Unlike conventional banks, Meezan, being the largest Islamic bank (by deposits share) has shown decent growth of 66 percent, YoY, on core banking operations earnings in January-June 2009. Nonetheless, high provisioning reduced it to a mere 23 percent.
Buffered by a one time high income of Rs 315 billion in Apr-Jun 09 on dealing with foreign currencies, earnings before taxation increased by 30 percent, YoY, in the first half 2009. Higher taxation, though, restricted the bottom line growth to 15 percent.
Meezan is required to work on conversion of deposits to lacerative financing as its advances to deposits ratio declined by 735 bps to 51 percent in Mar09 compared to 66 percent of Islamic banking segment. This is far lower than the current industry ADR ratio of 79 percent. On the positive side, Islamic banking (4.5%), and Meezan bank in particular (3.9%), hold a lower ratio of bad advances provision compared to the banking industry (7.6%).
However, this picture is skewed for Meezan Bank as it has kept 41 percent of bad financing on its books. The bank is currently trading at a price-to-book multiple of 1.2 on the book value published in Mar09 end, by adjusting for all its non provided bad advances, it is trading at par to book value. The stock price reduced to nearly half since the start of 2009 versus 38 percent upsurge in KSE 100 index, as the banks ADR ratio is on decline amid increasing bad loans.
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MEEZAN BANK PROFIT AND LOSS ACCOUNTS
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RS (MN) 2Q-09 2Q-08 % CHG 1H-09 1H-08 % CHG
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Return earned 2,378 1,468 62% 4,879 2,892 69%
Return expensed (1,202) (693) 73% (2,332) (1,363) 71%
Net return Income 1,176 775 52% 2,546 1,530 66%
Provisioning (405) (69) 484% (764) (82) 827%
Net return income after
provisions 771 705 9% 1,783 1,447 23%
Other income 486 150 224% 691 368 88%
Operating revenues 1,662 925 80% 3,238 1,898 71%
Other expenses (841) (600) 40% (1,643) (1,177) 40%
Profit before taxation 416 255 63% 832 638 30%
Profit after taxation 226 193 18% 509 443 15%
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EPS (Rs) 0.43 0.38 0.96 0.83
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Source: Company result
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