MCB Bank Limited (MCB) Earnings Call Transcript & Summary

Good afternoon, good evening, good morning, ladies and gentlemen, wherever you are. Welcome to the First Quarter 2025 Results Call for MCB Bank Limited. Once again, we are pleased to have Hammad Khalid join us on the call. He is the Chief Financial Officer of the bank. The format of the call will be a management presentation followed by a question-and-answer session. The usual housekeeping rules before we begin. [Operator Instructions] With that, sir, over to you.

[Foreign Language] Thank you, Raza, and thank you, everyone, for joining in the results release call for the first quarter 2025 financials. So as per routine, I can just quickly walk you through the operational landscape first. So MCB, primarily a domestically domiciled bank running 1,395 branches in the East, West of Pakistan. When we consolidate the branch network of our wholly owned subsidiary, MCB Islamic Bank, 304 branches as of March 31, 2025, we operate the second largest branch network in the country. Overseas presence pretty much limited to 3 domains, 5 retail branches in Sri Lanka, 2 wholesale banking license in UAE and 1 OBU in Bahrain. We have recently opened a Rep Office in U.K. to facilitate trade and remittance transfers. We are proudly serving a customer base of 9.1 million through our brick-and-mortar and ADC channel, which we are constantly enriching to serve our customers. From a market share perspective, based on the performance that we registered in the first quarter of the domestic deposit side, our share has scaled up from 5.74% as of December 31, 2024, to 6.04% as of 31st March 2025. Contrasting numbers on the advances side, the market share has dropped to 5.72% based on the receiving ADR purchases that were there at the quarter end -- last quarter end of 2024. On the home remittance side, we are the third largest fund remittance active player in the market, channeling close to [ PKR 4.5 billion -- PKR 4.1 billion ] is what we existed last year, [ PKR 4.5 billion to PKR 4.6 billion ] is what we are eyeing this year. Our market share is at 11.48%, slight dilution from what we shared last year with the market, primarily on account of the intensified competition that we observed from this particular business line. Dividend, the announcement for the first quarter was 90%, sums up to a dividend payout ratio of close to 77% approximately. Now moving on to the macroeconomic highlights. So the first quarter -- calendar quarter of 2025 has been a resilient quarter as far as Pakistan is concerned, primarily we did see some stability, fiscal management on the back of the IMF permits that we have signed in despite the global turmoil or issues that we observed stemming in from the geopolitical risk and the trade policy restrictions. Inflation on the counterpart basis have receded significantly with inflation for the month of March dropping down to 0.7% and average inflation rate of 5.4% for the fiscal year 2025. We have seen some traction on the fiscal side with fiscal deficit of 1.2% of GDP. However, with the budgetary formulation process in full swing for the next fiscal year, we anticipate that the fiscal dependence of the check-in on the banking sector is expected to continue despite the fact that this banking industry in Pakistan is the most heavily taxed industry, not only in the region, but I believe across the globe. On the external account side, remittance and [indiscernible] are the same here, with most noticeable increase in their exports number. However, imports continue to go up. Going forward, a lot depends on how the intentions that we have with our neighboring countries are de-escalated. From a IMF standpoint, the growth target -- GDP growth target for the fiscal year 2025 stands revised from 3.2% to 3.6% with a growth -- projected growth target at 4% in the upcoming year. Having said that, with Pakistan near-term financials, fundamentals appear stable, realizing these depends upon addressing the persistent vulnerabilities that have been existing for a number of quarters. Now moving on to MCB in particular, the key highlight for the quarter has been a tremendous increase in our current account base. This is the guidance that we shared with the market in our last result call. The aim is to increase our current account concentration to close to 55%. Pleased to share that based on the splendid performance registered by our retail franchise, domestic retail franchise, that is, we have added PKR 122 billion in our current account base, crossing the PKR 1 trillion benchmark on the current account side with the total deposit base crossing PKR 2 trillion benchmark. Overseas, on the other hand, depicted a drop of around PKR 12 billion. So on the retail front side, domestic, an increase of PKR 134 billion in current account was achieved in the first quarter. Just to put things in perspective, last year, full year, total increase was PKR 72 billion. And in the first quarter of 2025, we have added -- we have almost added double of what we did for the full year 2024. As a result of this, the cost-income ratio of the bank came to [ 38.23% ], a slight dilution from corresponding period last year, but still within the budgeted target that we set for ourselves. Stand-alone PBT of PKR 29.3 billion, consolidated PBT at PKR 31.55 billion, which is less than 10.7% when mapped against corresponding period last year. Now moving on to the financials, starting off with the statement of financial