Meezan Bank (MEBL) CY24 analyst briefing takeaways

Meezan Bank Limited (MEBL) held its analyst briefing recently, providing key insights into the bank’s financial performance for CY24 and management’s outlook for the future.

Strong financial performance

• Profit growth: The bank reported a CY24 profit of PKR 101.5 billion (EPS: PKR 56.6), reflecting a 20% YoY increase due to higher net profit earned and total other income.
• Dividend announcement: Along with the results, MEBL announced a final payout of PKR 7.0 per share, bringing the total annual dividend to PKR 28.0 per share.
• Return on financing & investments: The bank’s financing, investments, and placements grew to PKR 494 billion from PKR 432 billion in CY23, driven by volumetric growth.
• Deposits & other dues: Total deposits increased 17.9% YoY to PKR 2.58 trillion, with CASA deposits increasing to PKR 2.41 trillion (+21.6% YoY), resulting in CASA mix rising to 93% in CY24 from 89% in CY23. CASA deposits now represent 48% of total deposits.
• Other income: A significant 319% YoY jump in total other income to PKR 28.9 billion was recorded, primarily due to an increase in fee & commission income, dividend income, and gains on securities.
• Cost efficiency: Operating expenses stood at PKR 84.6 billion, up 18% YoY, leading to a cost-to-income ratio of 26.8%, an improvement from 28.9% in CY23.
• Return on Equity (ROE): Declined to 47% from 56.3% in CY23, still maintaining strong profitability levels.
• Financing book growth: Grew by 57.9% YoY to PKR 1.56 trillion, driven by corporate and SME/commercial lending, accounting for lending mix of 74% and 20%, respectively.

Asset quality & investments

• Investment Portfolio: Investments increased to PKR 1.87 trillion, compared to PKR 1.57 trillion in CY23. GoP Ijara Sukuk made up 91% of the investment portfolio, with 77% in variable-rate instruments and 23% in fixed-rate securities.
• NPL Ratio Improvement: The Non-Performing Loan (NPL) ratio improved to 1.6% in CY24, down from 1.7% in CY23. Meanwhile, the NPL coverage ratio declined slightly to 165% from 179% in CY23.

Branch expansion & market presence

• Branch Network Growth: MEBL added 47 new branches in CY24, bringing its total branch network to 1,051 compared to 1,004 in CY23, with plans for further expansion into high-growth areas.
• Market Share: The bank handled PKR 1.6 trillion in deposits and PKR 1.1 trillion in imports and exports, maintaining a 5.4% market share.

Future outlook & investment case

• Interest rate expectations: Management expects the policy rate to remain in the range of 11%-12% in the near term.
• Dividend policy: The bank aims to maintain its dividend levels, but future payouts will depend on interest rate policies and asset growth.
• Capital adequacy: The total Capital Adequacy Ratio (CAR) weakened to 20.4%, down from 22.4% in CY23, primarily due to expansion in the financing portfolio.
• Digital banking growth: The number of MEBL debit card users increased to 3.99 million, up from 3.27 million in CY23, with mobile/internet banking accounting for 78% of total digital throughput, which amounts to PKR 23.7 trillion.
• Circular debt exposure: The bank’s exposure to circular debt through government entities remained minimal, and management expects this issue to phase out in the medium to long term.
• Investment recommendation: Given MEBL’s strong ROE generation (expected average of 25.5% for CY25-CY27), solid asset growth, and disciplined allocation strategy, AKD Research maintains a BUY stance on the stock with a December 2025 target price of PKR 356 per share, indicating a 50% upside potential with a CY25 dividend yield (DY) of 10.6%.

Meezan Bank continues to solidify its position as the leading Islamic bank in Pakistan, driven by robust deposit growth, improved cost efficiencies, and a strong investment portfolio. The bank’s commitment to digital transformation, network expansion, and disciplined capital allocation makes it an attractive investment for the long term.

Source: AKD Research & Company Accounts