KARACHI: Meezan Bank Limited (MEBL) announced its financial results for the first quarter of 2025, reporting earnings of Rs. 22 billion, translating into an earnings per share (EPS) of Rs. 12.3. This marks a 12 percent decline year-on-year and an 8 percent drop quarter-on-quarter, broadly in line with industry expectations, according to Topline Securities.
Alongside the earnings announcement, the bank declared its first interim cash dividend of Rs. 7.0 per share for 1Q2025, meeting market forecasts.
Declining Net Spread and Higher Provisions
MEBL’s net spread earnings for the quarter fell by 8 percent year-on-year and 15 percent quarter-on-quarter, amounting to Rs. 62 billion. This drop is primarily attributed to the decline in interest rates and the impact of the Minimum Deposit Rate (MDR) applied to the individual deposit portfolio.
Provisioning expenses surged to Rs. 1.85 billion in 1Q2025, compared to Rs. 263 million in the same period last year and Rs. 7.3 billion in the previous quarter.
Strong Growth in Other Income
The bank posted a 29 percent year-on-year increase in other income, reaching Rs. 8.2 billion. This was driven by a 10 percent growth in fees and commission income to Rs. 5.5 billion and a 3.3x rise in foreign exchange income to Rs. 1.6 billion.
Expense Dynamics and Taxation
Operating expenses declined by 7 percent year-on-year but rose 9 percent quarter-on-quarter to Rs. 19.6 billion, impacted by network expansion and inflationary pressures. The effective tax rate stood at 55 percent, compared to 52 percent in 1Q2024 and 58 percent in 4Q2024.
Balance Sheet Highlights
On the balance sheet front, deposits witnessed a robust 11 percent quarter-on-quarter growth, reaching Rs. 2.97 trillion. Investments increased by 10 percent to Rs. 2.1 trillion, while advances fell 8 percent quarter-on-quarter to Rs. 1.4 trillion.
Outlook
Despite the earnings dip, Meezan Bank continues to be Topline Securities’ preferred pick in the banking sector. The stock is currently trading at a 2025E price-to-earnings (PE) ratio of 6.5x and a price-to-book value (PBV) of 1.7x, offering an attractive dividend yield of 11 percent.