position first. So the total asset base stand-alone basis is PKR 3.163 trillion, reflects a growth of PKR 460 billion. On the asset mix side, gross advances are down by PKR 284 billion quarter-on-quarter and much of it reflected in the corporate segment, short-term corporate segment, that is, which went down by PKR 276 billion. Coverage and infection ratios were reported at 94.13%, a slight dilution on the infection ratio [ 6.67% ], primarily on account of reduced advances base -- gross advances base. On the investment front, we have added PKR 658 billion to our base, PKR 1.8 trillion. Prime addition of PKR 565 billion coming in, in the fixed -- in the total PIBs portfolio, out of which much of it in the floating rate PIBs. Treasury bills, we have added close to PKR 56 billion -- PKR 59 billion during the first quarter. On the deposit side, as I shared with the forum that we have crossed the PKR 2 trillion benchmark on the deposit side with current account base in excess of PKR 1 trillion. So if you look at the numbers, PKR 170 billion is the total increase registered on the deposit side, out of which PKR 123 billion is on current accounts, which is almost 72% of the total increase that has been achieved in the first quarter of 2025. Borrowing base, you would observe a higher borrowing base, PKR 332 billion on account of the arbitrage, which is available currently close to 70, 80 basis points. So the bank has participated in the owner operations. Equity base of PKR 231 billion as opposed to PKR 227 billion, so an uptick of PKR 3.667 billion. Now moving on to advances. Advances base of PKR 810 billion, a drop of PKR 284 billion. Much of it, as I shared, reflecting the corporate segment, PKR 634 billion. So the concentration levels normalizing to 78% as far as corporate portfolio is concerned. One particular segment where you would observe increase is the consumer financing, which is up by PKR 2.65 billion after a series of quarters where the decrease was observed. So the strategy on this account is with the interest rate normalizing range where we see some decent demand out there without any concern on the risk appetite on the consumer financing side, we tend to grow this particular segment. So the base is currently at PKR 40 billion, which is less than 5% of what we have in terms of gross advances. So you will see some decent traction on this particular account as we've said. In terms of market share, we have dropped from 6.55% as of December 31 to 5.71%. In terms of NPL, almost flattish, PKR 15 million reduction when mapped against December 2024 numbers. The only movement is what we would observe between the doubtful and loss category, where the bank has subjectively -- plus some objective disposals have subjectively downgraded a few of its selected portfolio, which resulted in an additional ECL charge of close to PKR 1.2 billion. In terms of gross advances, PKR 810 billion, down from PKR 1.1 trillion reported as of year-end. So taking 2020 as a base, a CAGR of [ 8.14% ]. So on the yield side, a reflection of the interest rate movement, 11.22% is what we have earned in the first quarter of 2025. As an update on NIB, we have recovered PKR 112 million in the first quarter from the NIB-related NPL portfolio, which was transferred on account of merger back in 2017. Total recovery from this NPL stock sums to PKR 10.7 billion. So a good head start during the quarter. We would observe that the numbers have actually are dropping not very significantly as far as the recoveries are concerned, but we are left with a very chronic base. Most of them have adopted a legal recourse. But we do believe that with the right strategies in place, we will continue to generate good revenue, good recoveries from this particular one. On the investment front, treasury bills, PKR 135 billion, PKR 59 billion addition, PIBs, an addition of PKR 25 billion, fixed rate, that is. On the floaters, an addition of PKR 565 billion. So another major category where increase was observed was shares in listed and unlisted securities, PKR 4.5 billion, major exposures in oil, energy, banks, and cements. So this takes our investment cost to PKR 1.8 trillion versus PKR 1.15 trillion and a growth of PKR 657 billion. Surplus on revaluation of securities, PKR 16.82 billion (sic) [ PKR 16.84 billion ] versus PKR 15.7 billion, a positive movement of PKR 1.14 billion, much of it correlated with the equity investments and listed and unlisted securities. Now moving on to the deposit front, a total base of PKR 2.1 trillion, current account base of PKR 1.1 trillion. So the strategies are in place. We have been sharing that, that while we focus on deepening our existing relationship, activation of government relationship, capitalizing on the remittance inflows, what we have done this quarter is to align the retail franchise from all quarters and actually guide them towards current account mobilization. By that, I'm referring to the branch categorization that is in place. By that, I'm referring to the KPIs. By that, I'm referring to the incentive scheme that we've done using more current accounts. So that has yielded good results. As a result of which we have crossed PKR 1.1 trillion, and we expect similar traction in the upcoming quarters. Saving base of PKR 944 billion. So our CASA comes to 96.11%, slight dilution from 97.24% reported as of year-end 2024. In terms of CAGR, total deposit growth taken in 2020 as a base is 12.17%, where the CAGR on current accounts taking a similar