Meezan Bank posted a net profit of Rs1.9 billion for the six-month period ending June 30, up 4.8% compared to the corresponding six-month period of the preceding year.
According to a notice sent to the Karachi Stock Exchange (KSE) on Tuesday, the country’s largest Islamic bank also announced an interim cash dividend of Rs1.50 per share.
Given the double-digit growth trajectory of Islamic banking in the last 10 years, the increase in profits seems subdued on paper at least. However, senior bankers at Meezan Bank believe the performance is satisfactory in view of the constantly declining discount rate. “Spreads are reducing, but we are not passing on its effect onto our depositors,” said Meezan Bank Executive Vice President Ahmed Ali Siddiqui, while speaking to The Express Tribune.
Although the central bank does not impose any minimum savings rate on Islamic banks, Siddiqui says an average depositor of Meezan Bank received between 6% and 7% annual returns on their deposits in the last six months. “It’s because of shrinking spreads that our earnings did not go up as much as they potentially could despite an increase of Rs30 billion in deposits,” he noted, while referring to the 12.9% hike in deposits, which increased to Rs260.3 billion on June 30 from Rs230.4 billion at the end of the last calendar year.
A significant drop of almost 100% was witnessed in net provisions, which remained only Rs220,000 in January-June 2013 as opposed to Rs327.2 million in the first six months of 2012. “It shows that our asset quality has improved,” he said, adding that the negligible provisions are on account of significant recoveries that the bank made against the non-performing financings and corporate sukuks portfolio.
Administrative and operating expenses hiked 16.5% from Rs3.4 billion to Rs4 billion in the January-June period. Siddiqui attributed it to higher staff expenses, rent, electricity and fuel charges and other costs associated with branch expansion.
Eight new branches were opened during the half year, which took the bank’s total branch network to 318 branches in 92 cities. This means Meezan Bank is the eighth largest bank in the country in terms of the branch network. He added that the bank is expected to open 41 new branches in 2013, which will increase the total number of branches to 351 in 101 cities of Pakistan.
“We’re a giant in Islamic banking, holding over one-third of Islamic deposits in the country,” he said. The share of Islamic banking within the banking industry of Pakistan in terms of deposits at the end of March 2013 was 9.7%, according to the State Bank of Pakistan.
On the basis of enhanced share capital of Rs10 billion, the bank’s earnings per share remained Rs1.9 as opposed to Rs1.8 at the end of June 2012. Thus, the bank has met the State Bank’s minimum capital requirement of Rs10 billion a year in advance.
“The fact that Arab members of the board of directors actually came to Karachi to attend the board meeting reflects the trust and confidence they have in Pakistan and its banking industry,” Siddiqui said.
Published in The Express Tribune, July 31st, 2013.
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