Karachi, August 16, 2021 (PPI-OT): MEBL: Analyst Briefing Takeaways

MEBL held its analyst briefing to discuss the 1HCY21 results and future outlook. To recall, MEBL’s 1HCY21 earnings clocked in at PkR12.7bn, up 10%YoY. The growth in earnings was driven by a robust jump in Non Funded Income of 36%YoY.

The bank reported a deposit growth of ~32%YoY during 1HCY21 as against industry growth of ~22% over the same period. Resultantly, the bank’s market share of deposits increased to ~7%. The deposit growth surprised the management’s own forecast but is now expected to normalize to ~18% going forward.

The branch network growth had slowed somewhat due to COVID-19, however, the management is expecting to add 100 new branches in CY21 where 20 branches have already been opened this year.

The advances growth is expected to remain robust where the headline growth in loan book is targeted at 15% for CY21. This will allow the bank to comfortably beat the minimum threshold of 50% to avoid incurring added tax liability.

Bank’s exposure to HASCOL is only PkR4.2bn which is already 100% provided. The consortium of banks have been able to place their representative on HASCOL’s board and are working actively with the management to make recoveries on the outstanding loan.

Bank’s digital banking channels are its biggest contributor of fee and commission income and will continue to support earnings going forward with bank expected to maintain its share of ~15% in the market.

Bank’s FX income is expected to remain robust and the management expects to channel remittances of USD1.0bn through its network during the year.

Management doesn’t expect central bank to raise benchmark interest rates in the foreseeable future.

Management expects the GoP’s SUKUK program to restart soon which is important for bank’s earnings growth in the future.

The management is working to issue new Tier-II SUKUK in order to maximize the benefit in relation to capital adequacy requirement. The details of the issue will be made public soon.