Meezan Bank eyes Rs448.3/share by June 2026

July 29,2025(MLN): Meezan Bank Limited (PSX: MEBL) is expected to reach a target price of Rs 448.3/share by June 2026, implying an upside potential of 28% from last closing of Rs350.7/share.

Arif Habib Limited (AHL) has maintained its ‘Buy’ rating on the stock, citing the bank’s strong fundamentals and ability to absorb regulatory shifts without compromising profitability.

The outlook came amid the much-anticipated enforcement of the Minimum Deposit Rate (MDR) on Islamic banks from January 2025, which initially raised concerns over spread compression and margin pressure across the sector.

However, Meezan Bank, Pakistan’s largest Islamic bank has demonstrated resilience, with saving rates on Profit and Loss Sharing (PLS) accounts stabilizing at 7.8% in 1QCY25.

Regulatory relief, including SBP’s move to allow the inclusion of fixed assets in gross yield calculations has further softened the impact and supported sector-wide stability.

AHL noted that Meezan’s deposit strategy remains a key advantage, with the bank poised to cross Rs3 trillion in total deposits, supported by a five-year average deposit growth of 23%.

The deposit mix continues to improve, with current accounts projected to exceed 50% of total deposits, helping reduce the cost of deposits to 3.4%, well below the industry average.

This strengthening funding profile enhances margin stability and supports the bank’s earnings outlook.

Despite projected normalization of interest rates expected to bottom near 10%, Meezan’s NIMs are anticipated to decline from 9.6% in CY24 to 6.7% in CY25, according to the brokerage.

 However, this impact is likely to be offset by robust volumetric growth, driven by an expanding low-cost deposit base and disciplined asset deployment, enabling Meezan to sustain profitability.

In addition to its funding strengths, Meezan Bank continues to outperform peers on asset quality. AHL highlights that its NPL ratio stands at just 2.1% as of 1QCY25 compared to a sector average of 6.4% with a projected improvement to 1.6% by CY25f and a coverage ratio around 162%.

The bank’s prudent risk management and provisioning stance have helped maintain portfolio stability, even in high-rate environments.

Operational efficiency also remains a strong point, with controlled expense growth and limited branch expansion contributing to a cost-to-income ratio of around 35% in CY25f.

Meezan is also expected to sustain its dividend payout at Rs28/share, supported by solid core profitability and a strong capital base.

With sector-leading asset quality, efficient cost controls, and a well-diversified, low-cost funding base, Meezan Bank remains well-positioned to navigate the evolving banking landscape, inline with AHL’s buy take.