 6.7% 5.9% 6.3% 5.5% 5.0%
Tax Rate -28.7% -39.1% -32.4% -37.2% -28.7% -33.0% -32.1% -18.4%
ROA 4.00% 3.55% 3.66% 4.18% 4.23% 4.23% 3.74% 4.05%
E/A 8.5% 9.1% 9.4% 11.0% 12.2% 12.2% 12.4% 13.0%
ROE 47.4% 38.8% 38.9% 38.0% 34.6% 34.6% 30.2% 31.1%
Source: Company reports.
3
Asia Pacific Equity Research
18 March 2008
Khalid Iqbal Siddiqui
(92-21) 5635033
khalid.i.siddiqui@jpmorgan.com
Strength in spreads continues
MCB maintained its hallmark of being the highest spreads earner in the industry
during FY07, with NIM of 6.7%, which was relatively similar to the 6.8% earned
during FY06. MCB’s rising consumer loans portfolio, and 85% of deposit base still
being low cost, enabled it to earn healthy margins.
Figure 1: MCB—Strength in spreads evident
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2001 2002 2003 2004 2005 2006 2007 2008E 2009E 2010E
Av g. IEA Yield Av g. IBL Cost NIM (% of av g. IEA)
Source: Company reports.
Consumer loans are up to 14.7% of total loans
MCB saw a 72% increase in its consumer loans portfolio during FY07, with 4Q07
being the best quarter. Total consumer loans for MCB stood at PKR33.7 billion
(14.7% of total loans) at end-FY07.
Table 2: MCB—Consumer loans portfolio
PKR in millions, year-end December
FY03 FY04 FY05 FY06 FY07
Credit Cards 67 58 66 68 2,028
Personal Loans 292 2,115 2,769 5,337 11,538
Mortgage Loans 56 950 1,629 2,498 3,476
Auto Loans 797 3,602 7,710 11,700 16,700
Total 1,212 6,725 12,174 19,603 33,742
% of total loans 1.2% 4.7% 6.5% 9.5% 14.7%
Source: Company presentation.
The breakdown shows that personal and auto loans have contributed most to this
growth, while credit card growth has also been encouraging. Auto loans now account
for 49% of MCB’s consumer loans portfolio, while personal loans come in second
with a 34% share. MCB has also taken advantage of a slowdown in consumer
lending growth for peer banks, which have had to deal with some NPLs arising from
the consumer loans portfolio.
The advantage for MCB lies in the introduction of the electronic credit information
bureau (CIB), which was not previously available to banks in FY03-FY06.
Therefore, we think MCB’s late entry into consumer lending can also be termed as a
blessing in disguise.
Corporate lending has also risen 32% Y/Y. It is the commercial and agriculture loans
that declined Y/Y during FY07 by 36% and 10%, respectively. Consumer loans now
form the third-largest component of MCB’s total loans following corporate and
commodity sector loans.
4
Asia Pacific Equity Research
18 March 2008
Khalid Iqbal Siddiqui
(92-21) 5635033
khalid.i.siddiqui@jpmorgan.com
Cost of funds rises, but 85% of deposits remain low cost
MCB’s cost of funds saw an increase during FY07—from 1.6% in FY06 to 2.5% in
FY07—as MCB looks to diversify its deposit base to have room available for
increasing loan growth going forward. MCB’s loans/deposits ratio was at 75% at
end-FY07. The increased focus on consumer lending has allowed MCB to raise its
cost of funds, and the higher asset yields have offset the impact of higher cost of
funds.
Figure 2: MCB—Deposit breakdown end-FY07
Current
33%
Sav ings
52%
Fix ed
11%
Other
1%
FI
3%
Source: Company reports.
MCB’s deposit breakdown shows that low-cost current and savings accounts still
comprise 85% of its total deposits. We believe this deposit franchise is a key
competitive advantage for MCB, and management is likely to maintain the cost of
funds at a level where the benefit of rising asset yields from consumer lending is
likely to be retained in the form of higher NIMs going forward.
Pension write-back supporting earnings
MCB’s pension write-back was once again instrumental in supporting the bank’s
earnings. During FY07, MCB wrote back PKR5.5 billion from its over-funded
pension fund, which amounted to 26% of total pre-tax profit for the year.
