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Last Updated on Tuesday, 30 November 1999 05:00 Wednesday, 28 December 2011 09:43
Standing on a total asset base of Rs 179 billion as of September 30, 2011, Meezan Bank (MEBL) is the country's largest Islamic bank and the seventh largest mid-sized commercial bank.
Operating through a network of 235 branches, the bank provides myriad of Islamic banking products and services, with focus on four business segments such as corporate finance, retail banking, trading and sales, and commercial banking.
Assets: thick and fast Benefiting from expansion in its asset base, the bank's top-line improved by 47percent, year-on-year, to Rs 13 billion in 9MCY11.The bank's asset base registered a growth of 16 percent during the first nine months of CY11 to Rs 179 billion as of 30th September, 2011, when the industry's asset base rose by 9 percent.Massive expansion in an investment portfolio lifted the bank's asset base.
This can be gauged from the fact that the bank's investment portfolio grew by 62 percent during the first nine months of CY11 to Rs 89 billion at the end of September 2011.
Consequently, income from investments accounted for 49 percent of the bank's top-line in 9MCY11, as opposed to 22 percent in 9MCY10.Investment in Ijarah Sukuk (issued by the government) alone accounted for around 75 percent of the bank's total investment portfolio as of 30th September 2011.Hence, the Bank's Investment to Deposit Ratio (IDR) improved by a whopping 17 percentage points to 59 percent as of 30th September 2011, which is nearly 8 percentage points higher than the industry's (all commercial banks) IDR.In the same breath, the Bank's financing portfolio took a knock; fell by 14 percent to Rs 46 billion, resulting in 11 percentage points drop in Advance to Deposit Ratio (ADR) to 31 percent as of 30th September 2011.
Among the group of ten mid-sized banks, MEBL has the lowest ADR.
This was primarily due to a dearth of optimal financing avenues amid fragile economic condition.Deposits: on the uphill Aided by expansion in the Bank's infrastructure and growing popularity of Islamic banks, the Bank outdid the rest of the industry on the deposits growth front.MEBL's deposit base was increased by 16 percent during the period under review to Rs 151 billion at the end of September 2011, when the industry's deposit base grew by 6 percent.While in consideration of a growth in fixed deposit base, which rose by 20 percent during the first nine months of CY11 to Rs 53.5 billion as of 30th September 2011, the Bank's CASA eased down by 1 percentage point to 64 percent.Net spread earned at a good clip Hefty income from investments lifted the Bank's net spread earned by 59 percent, year-on-year, to Rs 6.9 billion in 9MCY11.In the same vein, MEBL's net spread ratio (net spread/return earned on assets) improved by 4 percentage points, year on year, to 52 percent in 9MCY11.
The Bank enjoys one of the highest net spread ratios among the group of ten mid-sized banks.Other income and expenses: under control Stronger dividend income, arising from investments in mutual funds, primarily, those which invest in Ijarah Sukuk (issued by the government), lifted the banks total other income.The other income accounted for nearly 22 percent of the Bank's total operating revenues in 9MCY11, as opposed to 16 percent same period last year.In light of inflationary pressure, along with expansion in infrastructure, the administrative expenses grew by 30 percent, year on year, to Rs 4.42 billion in 9MCY11.
The Bank expanded its branch network to 235 branches as of 30th September 2011, from 222 branches at the end of CY10.The best part is that despite higher expenses, MEBL operating revenues to expense ratio improved to 2 in 9MCY11, from 1.5 same period of the last year.Non-performing loans: in check MEBL managed to check growth in toxic loans, which jumped by 6 percent during the first nine months of CY11 to Rs 4.5 billion at the end of September 2011.
At the same time, industry's (all banks) NPLs rose by 12 percent to Rs 613 billion at the end of September 2011.Hence, the Bank's infection ratio increased by 145bps to 8.9 percent during the period under review.
Even at this level, the Bank's infection ratio is nearly 6 percentage points lower than the average infection ratio of the group of ten mid-sized banks.The Bank's non-performing loans remained well covered, given that the banks coverage ratio improved to 105 percent, as opposed to 89 percent at the end of December 2010.Profitability on a fast track Bolstered by massive growth in operating revenues, the Bank's bottom-line more than doubled, year on year, to Rs 2.2 billion during the first nine months of CY11, lifting EPS to Rs 2.85 from Re.1.24 earned same period the last year.Rating JCR-VIS Credit Rating Co, the rating agency, has maintained the medium to long-term entity rating of MEBL d 'AA-' with Stable Outlook.
While the bank's short term has been upgraded to 'A-1+' from 'A-1'.
Meeezan Bank Limited
Rs(mn) 9MCY11 9MCY10 chg
Profit earned 13,257 9,038 47%
Return on deposit -6,368 -4,696 36%
Net spread earned 6,890 4,342 59%
Provisioning -1,159 -848 37%
Net spread after provision 5,731 3,494 64%
Other income 1,968 1,518 30%
Operating revenues 8,857 5,860 51%
Other expenses -4,421 -3,385 31%
Profit before taxation 3,278 1,628 101%
Profit after taxation 2,292 995 130%
EPS (Rs) 2.85 1.24
Source: Company Accounts
COURTESY: Economics and Finance Department, Institute of Business Administration, Karachi, prepared this analytical report for Business Recorder.DISCLAIMER: No reliance should be placed on the [above information] by any one for making any financial, investment and business decision.
The [above information] is general in nature and has not been prepared for any specific decision making process.
[The newspaper] has not independently verified all of the [above information] and has relied on sources that have been deemed reliable in the past.
Accordingly, the newspaper or any its staff or sources of information do not bear any liability or responsibility of any consequences for decisions or actions based on the [above information].
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