basis 19%. So obviously, the concentration levels have improved significantly over the course of last few years. So in terms of absolute numbers, the concentration of current account stands at 51%. So we are inching closer to our target of 55% in the shorter term, [Foreign Language]. Moving on to the performance numbers. Gross markup income of PKR 70 billion versus PKR 89 billion, a negative variance of PKR 19.1 billion, primarily reflective of the significant drop in the interest rates. On the gross markup income side, PKR 35 billion versus PKR 51 billion, a positive variance of PKR 16.28 billion. So the net mark income of PKR 35 billion, a drop of PKR 2.89 billion. If I walk you through the spread analysis, so on the earning asset side, earning asset side, the gross advances base of PKR 840 billion at a yield of 11.22% versus PKR 573 billion for corresponding period last year. So there is an uptick of PKR 267 billion -- PKR 266 billion in average advances, where there is a drop in yield of 724 basis points. Resultantly, our gross mark-up in advances was down by PKR 3 billion, primarily on account of price variance amounting to PKR 15 billion, with a positive contribution coming from the volume variance size to the tune of [ PKR 12.2 billion ]. On the gross investment base, PKR 121 billion is the average increase in base with 614 basis points drop in yield results into PKR 15.1 billion drop in gross markup income on investments, primarily on account of price variance to reach [ PKR 21 billion ], offset to an extent of PKR 5.8 billion by the volume variance. On the deposit side, we reported an average base of PKR 2.015 trillion at a cost of 5.14%, which reflects an increase of PKR 210 billion on average in the deposit numbers with a drop in cost of 490 basis points. Pertaining to highlight that out of this PKR 210 billion average increase, PKR 139.3 billion is in current accounts. And on average, we are -- we have improved our concentration levels from 47% in the first quarter of 2024 to 49% in the first quarter of 2025. However, based on the income spreads, the NIM compression that we have seen, the spreads have reduced by 150 basis points when we map that against corresponding period first quarter. Now moving on to the noninterest income side, a base of PKR 9.21 billion, flattish when mapped against corresponding period last year. So the positive contribution came in from dividends, FX gains. Fee, on the other hand, depicted somewhat. Although we have seen few particular lines posting good growth like for the sake of banking business, debit card business. However, the intense competition that I referred to at the start of the presentation on the remittance side has dried up the remittance income in particular. So prime delta is on account of that, some negativity on the credit side, which we expect to cover in the second quarter [Foreign Language]. On the non-markup expense side, PKR 17.6 billion versus PKR 14.2 billion, an uptick of almost 20%, 19.7%. Operating expenses, PKR 16.9 billion versus PKR 13.9 billion. So the prime areas where this increase was registered was HR merit cycle adjustment, communication, our card-related business expenses and information technology-related expenses. This sums up to a profit before credit allowance of PKR 26.7 billion versus PKR 32.4 billion. On the credit loss allowance side, based on the reduction in our gross advances portfolio plus the recoveries that were made by our [ ARG ] unit, we were able to post a reversal of PKR 2.78 billion. On a net-net basis, it sums up to PKR 2.54 billion versus PKR 0.07 billion reported for corresponding period last year, a favorable variance of PKR 2.47 billion. This sums up to a profit before tax of PKR 29.3 billion, a drop of 10% when mapped against corresponding period last year. The increase in tax incidence of close to PKR 500 million that you observe on this slide is on account of the increase in the tax rate from 49% that was applicable for the first quarter of 2024 to 53% for the first quarter of 2025. Resultantly, our profit after tax of PKR 13.81 billion reflects a drop of 16.6% when mapped against corresponding period last year. Now moving on to the capital ratios, good enough buffer on top of the regulatory requirement, 760 basis points, Tier 1 of 15.3%, CAR of 19.1% versus 19.35%. So on the leverage ratio side, 6.18% against a requirement of 3%. Liquidity coverage ratio and net stable funding ratio way above the regulatory requirement of 100%. Well, a snapshot of our wholly owned subsidiary, you would see that the numbers on the performance side have dried up a bit. So the implication of MDR reflected on our wholly owned subsidiary financial numbers. As far as the operational footprint is concerned, so we have scaled to [ 304 ] by the end of first quarter 2024. So the guidance that we gave to the market was that we are maintaining the growth on the conventional side, while we are aggressively growing our own Islamic footprint. You would observe that we have added close to 100 branches in the last 3 years with the strategies to add another 150, 200 branches in the next [ 2 ] years, [Foreign Language]. As far as deposit base is concerned, an uptick of 8%, PKR 17.4 billion. Gross advances, a drop of PKR 12.2 billion, a base of PKR 110 billion, investment base of PKR 151 billion, primarily Ijarah Sukuk, [indiscernible], and our Islamic franchise. So sums up the presentation from my side. Over to you, Raza, for the Q&A. Thank you.