A major portion of MCB’s pension fund is invested in its own shares, and unrealized
gains on those shares have resulted in an over-funded pension fund. Unrealized gains
to the tune of PKR10 billion may still be available to the company, which would
result in a consistent write-back over the next few years. We have assumed a
constant PKR2.5 billion write-back in FY08E-FY10E.
Loan growth likely to improve going forward
During 4Q07, MCB showed that it has the ability to accelerate its loan growth. From
a loans/deposits ratio of 66% at end-3Q07, it was able to raise it to 75% at end-4Q07.
We believe that with teething issues regarding consumer lending having been sorted
out, and Pakistan’s deepening investment/GDP ratio, MCB will likely push total loan
growth in the vicinity of 18%-19% during FY08E-FY10E. This will be pushed by
consumer and corporate lending both, we believe.
Valuation
MCB currently trades at a FY08E P/B of 4.0x and P/E of 14.7x. We have used a
normalized ROE of 36.3%, which is on its adjusted equity/assets ratio of 10.3%.
5
Asia Pacific Equity Research
18 March 2008
Khalid Iqbal Siddiqui
(92-21) 5635033
khalid.i.siddiqui@jpmorgan.com
MCB’s high tier-1 ratio of 17% has resulted in this adjustment. If equity/assets were
not adjusted, and retained at the FY09E level of 13.9%, normalized ROE would
actually be 26.8%. Therefore, this would be lower than the 28.6% ROE expected for
FY09 and 29.2% expected for FY10.
DuPont analysis
Table 3 shows a DuPont analysis of MCB’s past and expected earnings.
Table 3: MCB—DuPont analysis
NORMALIZED FY03 FY04 FY05 FY06 FY07E FY08E FY09E FY10E
ROA
Gross Yield on Avg. IEA 9.75% 4.18% 3.50% 6.52% 8.26% 8.84% 9.65% 9.85% 9.97%
Cost of Avg. IBL -2.45% -1.26% -0.84% -1.10% -1.62% -2.49% -2.53% -2.61% -2.36%
Gross Spread 7.30% 2.92% 2.66% 5.42% 6.64% 6.36% 7.13% 7.24% 7.61%
Gross Margins (as % of avg. IEA) 7.90% 3.10% 2.77% 5.61% 6.84% 6.69% 7.71% 7.86% 8.20%
Less Suspended Interest (as % of avg. IEA) -0.25% -0.11% -0.07% -0.10% -0.03% -0.04% -0.28% -0.26% -0.24%
Net Margin (as % of avg. IEA) 7.65% 2.99% 2.70% 5.50% 6.82% 6.66% 7.44% 7.59% 7.96%
avg. IEA/ Avg. Assets 99% 98% 98% 98% 97% 95% 95% 96% 97%
NIM 7.57% 2.93% 2.64% 5.37% 6.63% 6.35% 7.07% 7.31% 7.75%
Non-IR/Asset 1.47% 0.98% 1.29% 1.63% 1.35% 1.20% 1.26% 1.37% 1.50%
Non-IR/Revenues 16.3% 25.1% 32.8% 23.3% 16.9% 15.9% 15.1% 15.8% 16.2%
Fees/Revenues 11.3% 10.5% 19.1% 12.5% 9.1% 9.3% 9.4% 10.4% 11.3%
Dealing/Revenues 2.0% 3.3% 4.7% 2.7% 2.7% 2.4% 2.1% 2.0% 1.8%
Other Rev/Revenues 3.0% 11.2% 9.0% 8.0% 5.2% 4.2% 3.7% 3.4% 3.1%
Total Revenue 9.04% 3.91% 3.93% 7.00% 7.98% 7.54% 8.33% 8.68% 9.25%
Cost/Income 32.6% 75.8% 69.7% 39.3% 33.1% 38.8% 34.7% 33.9% 32.4%
Cost/Assets 2.95% 2.97% 2.74% 2.75% 2.65% 2.93% 2.89% 2.94% 3.00%
Goodwill Amortization 0.00% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Pre-Provision Profits 6.09% 0.95% 1.19% 4.25% 5.34% 4.62% 5.44% 5.73% 6.25%
LLP/Loans -1.05% -0.75% -0.36% -0.75% -0.51% -1.36% -0.81% -0.87% -0.87%
Loans/Assets 59.0% 37.3% 46.7% 59.5% 61.5% 57.9% 57.3% 60.4% 63.8%
Prov/Write-backs on Sec. 0.00% 0.78% 0.25% 0.71% 0.75% 1.82% 0.71% 0.63% 0.56%
Pre-Tax 5.47% 1.45% 1.27% 4.51% 5.76% 5.65% 5.68% 5.84% 6.25%
Effective Tax Rate -32.0% -38.3% -45.9% -32.3% -34.6% -28.4% -31.0% -32.0% -33.0%
Minorities and outside interests 0.00% 0.00% 0.19% 0.12% 0.15% 0.00% 0.00% 0.00% 0.00%
ROAA 3.72% 0.90% 0.88% 3.17% 3.92% 4.05% 3.92% 3.97% 4.19%
Equity / Assets 10.3% 4.5% 4.8% 6.8% 10.2% 12.9% 13.6% 13.9% 14.4%
ROE 36.3% 20.0% 18.3% 46.8% 38.4% 31.4% 28.9% 28.6% 29.2%
Source: Company reports, JPMorgan estimates.
