We initiate our Meezan Bank Ltd. (MEBL) coverage with a Dec’25 Target Price (TP) of PKR 335, signifying a potential capital gain of 30.45%. The bank also offers a healthy dividend yield of 9.76% (an expected dividend payout of PKR 25/share for CY25). The total return (capital gains + dividend) stands at 40.21%. MEBL trades at a CY25 P/E ratio of 5.44x and a PBV of 1.62x.
Meezan Bank’s stellar growth in recent years can be attributed to several factors: 1) Remarkable deposit growth averaging 24% since 2020, driven by rising consumer preferences for Islamic banking; 2) Meezan stands as a major beneficiary of capturing the Islamic banking market share due to its first-mover advantage; 3) The growing consumer interest in Islamic banking and the SBP’s plan to transform Pakistan’s banking system to align with Shariah principles will further propel Meezan’s growth trajectory. Additionally, other highlights include the lowest infection ratio, consumer ease, and improved asset quality with a high coverage ratio.
MEBL stands as Pakistan’s premier Islamic bank, delivering consistent growth, profitability, and resilience in an evolving financial landscape. Over the past five years, MEBL has demonstrated exceptional performance, with net interest income soaring from PKR 64.8bn in 2020 to PKR 287bn in 2024, driven by robust deposit growth and an expanding asset base. The bank’s efficiency has improved significantly, with its cost-to-income ratio declining to 26.78% in 2024, reflecting strong operational discipline. Net profit surged to PKR 102bn, while asset quality remains stable, supported by a prudent risk management framework.
Meezan Bank maintains a strong investment portfolio, heavily weighted toward Government of Pakistan-issued Sukuks, with 77% in variable-rate Sukuks and 23% in fixed-rate Sukuks. This strategic positioning allows Meezan to benefit from a stable rate environment, ensuring steady cash flows from its investments.
Meezan’s deposit mix consists of 46.7% current accounts, 46.3% savings accounts, and 6.9% fixed deposits. However, with the SBP’s recent directive mandating Islamic banks to offer 75% of gross asset yields to savings deposit holders, margin pressures could rise. To counter this, Meezan is expected to further increase its reliance on current account (CA) deposits, safeguarding its net interest margins (NIMs) against regulatory changes.
Meezan Bank continues to attract deposits at an impressive pace, recording a 17% growth in total deposits in CY24 despite a challenging banking environment. This growth could have been even higher had the FBR not intervened with the ADR tax regime last year.
With a strong customer base and increasing trust in Islamic banking, Meezan is well-positioned to further expand its deposit portfolio, ensuring long-term stability and liquidity.
Meezan Bank delivered an outstanding 30% increase in non-markup income in CY24, demonstrating its ability to generate revenue beyond traditional lending. A significant 73% of this income comes from commission-based earnings, with 45% specifically from debit card fees and related charges.
As the bank’s deposit base expands, fee-based income is expected to grow further, reinforcing earnings stability. Another key contributor is gains on securities, accounting for 12% of non-markup income. These gains are primarily derived from the sale of government securities, positioning Meezan to benefit significantly in a rate-cut environment.