Thanks, Hammad, for the comprehensive presentation. [Operator Instructions] Hammad, we don't have raised hands at the moment, but we do have a few questions in the chat box. I'll read them out to you. The first question is from [ Waseem ]. He's got 2 questions. His first question is, what is your outlook on interest rates going forward? At what level do you expect the policy rate to bottom out? And when do you think that could happen?

Thank you for the question. So our take is that in the upcoming monetary policy, which is during the first week of May, status quo will be maintained. We don't expect any change in the upcoming monetary policy. However, looking at the fundamentals, if everything falls into place, we believe that there is enough gearing for the monthly easing to continue for another 100 to 150 basis points, and that might happen in the second half of 2025. We expect it to bottom out at close to, I believe, [ 10.5-ish ]. But obviously, this is a dynamic process and things keep on changing.

The second part of Waseem's question is, what percentage of your investment portfolio is currently in fixed rate instruments? And could you share the yield and weighted average -- the WAM of the fixed income portfolio, both on a stand-alone and consolidated basis?

Well, on a stand-alone basis, what I can share is that fixed rate PIBs are averaging around PKR 270 billion approximately for the first quarter with a weighted average yield of 13%. On the floaters, a base of PKR 1.2 trillion is what we showed in the presentation at a yield of 13.54% approximately, this is the yield that we are generating. On a consolidated basis, since obviously, that's Sukuk, parts of approximately around 50 to 60 basis points less than what we had on the competitive side as...

And in terms of the maturity, sorry, I'm not sure if you...

On the maturity side, fixed rate PIBs, I believe a maturity of close to 2.5 years is what we have on the book side. And one major maturity, which is due within the third quarter of this year is approximately PKR 40 billion, which is going to be deployed of the top [ PKR 9.95 billion ]. So we expect that the redeployment of those funds in the third quarter is going to help us addressing the question.

The next question in the chat box is from Syed Murtaza Hasan from Sona Corp. There are several questions, and I'll read them out to you one by one. The first question is your deposit growth and ADR targets for calendar year '25.

So deposit growth, I believe, looking at what we have achieved in the first quarter, we believe that we will be able to replicate a similar kind of performance in the upcoming quarters. Generally, if you look at the trend, third and fourth quarter, third quarter in particular, remains a bit muted as far as deposit mobilization is concerned. And that's something that we have observed across the industry that much, specifically MCB. So the target that we have in mind is working on the low-cost deposits. We have grown our base by 19% in the first quarter. So the target obviously is in excess of 25%, although budgetary targets were completely different from what we are saying here. So we are very close to what we were forecasting for the year 2025. But in terms of actual growth that we have achieved in the first quarter puts different kind of energy into the entire team to actually go beyond what we were forecasting for 2025 and surpass all the budget targets. So to give some guidance, I believe a minimum of 25% current account is what I'm discussing here is what we eye for the year 2025. On a total deposit base, I believe close to 25%, 26% will be the growth number. As far as the ADR is concerned, I believe with the ceding pressures, the change in law that took place almost on the tail end of last year, it would be normalized for the entire industry and ADR of close to 40% is what we believe we'll be operating at. Pertinent to highlight that, again, it's a function of lack of good quality credit opportunities out there for the market to capitalize on. And with a very limited pool of good quality assets, then competition obviously gets pretty intensified on those accounts. So we believe that if we are given an option to choose between a credit opportunity or investment in federal government securities and that opportunity falls within the risk appetite of the bank has defined, we will always go for that process since it opens up other avenues to generate cost and income.

