Earnings Report /
Pakistan

Meezan Bank: CY 19 review: In line with estimates

    Yusra Beg
    Yusra Beg

    Senior Investment Analyst

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    Intermarket Securities
    12 February 2020

    MEBL has posted consolidated NPAT of PKR4,727mn (EPS: PKR3.68) in 4Q19, up a robust 86%yoy, taking full-year CY19 NPAT to PKR15,584mn (EPS: PKR12.12), up 74%yoy. The result came in line with our projections; while net spread income beat estimates, relatively high provisions and admin expenses prevented an earnings beat. Alongside the result, MEBL announced a final cash dividend of PKR2.0/sh, also in line with expectations.

    4Q 19 key results highlights:

    • MEBL reported net spread income of PKR13,364mn, up 47%yoy and 8%qoq. Sequential growth has decelerated from 28%qoq in 2Q19 but remains impressive. Net spread income should continue to grow quickly in 2020f (15%+) with the bank benefitting from a higher-for-longer interest rate.
    • Total provisions of PKR1,684mn came in higher than our estimate of PKR 1,310mn, similar to most other banks who have reported 4Q results so far. We await detailed accounts to ascertain if this jump came from loan provisions or impairment on investments (e.g. equities).
    • Robust c 30%yoy growth in non-markup income led by high Fx gains and other income. This masked weakness in fee (PKR1,855mn; down 2%yoy but up 8%qoq) and loss on sale of assets (likely equities).
    • Non-markup expenses of PKR7,362mn (up c 30%yoy) remain elevated, although quick revenue growth has kept the C/I stable at c 45%.
    • MEBL reported a profit from associates of PKR726mn in 4Q19, vs. a PKR424mn loss in 9M19. 

    Highlights for CY 19:

    • Strong 94%yoy growth in net spread income to PKR46,533mn.
    • Sharp rise in total provisions to PKR4,186mn vs. PKR1,168mn in CY18.
    • Robust growth in non-markup income to PKR10,495mn (up 21%yoy) .
    • Non-interest expenses of PKR26,165mn (up 30%yoy).

    Although in line with estimates, MEBL’s performance falls short relative to banks that reported beats on both earnings and dividends in 2019 (MCB and BAHL). For now, we are comfortable with our Dec’20 TP of PKR123/sh but await detailed accounts to review our estimates. MEBL trades at a 2020f P/B of 1.9x, P/E of 6.7x and offers a D/Y of 6.1%.