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.