The second question from Murtaza is, so you mentioned your current account target of 55%. Is that for this year? I mean, do you expect to -- do you aim to achieve that by December? Or is this more of a medium-term target?

It is a medium-term target, but I don't completely rule out the possibility of achieving that by the end of this year. As I shared that we have been able to improve the concentration level to 51% on the government side with -- considering the fact that we have grown our deposit base as well. It's fairly easy to actually do away with the saving deposits and carry a similar base of a current account, which will automatically improve the current account concentration. But the bank is on a growth trajectory. We have added PKR 170 billion, out of which PKR 123 billion is current account. So we will continue to operate in a similar fashion. We are hopeful that we will improve the concentration levels in the ensuing quarters. The target, which I said is for the shorter term, but we might with the closure of this year as 55% concentration level for the current accounts.

Got it. There are questions on the rate and duration of the investment instruments. We've already answered that in the previous question. But the follow-up to this is, has the floating rate PIB been reset? Have the floating rate PIBs been reset in the first quarter?

Well, Raza, looking at the base that we carry, obviously, this would continue to be the case as far as the floating are concerned. It's not one particular tranche that is required in the books, right? So it's a continuous kind of a process. I do believe that a significant chunk of it has been repriced in the month of April, so not reflected in the results. So the strategy to counter for that NIM compression has been mobilizing more current accounts. And we believe that with a similar kind of a performance for the upcoming quarters, we will be able to improve our NIMs in the quarters that follow, inshallah. Plus one more thing which we have to highlight is that from a NIM standpoint, the deals that were made in the last quarter of 2024, the sub type of deals on the branch side have all matured in the first quarter, primarily at the tail end of the first quarter. So the NIM compression would obviously get sorted out when these branches are priced at the regulated, which primarily on the corporate book wages between cargo plus 1% on average.

Murtaza still has a few other questions, and I'll read them out. So the cost-to-income guidance for this year and your branch expansion targets?

Well, on the conventional side, as I shared earlier, we are containing the growth in our branch network. I'm not ruling out altogether that we won't add another branch. If we find good enough business case in any part of the country, be it the convention on the side, we will definitely capitalize on that. But we -- you would observe that we are down to 1,395 post the transfer of 29 branches, a few branches have been closed and merged where we -- after a careful analysis due deliberations certain that there is not a good enough business case for us to continue operations in those verticals. As far as the cost-to-income ratio is concerned, we are close to around 38%, 38.65% on a stand-alone basis. This is what we would like to continue. We would like to remain below 40% in terms of cost-to-income ratios. It's a function of what we can do. So looking at the expense base of MCB, I believe a lot has already been addressed. So the increase that I shared is primarily coming in from the human merit cycle just meets our cost, which is a function of the minimum wage, which gets revised almost everywhere. So there was a significant increase last year, which obviously reflects in our ECR cost for the first quarter. So the focus, again, would shift towards revenues. So we'll be more keen to book expenses which are variable in nature, which drive business, which drive performance. And cost-to-income ratio would be a key consideration in all such decisions.

And then there's a question on fee, which declined year-on-year. And I think if you look at the line items, remittances was a particular area that stood out. And I think for other banks also, we've seen remittance commission not doing so well this quarter. So what's happening there? And what is the overall outlook for remittance commission and overall fee for this year?

