MEBL posted 3QCY22 consolidated NPAT of PKR11.6bn (EPS: PKR6.46), up a sharp 65% YoY, and 47% QoQ. This takes 9MCY22 NPAT to PKR28.6bn (EPS PKR: 15.99), up 45%YoY. The 3Q result is much higher than our estimated EPS of PKR5.46, led by very strong net spread income (up 32% QoQ) and overall strong core business performance, which helped offset sharp rise in admin expenses (up 45%YoY). MEBL announced an interim cash dividend of PKR2.0/sh, above our estimated PKR1.5/sh (9MCY22 DPS: PKR5.2).
3QCY22 Key result highlights include:
MEBL reported 3QCY22 net spread income of PKR31.8bn, up a massive 83% YoY and 32% QoQ, much higher than expectations. This is a function of a prominent rise in spreads in line with asset repricing and a large proportion of low-cost deposits.
Total provisions have clocked in at PKR546mn, lower than our estimated PKR1.0bn – likely on lower general provision accumulation vs. the previous quarter (PKR961mn in 2Q).
Non-markup income reported a 24%YoY increase to PKR4.8bn in 3QCY22 – albiet lower by 27% QoQ. Fee income has risen 31%YoY and 10% QoQ to PKR3.8bn on strong trade commissions and card related fee. However, Fx income has normalized to PKR735mn vs. PKR2.3bn in the previous quarter leading to the overall sequential decline in non-markup income.
Core admin expenses have risen by a sharp 45% YoY to PKR13.0bn, likely driven by branch expansion and impact of high inflation. That said, strong revenues have helped maintain the C/I at 34%, the same as 2Q and much lower than 41% during SPLY.
MEBL reported a loss of PKR24mn from associates vs. loss of PKR136mn in 2Q, likely due to weak equity market performance. The bank reported an effective tax rate of 49% vs. 58% in 2Q, in the absence of retrospective tax impact, and inline with estimates.
MEBL is delivering on core business performance. A strong capital profile, excellent deposit franchise, and superior asset quality back our liking for the bank. MEBL trades at a CY23f P/B of 1.3x and P/E of 3.9x, and offers an 47% upside to our Dec23 TP of PKR160/sh.