Karachi: Meezan Bank Ltd (MEBL) presented its financial results for the first nine months of 2024 during an analyst briefing today, highlighting a significant increase in profits and robust growth in several key financial metrics.
According to AKD Securities Limited, Meezan Bank’s profit for the period stood at PkR77.5 billion, marking a 33% year-over-year increase, driven by a higher net spread earned and a surge in total other income. The bank’s return on financings, investments, and placements increased to PkR377.9 billion from PkR303.8 billion in the same period last year, reflecting higher average policy rates and volumetric growth.
The bank also saw a 9% year-over-year rise in returns on deposits and other dues, totaling PkR163.1 billion, attributed to the elevated policy rate during the period. Total other income grew by 20% to PkR18.2 billion, fueled by increases in fee, commission, and other income, along with capital gains and dividend income.
Operating expenses rose to PkR66.6 billion, up 31% year-over-year, leading to a cost-to-income ratio of 28.6%, slightly improved from 29.9% in the previous year. The bank expanded its branch network, adding 11 new branches, bringing the total to 1,015. Additionally, 35 more branches are in the pipeline.
Despite a decrease, the bank’s Return on Equity (ROE) remained high at 49.8%, with expectations to normalize between 40-50% going forward. The Non-Performing Loan (NPL) coverage ratio stands at 179%, with the infection ratio increasing to 1.70%. The bank made provisions related to the textile sector during the third quarter.
Capital adequacy strengthened considerably, with the total Capital Adequacy Ratio (CAR) reaching 27.3%, up from 23.4% previously. Total deposits grew by 27% year-over-year to PkR2.6 trillion, with a current and savings account (CASA) mix of 90%.
The bank’s financing book grew by 17% to PkR1.1 trillion, predominantly in corporate and SME/commercial lending. Meezan Bank aims to increase its Advance to Deposit Ratio (ADR) to over 50% by year-end, despite a competitive lending environment and related taxes booked in the third quarter.
Investment book dynamics showed an Investment to Deposit Ratio (IDR) of 68%, with a mix of variable and fixed-rate sukuks. Fee commissions saw a 24% increase, notably in card-related fees, trade fees, and branch banking fees.
The management expects the policy rate to remain between 13% and 13.5% and does not foresee regulatory changes affecting the bank’s implementation of a Minimum Deposit Requirement (MDR), which allocates half of the profits to depositors.
AKD Securities maintains a ‘Buy’ stance on MEBL with a target price of PkR290 per share, offering a projected total return of 32%, inclusive of a dividend yield of 11.5% for CY25.