Meezan Bank on Thursday posted its increasing profit after tax (PAT) of Rs 5.562 billion up by 11 per cent in Jan-Dec 2016, compared to Rs 5.023 billion in the same period 2014.
The Board of Directors of Meezan Bank in its meeting held in Karachi approved the full year (2016) audited financial result of the bank. The bank recorded Earnings per Share (EPS) of Rs 5.55.
The meeting was presided by Riyadh SAA Edrees, Chairman of the Board, Faisal AAA Al-Nassar, Vice Chairman of the Board, also attended the meeting.
The Board recommended the final cash dividend of Rs 1.25 per share (12.5 per cent) for the year 2016. This declaration, together with the earlier interim cash dividend of 17.5 per cent paid in the third quarter of 2016 brings the total payout for the year to Rs 3.00 per share (30 per cent). The bank has maintained its unbroken payout record since the date of listing on the Stock Exchange.
A significant achievement during the year was the impressive increase in the financial portfolio of the bank that increased by 50 per cent, from Rs 208 billion to Rs 312 billion. This growth in financing has outpaced the 17 per cent average financing growth of the banking industry during the same period. The Bank’s focus remained on successfully capturing credit opportunities in a relatively stagnant private sector market and actively pursued growth in financing all the segments, especially in SME/Commercial and Consumer Financing (primarily Car Ijarah and Easy Home) that grew by 62 per cent and 66 per cent respectively over the last year.
Advance to Deposits Ratio (ADR) of the bank now stands at an impressive 55 per cent, as compared to 44 per cent in 2015. Another significant achievement is the reduction in the Bank’s ratio of non-performing financings to total financing (NPL ratio) that now stands at 2.14 per cent, down from 3.27 per cent in 2015 as a result of the major recoveries made by the bank during 2016, highlighting the quality of the Bank’s portfolio.
Meezan Bank’s NPL ratio is one of the lowest in the banking industry and bears testimony to the Bank’s prudent financing strategy, backed by a sound risk infrastructure and rigorous remedial and recovery efforts. The average NPL ratio for the banking industry is 11 per cent. The focus remains to build a high quality and well-diversified portfolio, targeting top tier corporate, commercial and retail clients.
The Bank’s equity closed at Rs 28.15 billion and the Bank’s Capital Adequacy Ratio (CAR) stands at a comfortable level of 12.91 per cent, as compared to 10.98 per cent in 2015. The Bank’s CAR is well above the minimum mandatory level of 10.65 per cent. During the year, the bank successfully issued Sub-ordinate Sukuk (Tier II), amounting to Rs 7 billion that has further strengthened the CAR and will support the future growth strategy of the bank.
The issue received an overwhelming response from investors as a result of which the bank exercised its Green shoe option and accepted offers amounting to Rs 3 billion, more than the initially issued amount of Rs 4 billion. The bank was able to issue the Sukuk at a very attractive price and this indicates the strong brand value and standing of Meezan Bank. The Sukuk has been rated AA- (Double A-), by JCR-VIS Credit Rating Company Limited, an affiliate of Japan Credit Rating Agency, Japan.
Notwithstanding the overall decline in the country’s exports, the trade business (both import and export) handled by the bank, crossed the half trillion benchmark and grew by an impressive rate of 20 per cent to Rs 552 billion in 2016, as compared to Rs 461 billion in 2015. An extensive network of correspondent banks and significant foreign exchange lines with international banks has allowed the Bank to compete aggressively for trade business.
On account of this increased trade business volume and enhanced service quality, the fee, commission and brokerage income grew by 38 per cent.
There have been only two new issues of the Government of Pakistan’s Ijarah Sukuks during the year. Moreover, the issue size was so small as compared to the demand for such instruments that it led to a price war and the cut-off yield was lower than the equivalent instrument available for conventional banks. This has negatively impacted the Islamic Banking industry.
The Bank reported 20 per cent growth in deposits which increased by Rs 92 billion, closing the year at Rs 564 billion from Rs 472 billion, in line with the average deposit growth rate in banking industry. More importantly, the Bank has successfully re-aligned its deposit mix and achieved a lower cost of funds through a strong relationship management and customer centric approach. The current account in the deposit mix improved to 35 per cent in 2016 from 32 per cent in 2015. Accordingly, the Bank’s CASA (Current and Saving Account) mix improved to 75 per cent as compared to 72 per cent in 2015.
Administrative and other expenses increased to Rs 15.6 billion from Rs 13.8 billion, a rise of 13 per cent. The rise in expenses is primarily due to the increase in staff expenses, rent and associated costs as a result of the addition of 123 new branches during 2015, an investment which has reaped fruits for the Bank, as it is evident from the strong growth in deposits and profits over the years. The Bank remained focused on deepening the existing branch network and converting newly opened branches into profitable ventures as early as possible.
The Bank maintained its position as the leading Islamic bank in Pakistan (amongst both Islamic as well as conventional banks) with a branch network of 571 branches in 146 cities. The JCR-VIS Credit Rating Company Limited, an affiliate of Japan Credit Rating Agency, Japan has reaffirmed the Bank’s long-term entity rating of AA (Double A) and short-term rating at A1+ (A One Plus) with a stable outlook. The short-term rating of A1+ is the highest standard in short-term rating. Meezan Bank is the only Islamic bank in Pakistan with AA and A1+ credit rating.