MCB, Engro bring electronic bank guarantee solution

MCB Bank Ltd and Engro Fertilizers Ltd have partnered to accelerate digitization of financial products and developed Pakistan's first-ever solution to electronically manage bank guarantees.

With businesses adopting virtual operations and enforcing minimal physical interaction in the wake of COVID-19, Engro engaged MCB to develop an electronic bank guarantee management solution that will promote digitalization and enhanced corporate service delivery.

The Bank, in consultation with Mohsin Tayebaly & Co, managed legal and regulatory concerns to provide a SWIFT-based mechanism to Engro Fertilizers Ltd at nominal cost and minimal impact to business operations. Additionally, the designed process will also facilitate to mitigate the risk of counterfeit bank guarantees, identified as a recurring cause of concern in Pakistan's banking Industry.

This system, currently operational only for Engro Fertilizers, is expected to be rolled out for all other clients of MCB Bank. Given the existing credit sales model offered by most corporations, the product would assist the wider industry in facilitating their customers and stakeholders in the near future.

This project is in line with the commitment of Engro Fertilizers Ltd to improve national corporate practices and lead the industry with innovative solutions. Earlier this year, the Company was recognized as the best in industrial sector for showing outstanding performance and demonstrating progressive management practices, by the Management Association of Pakistan (MAP).

In a joint statement, Nadir S Qureshi (CEO Engro Fertilizers Ltd) and Mr. Imran Maqbool (President/CEO MCB Bank Ltd) shared pride in the abilities of the combined team responsible for identifying and developing this much needed financial solution. They were confident that this solution would transform the way bank guarantees could now be managed in the country. Mr. Imran Ahmed, CFO Engro Fertilizers Limited, added that designing electronic bank guarantees seemed to be a very challenging task at first, but the teams were able to co-create this solution with great dedication and professionalism.

The Board of Directors of MCB Bank Ltd (MCB) met on Thursday to review the bank's performance and announce its financial statements for the halfyear ended June 30, 2020.

According to the financials, the bank's unconsolidated profit after tax increased to Rs13.2 billion in the half-year ending June 2020, as compared to the Rs10.67 billion in the corresponding period last year, showing a growth of 24pc year-on-year.

The bank's earnings per share (EPS) clocked in at Rs11.15, which is an increase from the Rs9.01 during the same period last year. In compliance with the SBP's instructions, the bank has not declared a dividend for the second half ended June 30, 2020.

The bank's net interest income for the first six months of 2020 increased by 30pc over the first half of 2019, to Rs36 billion, on the back of volume growth and 69 basis points increase in net interest margin. On the operating expenses side, the bank reported a net decrease of Rs138 million compared to last year, with the cost to income ratio improving to 38pc in this half from 46.1pc last year.

The bank suffered from higher than expected provisioning costs of Rs3.9 billion in the second half of the calendar year 2020, which was a significant increase from the Rs759 million recorded in the second quarter last year.