6
Asia Pacific Equity Research
18 March 2008
Khalid Iqbal Siddiqui
(92-21) 5635033
khalid.i.siddiqui@jpmorgan.com
Analyst Certification:
The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily
responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with
respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report
accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research
analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the
research analyst(s) in this report.
Important Disclosures
• Client of the Firm: MCB Bank Ltd is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to
the company non-securities-related services.
• Non-Investment Banking Compensation: An affiliate of JPMSI has received compensation in the past 12 months for products or
services other than investment banking from MCB Bank Ltd.
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MCB Bank Ltd (MCB.KA) Price Chart
OW PKR405
OW PKR335 OW PKR490
Source: Reuters and JPMorgan; price data adjusted for stock splits and dividends.
Initiated coverage Apr 10, 2007. This chart shows JPMorgan's continuing coverage of this stock; the current analyst may
or may not have covered it over the entire period.
JPMorgan ratings: OW = Overweight, N = Neutral, UW = Underweight.
Date Rating Share Price
(PKR)
Price Target
(PKR)
10-Apr-07 OW 277.10 335.00
31-May-07 OW 327.60 405.00
10-Dec-07 OW 412.40 490.00
Explanation of Equity Research Ratings and Analyst(s) Coverage Universe:
JPMorgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the
average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve
months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s)
coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of
the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] The analyst or analyst’s team’s coverage universe is the sector
and/or country shown on the cover of each publication. See below for the specific stocks in the certifying analyst(s) coverage universe.
Coverage Universe: Khalid Iqbal Siddiqui: Bank Alfalah Ltd. (BAFL.KA), MCB Bank Ltd (MCB.KA), National Bank of
Pakistan (NBPK.KA), The Bank of Punjab Ltd (BOPU.KA), United Bank Ltd. (UBL.KA)
7
Asia Pacific Equity Research
18 March 2008
Khalid Iqbal Siddiqui
(92-21) 5635033
khalid.i.siddiqui@jpmorgan.com
JPMorgan Equity Research Ratings Distribution, as of December 31, 2007
Overweight
(buy)
Neutral
(hold)
Underweight
(sell)
JPM Global Equity Research Coverage 45% 41% 14%
IB clients* 50% 51% 38%
JPMSI Equity Research Coverage 41% 47% 12%
IB clients* 71% 64% 49%
*Percentage of investment banking clients in each rating category.
For purposes only of NASD/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold
rating category; and our Underweight rating falls into a sell rating category.
Valuation and Risks: Please see the most recent company-specific research report for an analysis of valuation methodology and risks on
any securities recommended herein. Research is available at http://www.morganmarkets.com , or you can contact the analyst named on
the front of this note or your JPMorgan representative.
