Meezan Bank posts net return of 65% in 1QCY24Breaking

May 10, 2024

Ayesha Mudassar

Meezan Bank Limited (MEBL), the leading Islamic bank of Pakistan, recorded a net return of Rs67.5 billion for the quarter ended March 31, 2024, with an impressive growth of 65% over the corresponding period of last year, reports WealthPK. The remarkable growth was propelled by higher returns from financing, investments and placements, which attained a notable increase of 45% during the period under review. Consequently, the bank announced an unconsolidated profit-before-tax and profit-after-tax of Rs53.05 billion and Rs25.4 billion, respectively, for 1QCY24.

The earnings per share (EPS) stood at Rs14.12, reflecting a rise of 64% compared to 1QCY23. However, the return on deposits and other dues expense grew to Rs51.5 billion from Rs40.9 billion in March 2023, a rise of 26% primarily due to a reduction in average borrowings from the State Bank of Pakistan under Shariah Compliant Open Market Operations and Standing Ceiling Facility Window.

Operating and other expenses rose from Rs14.9 billion to Rs21.2 billion, mainly attributable to inflation, rupee depreciation, investment in digitalization, and increased costs associated with branch expansion.

Analysis of financial position

Total assets and deposits in March 2024 remained aligned with December 23 numbers and closed at Rs3.0 billion and Rs2.27 trillion, respectively. The investment portfolio expanded by 3% compared to the previous year, reaching Rs1.6 trillion. This expansion can be directly attributed to the regular Sukuk auctions by the government of Pakistan, which has eased liquidity management challenges.

Amid monetary tightening, Meezan Bank has proactively moderated its credit lending activities, prioritizing the financing portfolio's quality. Resultantly, the gross financing portfolio declined by 6% from Rs992 billion to Rs930 billion at the end of the quarter, translating into an Advances to Deposit Ratio of 41% in March 2024.

Profit and loss account

Despite the fragile economic conditions, 2023 proved to be a momentous year with significant milestones for the bank. The profit-before-tax and profit-after-tax surged by 92% and 88%, respectively, compared to calendar year 2022.   Meezan maintained the distinction of being the most profitable bank in Pakistan. The earnings per share rose to Rs47.13, posting a considerable increase from Rs25.12 per share a year ago.

The return on financing, investments and placements surged to Rs431.7 billion from Rs232.1 billion in the year 2022, marking an impressive increase of 86%. This growth was due to augmented average earning assets volume and a remarkably elevated policy rate, averaging 20.69% compared to 13.20% in 2022. Similarly, the return on deposits and borrowings witnessed a substantial uptick, reaching Rs205 billion from Rs110 billion in 2022, reflecting an 86% increase. The growth in average deposits and borrowings volume, along with an increase in depositors' profit rates, have contributed to the rise in expense.

Balance sheet insights

The bank's asset base crossed the Rs3 trillion mark in 2023 from Rs2.6 trillion in 2022 – posting an increase of 17% or Rs434

billion. This expansion was funded by a robust growth in deposits. In addition, the investment portfolio reached Rs1.57 trillion, registering a 23% growth compared to Rs1.28 trillion in the previous year. The regular issuance of Ijarah Sukuk played a pivotal role in intensifying the bank's investment book.

About the bank

Meezan Bank was incorporated in Pakistan on January 27, 1997, as a public limited company. The bank was granted a Scheduled Islamic Commercial Bank's license on January 31, 2002, and formally commenced operations as Scheduled Islamic Commercial Bank effective from March 20, 2002. Currently, the bank is engaged in corporate, commercial, consumer, investment and retail banking activities.

Credit: INP-WealthPk