Dear Clients,

– Meezan Bank Limited (MEBL) reported CY20 result today posting Profit after Tax (PAT) of PkR22.2bn (EPS: PkR15.7, up 46%Y/Y). The result was below KASB’s estimate of PkR16.4/sh due to recognition of higher than anticipated provisioning.

– The result was accompanied with a final dividend of PkR2.0/sh that took the cumulative dividend to PkR6.0/sh during CY20.

– Net Interest Income increased 39% Y/Y as a result of decline in interest expense by 13%Y/Y because of reduction in policy rate by 625bps.

– Non-interest income increased by 8% Y/Y largely driven by 83% Y/Y growth in dividend income.

– Provisioning expense came in at PkR8.2bn against PkR4.2bn in corresponding period last year that contained the bank’s profitability.

– Operating expenses increased 17%Y/Y to PkR30.0bn and the C/I ratio improved to 40% in CY20 as compared to 46% in CY19.

– During 4QCY20, the company posted a profit of PkR4.1bn (EPS: PkR2.9) down by 36 %Y/Y and 6% Q/Q. This is on account of higher than anticipated provisioning.

– Moreover, non-markup income during 4QCY20 increased by 12% Y/Y and 36% Q/Q attributed to higher fee income and realized dividend income.

– On the other hand, operating expense reduced by 3% Y/Y and 9% Q/Q to PkR7.1bn. The cost income ratio improved to 39% during the quarter as against 45% in the corresponding period last year.

– We have an Outperform rating on MEBL with a target price of PkR118/sh. The stock is currently trading at one year forward P/Bv of 1.8x and offers a dividend yield of 6%.

Regards,
KASB Research