Karachi, April 19, 2023 (PPI-OT): MEBL: 1QCY23 Result Review

Meezan Bank Limited (MEBL) announced its 1QCY23 result earlier today, wherein the bank posted unconsolidated NPAT of PkR15.4bn (EPS: PkR8.6) - lower than our expectations. The 1QCY23 earnings were lower by 6%QoQ while higher by 68%YoY.

Net Spread Earned for the quarter was recorded at PkR41.0bn, lower by 8%QoQ while higher by 91%YoY. As expected, Profit expensed increased by 21%QoQ, as the policy rates increased. However, contrary to our expectations, the growth in Profit earned during the quarter was lower than expected, growing at just 5%.

Consequently, we anticipate earnings spreads at MEBL may have contracted during the quarter, to ~7% from 8% in the previous quarter; despite the increase in interest rates. This was likely driven by profit rates on Sukuks being repriced later in the quarter and those on deposits being repriced earlier in the quarter. Hence, it is likely that Earnings Spreads expansion is witnessed in the Jun'23 quarter.

In terms of other income, the bank witnessed a QoQ dip of 5%, majorly driven by a 3%QoQ dip in Fee and commission income generated during the period. This was further aided by the 38% reduction in the foreign exchange losses during the quarter.

Some respite for the quarter came in the form of slightly lower provisioning charges for the quarter, clocking in at PkR2.1bn in 1QCY23, 13% lower than the earlier quarter.

Earnings during the quarter were also buoyed by lower rate of taxation, wherein the effective tax rate clocked in at 44.6% in 1QCY23 vs. 48.7% in 4QCY22.

Alongside the earnings, the bank announced a cash dividend of PkR3/sh, corresponding to a payout ratio of 35% for the first quarter.