Meezan Bank 1H profits double

Buoyed by impressive jump in operating revenues, Meezan banks bottom-line almost doubled during 1HCY11. With average Kibor at a higher level, along with massive growth in investments, the returns from financing and investments improved massively in 1HCY11. The bank has benefited from higher investment in Ijarah Sukuk since returns from investments accounted for 57 percent of the top-line in 1HCY11, as compared to 52 percent in 1HCY10. The banks investment portfolio grew by 61 percent to Rs88 billion in the first six months. On the flip side, the banks financing portfolio suffered - fell to Rs48 billion as of June 30, from Rs54 billion at the end of CY10. As finding optimal financing avenues is a cumbersome task when compared to easy available sukuks, the banks ADR fell by 9 percentage points to 32 percent in the first-half. In light of the growing popularity of Islamic banking and expansion in branch network, deposits at the bank grew to Rs148 billion, capturing a rise of around 13 percent in the first six months of CY11. Meezan fared better compared to the industrys (all commercial banks) average deposit growth of 9 percent during the same period. In the face of deposit growth, the bank managed to keep the CASA ratio unchanged at 65 percent, slightly higher than the industrys (midsized banks) average of around 62 percent. However, the gross spread ratio of the bank improved by around one percentage point to 51 percent. Investment bankers provided valuable support to the bottom line as higher commission and brokerage income and a jump in dividend income drove up non-core income, up 22 percent over the corresponding period last year. Earnings were partly dragged down by a 29 percent jump in operating expenses due to higher administrative expenses, which surged well above inflation adjusted targets. However, it seems justifiable given aggressive expansion in the banks branch network during the past one year. The bank now owns 226 branches as against 201 branches at the end of 1HCY10. Moreover, the bank aims to expand the current network to 275 branches by the year end. Despite the growth in operating expenses, the banks income to expense ratio slightly ameliorated to 1.86 in 1HCY11 from 1.73 same period last year. The NPLs remained unchanged at Rs4.3 billion. However, improvement in profitability supported the bank to move ahead in the right direction, with its coverage ratio for NPLs improving from 89 percent to 98 percent during the first six months.

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MEEZAN BANK LTD
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PL Rs(mn)                             1HCY11    1HCY10      Chg
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Profits earned                          8480      5995      41%
Return on deposit                      (4159)    (3018)     38%
Net spread earned                       4321      2977      45%
Provisioning                            (553)     (474)     17%
Net mark-up income after provisions     3768      2502      51%
Other income                            1147       940      22%
Operating revenues                      5468      3917      40%
Other expenses                         (2933)    (2265)     29%
Profit before taxation                  1982      1178      68%
Profit after taxation                   1382       719      92%
EPS (Rs)                                1.72      0.90
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Source: Company Accounts
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