Well, as I shared in the presentation, this particular line has actually transitioned into a completely different business. So to channel more remittances to the counters, you actually pay out or give up your share of income that you are sharing with the counterparties over there. So for recollection of the forum, we generally get PKR 20 for reproducing the performance that we did last year for every $100 transaction for the remittance side, increase of up to PKR 100 million or less than 10% entitles the bank to another PKR 7. And in case we are able to exceed that PKR 100 million threshold or 10%, whichever is higher, there is a decent PKR 8 million, which is served as a rebate coming in from the regulator. So now with the increase in market with every other bank running to channel more remittances to versus counters, so there has been a change in business dynamic. The entire share, generally, we used to keep PKR 5 to PKR 6 for every transaction and the balance was passed on to the counterparties. But currently, as I shared earlier on the change in business dynamics, the entire number is now being passed on to the counterparties. Adding to that is a marketing spend. So one of the key increases that we reported in our OpEx is the marketing spend. And again, it's heading towards the same revenue. It's spent towards the counterparties. So the strategy of this account is to generate more FCY. And from a business case standpoint, when we have this inflow, last time around, as I shared earlier, last year, we channeled $4.1 billion. So in local currency terms, it's almost 60% of my total deposit base, which is channels to MCB. That provides us a good opportunity to capitalize them and actually convert them into smaller ticket deposits, plus the FCY liquidity provides us the leverage to actually charge some premium wherever there is a trade requirement or a foreign currency lending requirement coming in. So this is the business case around it. I believe with the changing dynamics, this is going to continue the way it is in the foreseeable future.

Understood. Thank you for providing that sort of all-encompassing picture on remittances and how the business is evolving. The final question from Murtaza over at Sona Corp is borrowings as a percentage of deposits increased to about 29%, which is high compared to MCP's historical numbers. Can we expect this to normalize to a lower level? And if I may ask, Hammad, sorry, before you answer, I mean, obviously, that's also feeding into slightly higher leverage for the bank, but you still -- I mean, there's a wide variation in the leverage levels of some banks and some other banks. I mean, usually, I think you're in the 11% to 12% to 12x range. But there are others that have gone up to, say, more than 20x. So how do you sort of see that evolving?

Well, I believe every other bank is going to join assignment. It depends upon the risk appetite. It depends upon how much of each bank is willing to make. So for us, I believe this is a level that you might see we will continue in the foreseeable future. We don't expect to drop it or maybe significantly increase it from this particular level. It might increase to a certain level, but we don't expect it to go beyond our deposit base. That's at least not the strategy for now. Again, it's a dynamic situation. We are constantly doing what's happening out there in the market. Secondly, the increase that you observe is on account of the arbitrage, which is currently available. So the price that we are getting for borrowing to 12.10%. However, if we invest that into a floater, maybe 10-year floater, the return on stage to 13.1%, 13.2%. So there's a good enough arbitrage of 1.1%, 1.2% on a 10-year currently. As I said, it's a dynamic process discussed at length at every -- almost every week at the management level. And in case we need to scale down, we feel that there is a risk reflecting in our books on account of such exposures. Obviously, we will try and scale ourselves down. Obviously, it's a function of how much liquidity we are able to generate on the deposit side. So to have that maturity, obviously, this would take some time. It's not going to happen over the quarter. Whatever you see in the books and considering the fact that it's being invested in a longer tenure bond actually engages us or hedges us for an extended period of time. So there are multiple strategies that are being worked at currently. To answer the concern, I believe it will be a similar kind of a percentage. It might go to maybe 30%, 35%, but not beyond that.

Understood. The next question is from Waleed Rathore of Maple Leaf Capital. Hammad, I'm going to have to ask you to repeat yourself, but this is a popular question. So what is the average yield during the quarter on your fixed and floating rate PIBs and the T-bill portfolio?

Well, on the fixed rate PIBs, the weighted average is approximately 13%. On the floaters, it's 13.54%. And the treasury bill yield during the first quarter, I believe it's approximately 12.6s is what we are projecting.

The next round of questions is from Mustafa Mustansir of Taurus Securities. His first question is, could you please share the impact of revised MDR, the minimum deposit rate on the first quarter results of MCB and MCB Islamic?

Well, as far as MCB is concerned, no significant impact of the MDR relaxations that we received on 3 particular clients with the part in the financial institution, corporate or public sector or the public limited company side. So as we shared with the market for us, the exposure was pretty much limited to around PKR 80 billion, PKR 85 billion. And the offering -- standard offering, the rack rate for such offer is 100 basis points less than the minimum deposit rate that we are offering to our regular customers. From MCB Islamic standpoint, the impact was more pronounced, considering the fact that the MDR application was on the individual side. So if we are primarily being the retail bank, the impact that we got is close to PKR 2 billion -- north of PKR 2 billion for the full year, part of it reflected in the first quarter financials.

Got it. The second question from Mustafa is what percentage of assets, specifically advances and investments have repriced? And to what extent as of March '25? And can we expect further repricing going forward on the asset side?

