Meezan Bank: A Case of High Payouts and Projected Capital Gains
After posting over PKR 22 billion Profit after Tax in the first quarter of the year with a 57% payout ratio, country’s largest Islamic Bank looks set to reward investors yet again in the coming weeks. As the result season continues through August, income hunters continue to anticipate impressive payout announcements, especially from the banking sector.
When it comes to companies with high payout ratios, Meezan Bank Limited (MEBL) has consistently been amongst the most notable names in recent quarters. Following table shows the bank’s payout ratio over the previous 9 quarters. The bank has gradually raised its payout ratio from 30-35% levels seen up till 2022.
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| Quarter | EPS | DPS | Payout Ratio |
|---|---|---|---|
| March 2025 | 12.28 | 7.00 | 57% |
| December 2024 | 13.36 | 7.00 | 52% |
| September 2024 | 14.37 | 7.00 | 49% |
| June 2024 | 14.71 | 7.00 | 48% |
| March 2024 | 14.18 | 7.00 | 49% |
| December 2023 | 14.76 | 8.00 | 54% |
| September 2023 | 14.21 | 5.00 | 35% |
| June 2023 | 9.59 | 4.00 | 42% |
| March 2023 | 8.62 | 3.00 | 35% |
What is impressive to note is the sustainability of these payout despite falling interest rate since 2024. There were concerns regarding a drop in Net Interest Margins for Banks, since the State Bank of Pakistan decided to bring down the policy rate.
However, Meezan Bank remained resilient with its strong deposit base, 50% of which is composed of low-cost deposits. This puts Meezan Bank in a strong position to tackle with further declines in Net Interest Margins going forward.
Investment portfolio risks
Meezan Bank’s investment portfolio requires diversification from its current levels. As of 1Q2025, almost 92% of the PKR 2.05 Trillion portfolio was concentrated within GoP Sukuks. Further, 80% of the allocations were towards variable-rate instruments, which indicate that portfolio income could decline in coming quarters. Hence, the bank needs to diversify its investment portfolio mix to avoid a sharp decline in investment income.
Valuation trajectory
It is important to note than during June 2025, Meezan Bank surpassed $2 Billion market capitalization on PSX, and currently stands at roughly $2.3 Billion. Despite such surge is share price, the stock still offers an impressive annualized dividend yield of around 8%.
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As per analysts’ estimates, the stock currently trades at CY25 Price-to-Book ratio of 2.2x and has further upside potential of PKR 100.
A strong capital adequacy ratio of around 25%, stable cost-to-income metric, and low non-performing loans have made it an attractive investment prospect. This is backed by sector leading ROE, strong dividend yields and increased focus towards effective asset allocation.
⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →
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