Meezan Bank Limited (MEBL) announced its earnings for 1QCY20 in which the bank posted PAT of PKR 5,505Mn (EPS: PKR 4.28). Earnings remained higher than our expectations mainly due to lower administrative expenses and stronger non-markup income.

Net-Interest Income (NII) of the MEBL improved by 62%/10% YoY/QoQ during the period to clock-in at PKR 14,718Mn. On the other hand, non-interest income of the bank witnessed uptick of 64%/23% YoY/QoQ. Improvement in both segments resulted into a strong improvement of 62%/12% YoY/QoQ in bank’s revenues for the period.

Weakness in fee income was visible with the line-item showing YoY and QoQ decline of 15% and 23% respectively. The weakness in fee income was more than compensated by improvement in income from dealing in foreign currencies (FC).

The improvement in FC dealing is likely on account of 7.7% PKR depreciation and higher FX market volatility during the quarter.

Provisioning expenses were almost the same when compared to 4QCY19 at PKR 1,638 mn. We suspect that approx. 60% of this amount was owing to loan provisioning and the rest was on account of equity provisioning expenses for the quarter. Looking at the numbers, we believe that management did not take the option of partial equity provisioning (25%) and opted to provide the full amount.

1QCY19 results surpassed our expectations as apart from strong non-markup income, administrative expenses also fared better than our estimates. Overall Cost/Income during the 1QCY20 clocked-in at 40% vis-à-vis 45% in 4QCY19. (BMA Capital Management Ltd.)