Well, on the advances side, much of the repricing has already done. Obviously, approximately 65% to 70% of our book is in a 3-month repricing schedule, balancing distributed between 6 months, 1 month and 1 year. So around 70% is on a 3-month. So it's pretty current as far as the advances portfolio is concerned. Some of it would obviously reflect in the second quarter. On the investment side, as I shared earlier, it's a huge base. It's not one particular part of the book. So it would continue to get repriced. Second quarter, there is a major repricing, which will take place on the floater side. I shared in an earlier response that we have one particular maturity in the third quarter of the fixed rate amounting to PKR 40-odd billion, which is coming to invested at 9.2% or 9.3%. So that particular deployment is going to aid us in our net interest margins.

Hammad, if I may ask a follow-up on this. I mean, I noticed in your presentation, the yield on advances in the first quarter was 11.22%. And obviously, the policy rate is at 12%. So is this a reflection of maybe some of those year-end -- 24 year-end advances that were made potentially at concessionary rates that have yet to sort of move out? Or -- and do you expect the yield on -- sorry, yield on advances to maybe -- if the policy rate remains where it is, do you expect this yield to maybe even inch up a little bit in subsequent quarters on advances?

Well, I believe that partly is on account of that. So on the advances side, we have to view that in the second quarter, you would see an improved. Plus what we need to factor in that the yields are primarily worked out after all the subsidized loans. So in case there's a turf, there's maybe some employee-related financing. The yields are worked out on a total gross basis. So it's not entirely reflective of the TIBOR plus or minus per se, but it's worked on a portfolio-wide basis, total gross advances numbers. So yes, you're right. In the second quarter, we do expect some improvement coming in from the gross advances side at all the deals that were made at sub-TIBOR in the fourth quarter of 2024 stand mature in the first quarter of 2025. But almost the entire quarter, almost the entire quarter. Much of it was mature in the month of March.

Understood. That's very useful. And Mustafa's final question, this is similar. You asked about the repricing on the asset side. He's also asking what percentage of term deposits are yet to be repriced on the deposit side, if you could please share?

Well, term deposit, look, MCV, it's hardly anything, 3% or 4% of our total base, so with 96%, 97% CASA base for us, we don't carry a huge term deposit portfolio. Having said that, no significant impact is what we anticipate out of term deposit repricing. The increase that we observed during the first quarter is on account of one particular transaction where we had the possibility of engaging the customer at a lower than MDR transaction. So it's priced at significantly lower than the MDR that we would have with that customer.

[Operator Instructions] The next question in the chat box is from Sunny Kumar of Topline Securities. He's asking you, to please repeat the total and current account deposit targets for 2025, if you can please share?

Thank you, Sunny, for the question. So for the current account side, what we are aiming is approximately 25% increase. And considering the fact that we want to improve the current account concentration to 55% in the shorter term, that's the medium target that we have been indicating for a while now. The saving account portfolio would not grow with a similar kind of percentage. So approximately almost less than a 30% growth in our total portfolio, out of which 25% is what we are on the current account. So what I can safely tell you, we are not even discussing anything other than current accounts in the bank right now. And as a result of this, we have seen some decent traction in current account mobilization in the first quarter. This is the strategy going forward. And I believe that the interest rate environment supports us. There is good enough appetite out there for us to grow. We have identified new markets. We are actively engaged at all levels. And hopefully, we will come up with a better number on the current account side in the public sector.

Hammad, as of right now, we don't have any further questions. So maybe I can ask a couple of questions of my own. You mentioned that the consumer portfolio went up to about PKR 40 billion in March, and there's a quarter-on-quarter increase of about 7%. And you said that you expect to see good traction going forward. So is there -- that's interesting to me because obviously, MCB has been usually been conservative on this front. And the portfolio, I think, is still shy of 5% of total loans. Is there some targets or some guidance you can give maybe on the medium term where you expect to take the consumer portfolio? And then where will the concentration be? Is this auto loans we're talking about? Is this credit cards? What's the plan here?

