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Meezan Bank posts excellent quarterly results in March 2018

Meezan Bank, which is the first and largest Islamic commercial Bank of Pakistan, have recorded excellent results for the first quarter ended March 31, 2018. They have mentioned in the financial statement that the Bank is now the 7th largest Bank (amongst both Islamic as well as Conventional Banks) in terms of deposits in the country with a branch network of greater than 600 branches in 159 cities.

Meezan Bank has consistently been recognized as the Best Islamic Bank in the country by various domestic and foreign institutions, which shows the management of the bank’s commitment to excellence. These institutions include Islamic Finance News – Malaysia, Global Finance magazine – New York, Asset AAA – Hong Kong, Asiamoney – Hong Kong, The Banker – United Kingdom, South Asian Federation of Accountants, Islamic Finance Forum of South Asian Awards, Pakistan Banking Awards – Dawn & IBP Pakistan, Employers Federation of Pakistan and CFA Association- Pakistan.

During the period under review financial experts have also calculated that Profit After Tax (PAT) raised by 27 percent to Rs 1,915 million from Rs 1,512 million in same quarter last year. Different sources urge that the Islamic finance sector surprised market players around the world with an incredibly successful 2017. Sukuk bonds, which generate returns without breaching Islamic law, came into high demand, with issuance surging by a phenomenal 45 percent to $97.9 billion last year alone. As a consequence, the sector has seen excellent liquidity conditions in the Gulf States, throughout which most Sukuk assets are held.

Sources also mentioned that new markets have also opened up, allowing ambitious companies dealing in Islamic finance to enlarge and rise at impressive rates. Despite the success of 2017, growth in Sukuk issuance is slowing in 2018 as governments in the Gulf region moderate their budgets.

Meezan Bank: Assets & Deposits (Rs. Mn)

Details

March 31, 2018

December 31, 2017

Growth %
Total Assets 769,485 781,699 (2%)
Deposits 669,559 673,188 (1%)
Source: Meezan Bank

Despite of all above, the CASA mix of Meezan Bank now stands at 76 percent of total deposits as against to 75 percent in December 2017. Islamic financings and related assets ended at Rs413 billion which is slightly lower than Rs420 billion as at December 31, 2017 mostly because of repayment of seasonal financing which is in line with their budget. The management of Bank sustained its financing exposure in all sectors and continued to actively pursue growth in SME/ Commercial and Consumer segment. The Advance to Deposit ratio reached at 62 percent. The experts have also mentioned that the bank has one of the lowest nonperforming financing ratios in the banking sector- less than 2 percent as against to an industry average of 8.0 percent.

Provision against non-performing financing portfolio is also sustained at a very comfortable level with a coverage ratio of 132 percent. The financial statement also showed that the bank’s net spread before provision raised by 28 percent mainly because of bank’s continuous focus on rising financing portfolio and sustaining an optimal cost of funds by strong relationship management and enhanced customer experience.

No doubt, Meezan Bank that is equipped to offer comprehensive and innovative financial solutions through a diverse product offering to its clients. In a short span of time, the management has organized itself as a market leader in the Investment Banking market of the country by offering Shariah-compliant Investment Banking services.

The financial experts also calculated that the bank’s fee and commission income were raised by 27 percent which was chiefly supported by growth in trade business which increased by 39 percent from the same quarter last year.

Although administrative and operating expenses raised to Rs4,521 million from Rs3,828 million mainly because of rise in staff expenses, rent and costs associated with new branches – an investment which has reaped fruits for the Bank, as is evident from the strong growth in deposits and profits over the years.

Presently Meezan Bank has inked a MoU with VPL Limited – a leading importer of trucks, buses, construction & mining equipment, generators and tools in Pakistan as their preferred financier. Under this MoU, Meezan Bank will be the preferred financier for UD Trucks supporting the long-haulage and construction segments in the country. Meezan Bank was planning to rise up to Rs7 billion by issuing Tier 1 Islamic bond or Sukuk in the coming few months. The management of the bank predicts that the bond to be the oversubscribed because of fits attractiveness to the Islamic banks, windows, Takaful companies, Mudarabah companies, pension funds, Shariah Compliant investment by companies and entities. Islamic banking institutions in Pakistan need to strengthen their capital adequacy position in view of evolving regulatory requirement till 2019.

Conclusion

Studies revealed that the growth of Islamic finance has been rapid at 10 to 12 percent yearly over the past two decades. By 2015, the industry had surpassed US$1.88 trillion in size. No doubt, Islamic finance has emerged as an effective tool for financing development international, including in non-Muslim countries, and may prove to be a significant contributor towards realizing the Sustainable Development Goals (SDGs). Meezan Bank operates strictly under the rules of Islamic Shariah and is well-recognized for its product development capability, Islamic banking research and advisory services in Pakistan.

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