Meezan Bank (MEBL) announces Q1 financial results
Akseer Research has just released an update on its coverage of Meezan Bank Limited (MEBL) stock. The research house has raised its Dec 24 MEBL target price to Rs. 194 per share. Here is an analysis of their Q1 earnings report for MEBL:
Positive 1QCY24 Results for Meezan Bank Limited
Meezan Bank Limited (MEBL) announced its 1QCY24 results, showing significant growth compared to the same period last year. Let’s break down the highlights:
Financial Performance
- Earnings Per Share (EPS): MEBL reported an unconsolidated EPS of PKR 14.2, marking a robust 65% increase Year-over-Year (YoY).
- Dividend: Alongside its results, the bank declared an interim cash dividend of PKR 7.0 per share.
- Net Interest Income: The bank’s net spread earned for the quarter soared to PKR 67.6 billion, up 65% YoY, attributed to higher interest rates.
- Profit: MEBL’s profit surged by 45% YoY to PKR 119.2 billion, with a slower growth in return expenses at 26% YoY.
Income Streams
- Non-Funded Income: MEBL reported non-funded income of PKR 6.4 billion for 1QCY24, showing a 64% YoY increase, driven mainly by fee & commission income.
- Fee & Commission Income: Fee & commission income rose by 40% YoY to PKR 5.1 billion.
Expense and Provisioning
- Provision Reversal: Provision reversal for the quarter stood at PKR 344 million compared to a provision expense of PKR 2.1 billion in the same period last year.
- Operating Expenses: Operating expenses increased to PKR 21.2 billion during 1QCY24, up 42% YoY, likely due to inflationary pressures.
Taxation
- Effective Tax Rate: The effective tax rate for 1QCY24 was 52%, higher than the previous year’s 44%, primarily due to additional charges including super tax and ADR-related taxation.
Financial Highlights (PKR mn)
| Item | 1QCY23 | 1QCY24 | YoY Change |
|---|---|---|---|
| M/up Earned | 81,953 | 119,146 | 45% |
| M/up Expense | 40,907 | 51,582 | 26% |
| Net Interest Income | 41,046 | 67,564 | 65% |
| Non-Interest Income | 3,865 | 6,358 | 64% |
| Total Provisions | 2,130 | (344) | -116% |
| Admin Expenses | 14,937 | 21,208 | 42% |
| Profit Before Tax | 27,844 | 53,058 | 91% |
| Taxation | 12,420 | 27,651 | 123% |
| Profit After Tax | 15,424 | 25,407 | 65% |
| EPS | 8.6 | 14.2 | 65% |
| DPS | 3.0 | 7.0 | 133% |
Investment Outlook
Akseer Research maintains a ‘Neutral’ stance on MEBL stock with a Dec-24 PT of PKR 194/share, indicating a potential downside of 16%. However, the stock offers an attractive dividend yield of 12%.
Risks and Outlook
Key risks to the investment thesis include lower-than-anticipated decline in interest rates, slower-than-expected growth in advances and deposits, and higher-than-expected provisioning.
Company Overview
Meezan Bank Limited is the largest Islamic commercial bank in Pakistan, operating since 2002. The bank is involved in various banking activities including corporate, commercial, consumer, investment, and retail banking. As of December 31, 2023, MEBL operated 1,004 branches across the country.
Disclaimer
The information in this article is based on research by Akseer Research. All efforts have been made to ensure the data represented in this article is as per the research report. This report should not be considered investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.
Comments (2)
Does this in a way guide us to brighter future prospects for shareholders?
And if the bank deals in Halal products, how is there a discussion of interest gain?
Prospects are still good for banks. The growth may slow down but they are still good businesses with consistent payouts.
Islamic banks earn money by investing your money in Islamic Sukuks(let’s say at 20%). They give you a profit of 6%-10% on your savings. The difference is called the net spread that the bank earns as profit, also called net interest income.