Thank you for the question, Raza. So I believe it will be a gradual kind of an increase. We don't expect the numbers to actually double up in the upcoming quarters, but adding 10% to 15% every quarter is what we are adding. The portfolio, primarily, the concentrations would remain towards the secured portfolio. By that, I'm referring to home loans and cars in particular. And although we do feel handicapped by the obligor limit that is in place of PKR 3 million, considering the prices out there, PKR 3 million is almost 30% of the total financing requirement for a decent par, which is offer in the Pakistani market. So there is some active discussion, not very sure whether we'll be able to gain some traction from the regulator on this particular front. Having said that, we do understand that there are certain schemes and offered by the auto lenders where vehicles are being offered on a sovereign at 0% rate. So that does put up a challenge to grow on this financing side. But having said that, we have added PKR 2.5 billion to the distributable base and in the shorter term, we believe that we will continue having that. As far as the share is concerned, I believe it would top out somewhere around 10%, but 10% means we have to double up our consumer portfolio from this point onwards. So as I said earlier, it will be a slow gradual band of promotions.

And secondly, I mean, I know the U.S. tariffs have been put on hold for 90 days. But at the time when they were sort of -- when they were announced, did you have conversations with the clients in the textile space? I mean that's obviously our biggest export was there. Is there any initial feedback you can give from there? Or it's too early to sort of?

Well, I believe it was too early. Honestly, the engagement did start with a few of the selected textile brands, but the feedback was not very, I would say, considering the fact that we have seen a series of such decisions taken and then they were reverted back. Same is the case with this decision. So obviously, analyzing other options or looking at other markets, it would take some time for such textile business to actually move out. So I believe it's a tad to able to discuss this with the analysts.

Understood. We have a question from Abdul Majid in the chat box. So given your expectations for how interest rates could potentially pan out? When do you expect net interest margins to bottom out?

Well, to be fair and to be honest, the guidance that we were giving to the market, we expected some compression in the net interest margin versus what we have reported for the first quarter. So our call was that considering that in the first quarter, the rates were as high as, averaging around 21%, 22% for first quarter and now at around 12%. So there was a serious drop despite the fact that we were growing our book. So the 8% primarily came in from the current account normalization. I'm reiterating it because that's a strategy that is going to be in place probably for the foreseeable future. We were at around 39% concentration back in 2019. We were a 45%, 46% concentration. Now we are at 55%, and we are slowly gradually heading towards that level. As far as the NIM bottoming out is concerned, with this pricing coming -- repricing coming into play in the second quarter, I believe there would be some pressure, but we will try and contain the impact through current account normalization. So I would take first quarter NIMs as a base, and I would not expect any further reduction in the net interest margins quarter-on-quarter.

And a follow-up on that from my side. I mean, I'm sure there is -- I mean, obviously, the way interest rates have panned out, there might be some room to book capital gains. So is that a conversation that happens on the treasury side? Or are you happy to see instruments just sit out till maturity? How do you see this?

Well, Raza, if you look at our portfolio, it's highly skewed towards the floaters, the shorter-term repricing maturities coming into play. So if I map myself with other peers, there's not a huge quantum of capital gains, which is part in our books. So there is an active discussion, as I said earlier, within the ACO at the management level to look at whatever possible opportunities we can see to deploy and generate more margins. But as far as capital gains are concerned, I believe on the fixed rate PIBs, the total quantum that is available is PKR 2.6 billion, PKR 2.7 billion. So we are running the tool book, and we'll continue to.

Understood. Hammad, thank you so much. There aren't any further questions from the participants. And since we're nearly 45 minutes past the start mark, maybe I can invite you to make some closing remarks.

So first of all, thank you, everyone, for joining and showing your keen interest in MCB. Secondly, there is a clear strategy ahead of us. And as I said earlier, we will try and capitalize on our core strengths. And our core strengths have been containing the expenses increase, building a low-cost deposit base, but now it's a bit change to low cost deposit base. So we are actively pursuing the current fund localization. And the third most important thing that we have been following is lower inflation ratio. So we are fairly confident of our advances book. We don't expect any significant revision in our inflation ratios as we find ahead. Having said that, there is some active work being done on the digital front, which is going to supplement our retail franchise growth, particularly in the metro cities area. We do feel that there is a good enough market out there in the rural space in Pakistan where this branches banking or this digital channel can actually help us penetrate in the segment of the cricket base. So this is the strategy. This is helping us in generating good current account numbers that we did in the first quarter. We look forward to deliver exceptional performance in the remainder quarters of 2025. Inshallah.

Thank you so much for this comprehensive presentation and comprehensive answers to all the questions. Thank you again, and thank you to all the participants and hope to see you again next time.

Thanks. Thank you, everyone.

Thank you. Goodbye.