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