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various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues, which
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8
Asia Pacific Equity Research
18 March 2008
Khalid Iqbal Siddiqui
(92-21) 5635033
khalid.i.siddiqui@jpmorgan.com
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9
Asia Pacific Equity Research
18 March 2008
Khalid Iqbal Siddiqui
(92-21) 5635033
khalid.i.siddiqui@jpmorgan.com
All Data As Of 17-Mar-08
Targets & Recommendations EPS Revisions EPS Momentum (%) Historical Total Return (%)
Consensus Growth Outlook (%)
Quant Return Drivers (A Score >50% indicates company ranks 'above average') JPMorgan Composite Q-Score
Score 0% (worst) to 100% (best) vs Country Peers
17%
26%
40%
88%
18%
94%
96%
62%
7%
96%
76%
Regional IBES Industry Peers (Closest by Size, Consensus. ADV = Average daily value traded in US$m over the last 3 mths)
Code PE FY1 Q-Score**
8369-JP 16.99 21.5 15%
8354-JP 26.14 14.0 39%
BAY-TH 6.81 18.2 22%
302-HK 4.45 17.4 50%
8377-JP 12.85 11.3 29%
MCB-PK 22.46 16.6 76%
601009-CN 24.28 29.2 89%
8333-JP 14.87 16.4 6%
532461-IN 2.38 7.7 91%
BDMN-ID 2.50 12.1 67%
KTB-TH 7.00 8.7 24%
Country Peers (Closest by Size, Consensus. ADV = average daily value traded in US$m over the last 3 mths)
Code ADV PE FY1 Q-Score**
OGDC-PK 22.80 10.6 74%
MCB-PK 22.46 16.6 73%
PTC-PK 3.87 19.0 6%
NBP-PK 30.38 10.8 24%
PPL-PK 18.73 9.6 38%
UBL-PK 3.36 13.7 34%
POL-PK 27.37 9.8 80%
FFC-PK 3.30 10.4 87%
ENGRO-PK 18.98 19.1 75%
FFBL-PK 4.44 15.9 91%
LUCK-PK 14.29 15.7 40%
Source: Factset, Thomson and JPMorgan Quantitative Research. For an explanation of the Q-Snapshot, please visit http://jpmorgan.hk.acrobat.com/qsnapshot/
Q-Snapshots are a product of JPMorgan’s Global Quantitative Analysis team and provide quantitative metrics summarized in an overall company 'Q-Score.'
Q-Snapshots are based on consensus data and should not be considered as having a direct relationship with the JPMorgan analysts’ recommendation.
* Total number of target prices, recommendations or EPS forecasts that make up consensus. ** The Composite Q-Score is calculated by weighting
and combining the 10 Quant return drivers shown. The higher the Q-Score the higher the one month expected return. On a 14 Year back-test the stocks
with the highest Q-Scores have been shown (on average) to significantly outperform those stocks with the lowest Q-Scores in this universe.
1,089
Fauji Fertilizer Bin Qasim Ltd.
Hokuhoku Financial Group Inc.
Name
The Bank Of Kyoto Ltd.
Fukuoka Financial Group Inc.
United Bank Ltd.
Engro Chemical Pakistan Ltd. Chemicals: Agricultural
Bank of Nanjing Co. Ltd.
688
581
4,152
4,005
3,847
3,659
1,030
3,361
1,121
2,668
Chemicals: Specialty
Construction Materials
Country
Japan
Japan
Major Telecommunications
Chemicals: Agricultural
Joyo Bank Ltd.
Major Banks
China
vs (regional) IBES Industry Peers
98%
Punjab National Bank India
Bank Danamon Indonesia
Thailand
Indonesia
40%
Pakistan Telecommunications Co. Ltd.
32%
Quality: Earnings Risk (Variation in Consensus)
Earnings&Sentiment: Earnings Momentum
Earnings&Sentiment: Change in Recomms
Momentum: 12 Month Price Momentum
Momentum: 1 Month Price Reversion
Quality: Return On Equity (forecast)
Bank of Ayudhya PCL
20%
National Bank of Pakistan
Fauji Fertilizer Co. Ltd.
Pakistan Petroleum Ltd.
Name
MCB Bank Ltd.
Oil & Gas Development Corp.
64%
77%
64%
11%
Valuations: P/E Vs Market (12mth fwd EPS)
73%
Valuations: EPS Growth (forecast)
Valuations: P/E Vs Sector (12mth fwd EPS)
COMPOSITE Q-SCORE** (0% To 100%)
76%
Krung Thai Bank PCL
Lucky Cement Ltd.
