Karachi, August 12, 2021 (PPI-OT): MEBL: 1HCY21 Result Review

Meezan Bank Limited (MEBL) announced its 1HCY21 result today where the bank reported earnings of PkR12.7bn (EPS: PkR9.0). The result was in line with our estimates.

Along with the result, the bank also announced a payout of PkR1.5/sh (bonus of 15%), taking the cumulative payout during 1HCY21 to PkR3.0/sh.

Bank’s core earnings reportedly contracted by 3.5%YoY during 1HCY21 on the back of receding net spread, however, a robust growth in book size mitigated the decline.

Bank booked provisioning expenses of only PkR432mn during 1HCY21, as opposed to PkR3.1bn during SPLY. This YoY fall in provisioning expenses, amid a high base effect, derived earnings growth during 1HCY21.

Non-core income, on the other hand, grew by 36%YoY owing largely to a phenomenal increase in fee and commission income (up 64%YoY) while FX income also grew by 23%YoY which neutralized the decline in securities trading income.

Operational costs grew by 13%YoY to clock in at PkR17.1bn amid expansion in branch network and general uptick in price levels. Consequently, the cost to income clocked in at 45%, deteriorating slightly from 43% it clocked during SPLY.

The effective tax rate remained ~39% during the period under review as the bank managed to avoid additional tax liability owing to its comfortable ADR.

The scrip currently trades at a forward P/B of 2.3x on the last close.