Banking Sector - Its MCR time again! Written as on December 31, 2012
Highlights
• MCR proving to be a tough cookie to crack
• What about those who are left behind?
As per State Bank of Pakistan , scheduled banks of the country are required to prop up their Minimum Capital to the level of Rs9bn. In today's Value Seeker, we take a look at the banks that are currently at the wrong side of the fence as far as meeting SBP's MCR is concerned.
MCR proving to be a tough cookie to crack
Keeping up with the global happenings, SBP in Apr-09 decided to bring down the MCR (free of losses and other adjustments) to level of Rs10bn by the end of year 2013 against previously indicated level of Rs23bn. This translated in MCR of Rs9bn by the end of Dec 31, 2012, with the same reaching Rs10bn during the same period next year. However, there remain a heavy chunk of banks that are still finding it difficult to reach that safe figure of Rs9bn.
What about those who are left behind?
As per the figures released on 30 Sep-12, 11 out of our sample 23 banks are yet to meet the MCR figure for CY12. However, several of the aforementioned 8 banks have been working we have further divided these banks into those who can potentially meet the MCR. Banks such at FABL, AKBL, SNBL, BOK and BOP have enough reserves available to enable them to covert the said head into share capital. Resultantly, we foresee these banks giving out bonus dividends to bridge the gap between their share capital and SBP's prescribed MCR. And as per our conversation with the bank's management, BOK recently gave out bonus dividend and in effect fulfilled the MCR requirement.
On the other hand, banks not having substantial reserves to bolster their share capital are looking at alternatives to fulfill the MCR. SILK is in process of issuing preferred shares while, upon successful acquisition JSBL is going to meet the MCR. While, for banks such as such as BURJ, SMBL, BIPL, and KASB, the course of action still remains unclear.
