Meezan Bank’s profit up 93% in fourth quarter of CY22

Meezan Bank Limited (MEBL) announced net profit for the fourth quarter of CY22 at Rs16.3 billion (EPS: Rs9.12), depicting a whopping increase of 93 per cent YoY or 41 per cent QoQ (fourth quarter of CY21 EPS: Rs4.74).

This profitability is the highest-ever recorded by the bank. The jump in the overall earnings was mainly on the back of higher net interest income. Moreover, the bank announced a dividend of Rs3 along with the fourth quarter result taking the full year’s payout to Rs8.5/share.

The net spread earned was recorded at Rs121.7 billion (up 77 per cent YoY), leading to a jump of 91 per cent YoY in profit-before-tax, which was recorded at Rs88.4 billion.

The investment portfolio of the bank was recorded at Rs1.28 trillion, of which, the exposure in the government of Pakistan Ijara Sukuk was recorded at Rs1.1 trillion (up 177 per cent YoY).

The variable Sukuk comprises 77 per cent of the Ijarah Sukuk investment of the bank, while the remaining 23 per cent is parked in fixed. The weighted average yield on the fixed Ijara Sukuk is just below 11 per cent and have a duration of three years as of December 2022.

The return on equity (ROE) of the bank stands at 44.6 per cent as of CY22, compared with 36.4 per cent during CY21.

Similarly, the cash adequacy ratio (CAR) ratio stands at 18.42 per cent, comfortably above the minimum requirement of 12 per cent. The infection ratio stood at 1.3 per cent, while the coverage ratio was 166 per cent, as of December 2022.

The bank booked general provisioning expense of Rs3.9 billion, while booking a net reversal of Rs661 million under the specific provisioning (breakup of which includes: charge of Rs815 million and reversal of Rs1.476 billion) during CY22.

According to the management, the existing general provision is sufficient to cover any additional charge, which may be required under IFRS-9. Currently, the bank’s deposits and financing stand at Rs1.66 trillion and Rs1 trillion, respectively, as of CY22.

The bank has witnessed 43 per cent growth YoY in fees and commission, mainly on the back of higher trade volumes and a rise in the digital transactions. As of December 2022 end, MEBL has a total of 962 branches in 317 cities.

MCB Bank earns profit of Rs13.7b

The MCB Bank Limited announced the net profit of Rs13.7 billion (EPS: Rs11.61) for the fourth quarter of CY22, depicting an increase of 65 per cent YoY and a rise of 49 per cent QoQ (fourth quarter of CY21 EPS: Rs7.02).

The jump in the overall profitability in the fourth quarter was on the back of higher net interest income, which surged 66 per cent YoY. Along with the result, the bank also announced a dividend of Rs6, taking the overall dividend of CY22 to Rs20.

The investment portfolio comprises 93 per cent of the government securities, of which Rs132 billion has been invested in the treasury bills, Rs289 billion in fixed Pakistan Investment Bonds (PIBs) and Rs528 billion in floaters as of December 22.

The management aims at taking exposure in the short-term bonds, amid the interest rate hike scenario.

The average yield on investment increased to 12.41 per cent in CY22, compared with 8.3 per cent in CY21. Additionally, the weighted average duration of the PIBs portfolio (AFS and HTM, excluding floaters) is 2.32 years. The rate of return on the fixed PIBs portfolio was around 10.5 per cent.

On account of the increase in the key policy rate, the cost of deposit of the bank in CY22 was around 6.23 per cent (CY21: 3.42 per cent).

On the interest rate outlook, the management expects a rate hike of 150bps in the upcoming Monetary Policy Committee meeting, taking the policy rate to 18.5 per cent.

The yields on advances improved from 7.22 per cent (CY21) to 11.38 per cent (CY22). The bank achieved an advance-to-deposit ratio (ADR) of 57.85 per cent, well above the minimum requirement of 50 per cent by the State Bank of Pakistan, avoiding the ADR-related taxes.

The deposits went down from Rs1.4 trillion (December 2021) to Rs1.38 trillion as of December 2022. Going forward, the bank will continue to focus on improving the current accounts proportion, which rose to Rs680 billion as of December 2022 from Rs563 billion as of December 2021 (21 per cent). With this, the bank’s CASA improved from 92.9 per cent (December 2021) to 95.9 per cent (December 2022).

The bank expects a gross charge of around Rs6.5 billion to be routed through equity as a result of implementation of IFRS-9. However, CAR as a result of adjustments in general provisioning is likely to improve, going forward.

On the exchange rate outlook, the management believes that the dollar/rupee rate will remain in the range of 265 to 275 in the short-term and, moving forward, they believe that the rupee would depreciate 6 to 7 per cent against the greenback.