Industry USD MCAP
Oil & Gas Production
4,005
9,197
Regional Banks
Pakistan Oilfields Ltd.
3,077
3,718
Oil & Gas Production
Oil & Gas Production
Major Banks
Q-Snapshot: MCB Bank Ltd.
4,022
Wing Hang Bank Ltd.
ADV
Thailand
Hong Kong
4,224
USD MCAP
4,325
I N D U S T R Y
Earnings&Sentiment: Net Revisions Fy2 EPS 83%
4,248
Japan
Japan
MCB Bank Ltd. Pakistan
3,628
3,777
3,686
-2
-3
53
743
-200
0
200
400
600
800
1Mth 3Mth 1Yr 3Yr
(Local Currency %)
0
2
4
6
8
10
12
Up Dn Total*
Consensus Changes (4wks)
Targets Recoms
0
1
2
3
4
5
6
Up Dn Total*
Consensus Changes (4wks)
FY1 FY2
0
1
2
3
4
5
6
Up Dn Total*
Consensus Changes (4wks)
FY1 FY2
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
-1 Mth -3 Mth
(%)
FY1 FY2
HIGH/STRONGER
0%
25%
50%
75%
100%
0% 25% 50% 75% 100%
LOW/WEAKER
COUNTRY
14.4
8.0 10.0
30.0
7.3
0.0
10.0
20.0
30.0
40.0
EPS Actual To FY1 EPS FY1 To FY2 EPS FY2 To FY3 Dividends FY1 To FY2 Sales FY1ToFY2
Khalid Iqbal Siddiqui
(92-21) 5635033
khalid.i.siddiqui@jpmorgan.com
Asia Pacific Equity Research
18 March 2008
MCB Bank Ltd: Summary of Financials
Income Statement Growth Rates
PKR in millions, year end Dec FY04 FY05 FY06 FY07E FY08E PKR in millions, year end Dec FY04 FY05 FY06 FY07E FY08E
NIM (as % of avg. assets) 2.6% 5.4% 6.6% 7.0% 7.7% Loans 41.3% 31.3% 9.9% 14.6% 16.6%
Earning assets/assets 97.8% 97.6% 97.2% 97.2% 98.2% Deposits 4.5% 3.7% 12.1% 23.2% 15.3%
Margins (% of earning assets) 2.6% 5.4% 6.6% 7.0% 7.7% Assets -4.8% 15.3% 14.9% 19.7% 15.2%
Equity 31.0% 60.2% 81.0% 25.4% 24.9%
Net Interest Income 7,026 14,975 21,276 26,552 33,918 RWA 35.7% 17.3% 14.5% 20.8% 17.9%
Total Non-Interest Income 3,429 4,546 4,342 5,234 6,383 Net Interest Income 2.7% 5.5% 6.8% 7.2% 7.8%
Fee Income 1,992 2,449 2,325 2,906 3,778 Non-Interest Income 37.7% 32.6% -4.5% 20.5% 22.0%
Dealing Income 493 531 692 796 875 of which Fee Grth 58.1% 53.9% 53.6% 55.5% 59.2%
Other Operating Income - - - - - Revenues -12.4% 95.5% 45.2% 25.3% 24.0%
Total operating revenues 9,084 17,756 25,785 32,298 40,051 Costs 3.2% -5.4% -10.6% -19.9% -15.0%
Pre-Provision Profits 1.6% 53.3% 25.4% 23.0% 23.9%
Operating costs -7,286 -7,676 -8,490 -10,182 -11,705 Loan Loss Provisions 37.2% -179.9% 18.2% -63.6% -25.1%
Pre-Tax 0.1% 56.4% 23.5% 24.2% 24.0%
Pre-Prov. Profits 3,169 11,845 17,127 21,604 28,596 Attributable Income 31.9% 273.8% 44.6% 26.1% 32.4%
Provisions -444 -1,242 -1,016 -1,663 -2,080 EPS 387.0% 1420.9% 1996.9% 2424.9% 3094.3%
Other Inc/Exp. - - - - - DPS -9.1% 70.0% 76.5% 13.3% 17.7%
Exceptionals -150 73 -133 -133 -133
