Earnings Report /
Pakistan

Meezan Bank: 1QCY20 review – Solid spread income

  • MEBL has posted 1QCY20 consolidated NPAT of PKR5,024mn (EPS: PKR3.91), up a robust 69%yoy and 6%qoq.

  • MEBL reported net spread income of PKR14,713mn, up 66%yoy and 10%qoq.

  • MEBL trades at CY20f P/B of 1.1x, we retain our Buy stance.

Yusra Beg
Yusra Beg

Senior Investment Analyst

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Intermarket Securities
6 May 2020

MEBL has posted 1QCY20 consolidated NPAT of PKR5,024mn (EPS: PKR3.91), up a robust 69%yoy and 6%qoq. The result came slightly higher than our projected EPS of PKR3.75. The deviation stems from (i) net spread income of PKR14,713mn, above our estimates by 4%, and (ii) stronger than expected capital gains realization, which helped offset a major loss from associates. With the SBP announcing a 2-quarter moratorium on dividends, our expectation of a PKR1.0/sh first interim dividend was understandably not met.

1QCY20 Key result highlights include:

MEBL reported net spread income of PKR14,713mn, up 66%yoy and 10%qoq. This is a strong posting, and indicates that MEBL may be able to grow its net spread income this year.

Provisions of PKR1,638mn came largely in-line with estimated PKR 1700mn. This likely includes an element of impairment on equities.

Robust 53%yoy and 21%qoq growth in non-markup income was led by high capital gains (PKR723mn) and fx income (PKR963mn), which helped mask weakness in fee (down 13%yoy and qoq to PKR1,623mn).

Non-markup expenses of PKR6,864mn are up 25%yoy but lower by 4% qoq. This was largely in-line with projections. Together with strong revenue, the cost/income has come down to less than 40% (vs. 45% in 2019) but is unlikely to stay this low as revenue comes off going forward.

MEBL reported a substantial loss from associates of PKR907mn in 1QCY20, vs. PKR26mn profit in the same period last year, likely on the equities portfolio from its subsidiary Al Meezan Investments. 

We are encouraged by MEBL’s strong net spread income which indicates the bank may be able to protect margins to some extent even in a sharply lower interest rate environment. That said, MEBL derives a large portion (33%) of if its fee income from trade which is likely to further suppress fee income in the coming quarters. MEBL trades at CY20f P/B of 1.1x, where we retain our Buy stance.