August 17, 2021 (MLN): Meezan Bank Limited (MEBL) conducted its corporate briefing session yesterday to discuss the latest financial performance and future outlook of the bank.
To recall, the bank posted an increase of 11.39% in its half-year net profits, standing at Rs12.90 billion which translated into an EPS of Rs9. This growth in earnings was primarily driven by a robust jump in Non-Funded Income of 36%YoY, lower provisions coupled with higher growth in non-remunerative deposits.
Despite a sharp fall in the interest rate during the said period, the Net spread of the bank went down by just 4% YoY in 1H2021 as a higher volume of earnings assets and current accounts supported the net spread of the bank.
The bank’s deposits grew by 32%YoY during 1HCY21 as against industry growth of 22% over the same period. Accordingly, the bank's market share of deposits increased to 7%. However, the management expects this deposit growth would normalize to 18% in the near term.
Similarly, CASA of the bank expanded to 80% in the said period compared to 75% in 1HCY20.
According to the key takeaways covered by AKD securities, the management of the bank stated that the advances growth is expected to remain robust where the headline growth in the loan book is targeted at 15% for CY21. This will allow the bank to comfortably beat the minimum threshold of 50% to avoid incurring added tax liability.
With regards to MEBL’s exposure to HASCOL, the management highlighted that it had only 4.2bn which is already 100% provided. The consortium of banks has been able to place their representative on HASCOL’s board and are working actively with the management to make recoveries on the outstanding loan, it added.
The bank’s digital banking channels are its biggest contributor of fee and commission income and will continue to support earnings going forward with the bank expected to maintain its share of 15% in the market.
Further, the management of the bank stated that the bank has undertaken 3 major projects in the digital space this year which relate to data analytics, middleware/switching infrastructure and digital platforms, Abdul Rehman Siddiqui, Senior Research Analyst at BMA Capital said in a note.
During the briefing when asked whether the bank will stick to its plan for branch expansion or focus more on digital channels, the management stated that it will continue to focus on both as they both can go hand in hand. The management is expecting to add 100 new branches in CY21 where 20 branches have already been opened this year.
Currently, the Capital Adequacy Ratio (CAR) of the bank stands at 19%, which remains at comfortable levels compared to the minimum regulatory requirement of 11.5%.
Speaking of GOP's SUKUK program, the management expects that it would restart soon which is important for the bank’s earnings growth in the future.
Moreover, recently, the Board of Directors (BoD) authorized the bank to exercise the call option in full in relation to the Tier II Capital Sukuk Issue in the amount of PKR7 billion issued by the Bank on September 22, 2016.
On the policy rate front, the management believes that inflation is likely to remain relatively under control, hence, it does not see the rate reversal cycle in near future.
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