KARACHI: On October 19, Meezan Bank disclosed its financial report for the third quarter ending in September 2023. The numbers were nothing short of spectacular: the bank achieved its highest-ever quarterly earnings, a staggering Rs25 billion, which translated to an impressive earning per share (EPS) of Rs14.2 for the third quarter of 2023 (July – September).
According to brokerage house Arif Habib Limited, this remarkable surge in earnings can be attributed to record total income.Â
According to brokerage house Topline Securities, the bank’s earnings not only shot up by over two times year-on-year, but also witnessed a remarkable 48% increase quarter-on-quarter during the three months from July to September 2023. This phenomenal performance brought the cumulative nine-month earnings to an impressive Rs58 billion, with an EPS of Rs32.4, marking a remarkable 103% year-on-year growth.
Meezan Bank also announced a substantial interim cash dividend of Rs5 per share in the third quarter of 2023, making the total dividend for the first nine months of the year an attractive Rs12 per share.
Topline Securities emphasized that the upsurge in earnings was primarily due to an unexpectedly high net spread earned by the bank. A bank’s net spread represents the difference between the returns received from loans and other financial products versus the returns paid on deposits and borrowings. In the third quarter of 2023, this figure experienced a monumental 102% year-on-year increase and a notable 29% quarter-on-quarter boost, reaching an impressive Rs64 billion. This growth was spearheaded by rising asset yields and a substantial uptick in zero-cost current account deposits, which constitute roughly half of the bank’s total deposits. It’s worth noting that no returns are paid on this account type.
As a result of this growth, the bank’s profit ballooned by 84% year-on-year, reaching an impressive Rs121 billion. On the flip side, the cost of deposits increased by 68% year-on-year to Rs57 billion in the third quarter of 2023. Ultimately, the bank’s net profit for the quarter settled at approximately Rs64 billion, marking an astonishing 102% year-on-year increase and a substantial 29% quarter-on-quarter growth. Consequently, the total net profit earned in the nine months of 2023 reached around Rs155 billion, reflecting an incredible 100% year-on-year surge.
The ‘other’ income of Meezan bank also experienced a healthy boost. In the third quarter of 2023, other income surged by 41% year-on-year, reaching Rs6.2 billion. This was primarily due to a notable increase in fee and commission income, which jumped by 34% year-on-year to reach Rs4.6 billion. Additionally, foreign exchange income soared 114% year-on-year, totaling Rs1.6 billion.
While other expenses did experience an increase of 52% year-on-year and 19% in the third quarter compared to the second quarter, reaching Rs19.5 billion, Topline Securities attributed this to the bank’s expanding branch network and inflationary pressures.
Despite these growing expenses, the bank managed to improve its cost-to-income ratio to 28% in the third quarter of 2023, a notable advancement from the 36% recorded in the third quarter of 2022 and the 30% registered in the second quarter of 2023.
The effective tax rate of the bank remained steady at 49% in the third quarter, mirroring the rate from the same period in the previous year. However, this rate had dipped by 400 basis points from the 53% recorded in the second quarter of 2023, primarily due to the super tax imposed in the prior quarter.
