meezanPakistans largest Islamic bank, Meezan Bank Limited, announced its 2012 half-yearly financial results on Monday, registering a very decent 33 percent year-on-year growth in net profits. The leading Islamic bank kept pace with the industrys deposit growth during the period - registering an impressive 14 percent growth in deposits over the period ended December 31, 2011. Money supply growth in the market during the same period was recorded at nine percent. The utilisation of the deposits is where the real story lies. As has been the case of late with the domestic banking industry, growth in investments has outpaced the growth in advances. MEBL was no exception - as net investments were 35 percent higher over December 2011. Almost all the growth in investment came from increased exposure in Government of Pakistans Ijara Sukuk, which forms as much as 85 percent of the total investments. The growth in investments, however, came at the expense of an 11 percent decline in financing (advances) over the period ended December 31, 2011. The lack of appetite in the market for long term financing is evident from the slide in financing, which is why MEBLs ADR stood at a very low 27 percent for 1HCY12, down from 35 percent recorded as at the end of CY11. Conversely, the IDR stands at a very high 68 percent (Dec 2011: 58 percent), way above the last recorded industry average of 55 percent. The asset composition is fast making the bank look more like an investment bank, also evident from the lions share (55 percent) of return on investments in the top line. Just half a year ago, the revenue composition was evenly distributed between the return on investment and financing. Despite a decline in financing, the NPLs have surprisingly surged by 10 percent over December 2011, while the provision increased by five percent - inflating the infection ratio by 1.5 percentage points to zero percent. Going forward, the banks health in terms of profitability looks good as bulk of the deposits are parked in government bonds (Sukuk). The spread ratio though, might face some pressure in the lower interest rate scenario as the minimum rate on deposit is now increased.

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MEEZAN BANK LIMITED
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(Rs mn)                        1HCY12    1HCY11       chg
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Mark-up Earned                10,334     8,480        22%
Mark-up Expensed              (5,256)   (4,159)       26%
Net Markup Income              5,078     4,321        18%
Provisioning                    (327)     (553)      -41%
Net Mark-up income             4,750     3,768        26%
after provisions
Other  income                  1,399     1,147        22%
Operating revenues             6,477     5,468        18%
Other  expenses               (3,439)   (2,933)       17%
Profit before taxation         2,711     1,982        37%
Profit after taxation          1,844     1,382        33%
EPS (Rs)                        2.04      1.53
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Source: Company Accounts

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