Corporate results: Meezan Bank’s profit grows by 12.5%

After-tax profit increases to Rs1.1 billion, EPS goes up to Rs1.1 from Rs0.9 in 1QCY14.

KARACHI:

Meezan Bank announced its earnings for the first quarter of 2014, its after-tax profit increased to Rs1.1 billion, up 12.5% from the corresponding three-month period of 2013.

According to a notice sent to the Karachi Stock Exchange (KSE) on Thursday, Meezan Bank’s earnings per share increased to Rs1.1 on March 31 compared to Rs0.9 recorded at the end of the last year’s first quarter.

Speaking to The Express Tribune, Meezan Bank’s Executive Vice President Ahmed Ali Siddiqui said the rate of growth in profits is satisfactory given the current discount rate of 10%.

“One of the main challenges being faced by Islamic banks is of liquidity. On the one hand, corporate customers want rates that are very close to the discount rate. On the other hand, half of our portfolio is based on Sukuk (Islamic bonds) whose return is 30 to 50 basis points less than the rate offered by treasury bills,” Siddiqui noted.

The bank’s net spread after provisions was Rs2.8 billion, up 4.4% from the first quarter of the last year.

The sum of its other income and net return earned on financings, investments and placements for the January-March quarter equalled a little more than Rs4 billion, which is 18.8% higher than the corresponding figure recorded in the first quarter of 2013.

However, the bank’s administrative expenses have increased at a much faster pace since March 2013. Meezan Bank’s quarterly profit-and-loss statement shows its administrative expenses for the first quarter remained Rs2.4 billion, up 24.1% on a year-on-year basis.

According to Siddiqui, the bank has opened 40 new branches since March 2013, resulting in a rapid rise in its administrative expenses.

Another notable feature in the bank’s latest financial accounts is the substantial rise in the bank’s reversal of provisions against non-performing Islamic financings and investments. Compared to the first quarter of 2013, they increased by a massive 257.1% to Rs37.7 million in the latest three-month period.

“Although the overall impact of the reversal of provisions against non-performing financings on the bank’s bottom line cannot be called substantial in relative terms, the significant increase in percentage terms reflects that the bank’s portfolio is getting fairly healthy,” Siddiqui said.

Meezan Bank’s deposits reached Rs307 billion on March 31 as opposed to Rs290 billion at the end of 2013, reflecting a quarter-on-quarter increase of 5.8%.

Published in The Express Tribune, April 25^th, 2014.

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