Meezan Bank prospering

The countrys largest Islamic bank, Meezan Bank limited (MEBL), recorded a hefty growth in its bottomline during 1QCY12. Supported by significant growth in net spread (earned) income and other income, the banks net profit amounted to Rs903 million in 1QCY12, higher by 45 percent compared to the same period last year. In light of an expansion in the banks asset base and business size, MEBLs topline grew by around 26 percent in 1QCY12, compared to the same period last year. Revenues from investments accounted for nearly 55 percent of the top-line in 1QCY12, as opposed to its share of 40 percent during the same period last year. The massive growth in investment income is symptomatic of the banks growing exposure in investments. MEBLs investments portfolio stood at around Rs 110 billion at the end of March 2012, around 12 percent and 58 percent higher compared to the investment base at the end of December 2011 and March 2011, respectively. The banks Investment to deposit ratio (IDR) stood at around 63 percent at the end of March 2012, nearly 11 percentage points higher than the industrys (all scheduled banks) average IDR. The banks financing portfolio jumped to Rs61 billion at the end of March 2012, marking a growth of three percent and 21 percent compared to the financing base at the end of December 2011 and March, 2011, respectively. The banks deposit base reached close to Rs176 billion as at 31 March, 2012, as opposed to Rs170 billion at the end of December, 2011 and Rs135 billion at the end of March 2011. The banks CASA ratio stood at 63 percent as on 31 March 2012. The bank managed to clock in a gross spread ratio of 49.7 percent in 1QCY12, imporoved by around one percentage point compared to the corresponding period last year. Income from non-core banking activities also registered growth on the heels of a higher fee, commission and brokerage income, dividend income and capital gains on sale of investments. In keeping with the high inflationary pressure, along with the banks focus on growing business size, MEBLs administrative expenses grew by around 27 percent in 1QCY12 compared to the same period last year. The bank added 54 new branches to its existing infrastructure in the past 12 months, bringing its total branch network to 276 branches by the end of March 2012. However, its commendable that that the bank managed to keep operating revenues to expense ratio close to the last years level of around 1.9 in 1QCY12. Non-performing loans level remained virtually unchanged during the first three months of the current year to Rs4.6 billion as on 31st March 2012, while the banks infection ratio stood at around 6.9 percent as on 31 March 2012, eased down by 29 bps compared to the December 2011 level.

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Meezan Bank Limited
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Rs (mn)                        1QCY12    1QCY11     chg
Profit earned                  5,002     3,960      26%
Return on deposits            (2,516)   (2,034)     24%
Net spread earned              2,486     1,926      29%
Provisioning                    (194)     (304)    -36%
Net spread after provisions    2,292     1,622      41%
Other income                     799       650      23%
Operating revenues             3,285     2,576      28%
Other expenses                (1,743)   (1,371)     27%
Profit before taxation         1,348       901      50%
Profit after taxation            903       586      54%
EPS (Rs)                        1.00      0.65
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Source: Company Accounts