Disposals/ other income - - - - - Balance Sheet Gearing FY04 FY05 FY06 FY07E FY08E
Pre-tax 18,185 28,439 35,124 43,630 54,087 Loan/deposit 65.1% 82.0% 80.4% 74.9% 75.9%
Tax -1,626 -4,096 -6,390 -7,500 -9,570 Investment/assets 25.9% 23.3% 18.8% 22.7% 20.7%
Minorities 0 0 0 0 0 Loan/Assets 53.0% 60.4% 57.8% 55.3% 56.0%
Other Distbn. - - - - - Customer deposits/liab. 85.3% 76.8% 74.9% 77.1% 77.2%
Attributable Income 2,430 8,922 12,539 15,227 19,431 LT debt/liabilities 0.6% 0.5% 0.5% 0.4% 0.3%
Per Share Data PKR FY04 FY05 FY06 FY07E FY08E Asset Quality/Capital FY04 FY05 FY06 FY07E FY08E
EPS 3.870 14.209 19.969 24.249 30.943 Loan loss reserves/loans 4.6% 4.2% 4.2% 4.3% 4.5%
DPS 2.50 4.25 7.50 8.50 10.00 NPLs/loans 6.1% 4.5% 4.1% 3.7% 3.4%
Payout 0% 0% 0% 0% 0% Loan loss reserves/NPLs - - - - -
Book value 23.18 37.12 67.18 84.23 105.17 Growth in NPLs - - - - -
Fully Diluted Shares - - - - - Tier 1 Ratio - - - - -
Total CAR - - - - -
Key Balance sheet PKR in millions FY04 FY05 FY06 FY07E FY08E Du-Pont Analysis FY04 FY05 FY06 FY07E FY08E
Net Loans 137,318 180,323 198,237 227,239 265,002 Margins (as % of Avg. Assets) 2.6% 5.4% 6.6% 7.0% 7.7%
LLR -6,692 -7,817 -8,608 -10,271 -12,351 Non IR/Avg. Assets 1.3% 1.6% 1.4% 1.4% 1.4%
Gross Loans 144,010 188,140 206,845 237,509 277,353 Non-Int. Rev./ Revenues 37.7% 25.6% 16.8% 16.2% 15.9%
NPLs 8,838 8,396 8,571 8,881 9,475 Revenue/Assets 3.5% 5.9% 7.5% 7.9% 8.5%
Investments 67,195 69,481 64,451 93,454 98,126 Cost/Income 69.7% 39.3% 33.1% 32.0% 29.0%
Other earning assets 6,154 5,656 11,220 10,659 10,126 Cost/Assets 2.7% 2.8% 2.6% 2.7% 2.6%
Avg. IEA 259,893 272,234 312,124 366,488 434,024 of which Goodwill Amort. 0.0% 0.0% 0.0% 0.0% 0.0%
Goodwill 0 0 0 0 0 Operating ROA 1.2% 4.2% 5.3% 5.7% 6.5%
Assets 259,174 298,777 343,178 410,943 473,413 LLP/Loans -0.4% -0.7% -0.5% -0.7% -0.8%
Loan/Assets 51.7% 64.6% 61.8% 60.3% 59.9%
Deposits 221,069 229,345 257,186 316,922 365,285 Other Prov, Income/ Assets - - - - -
Long-term bond funding 1,599 1,598 1,597 1,597 1,597 Pre-Tax ROA - - - - -
Other Borrowings 237,825 266,857 289,817 346,316 395,051 Tax rate -9% -14% -18% -17% -18%
Avg. IBL 245,980 252,341 278,337 318,066 370,683 Minorities & Outside Distbn. 0.0% 0.0% 0.0% 0.0% 0.0%
Avg. Assets 265,749 278,975 320,978 377,061 442,178 ROA 1% 3% 4% 4% 4%
Common Equity 14,553 23,308 42,185 52,891 66,040 RORWA 1.7% 5.1% 6.2% 6.4% 6.8%
RWA - - - - - Equity/Assets 4.8% 6.8% 10.2% 12.6% 13.4%
Avg. RWA 139,740 174,818 202,360 238,479 284,334 ROE 18% 47% 38% 32% 33%
Source: JPMorgan estimates, Company data

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