MEBL senior management held an analyst briefing today to discuss the financial performance of 2QCY24 and the future outlook

Brief Takeaways

•        To recall, MEBL announced earnings (PAT) for 2QCY24 at PKR 26.7bn (EPS: PKR 14.9), depicting an increase of 54% YoY | 5% QoQ (2QCY23 EPS: PKR 9.66). This jump in overall QoQ earnings was mainly due to higher total income and provisioning reversal. The bank announced a dividend of PKR 7/share along with 2Q result.

•        There was a 52% YoY increase in net spread earnings, largely due to elevated interest rates throughout the year, contributing 80% to the growth. Increased deposit volumes drove the remaining 20%.

•        MEBL’s market share of deposits has reached 7.8%, with a YoY deposit growth of 26%, totaling PKR 2.4trn. The CASA ratio increased to 90% compared to 88% in the SPLY.

•        The bank’s investment portfolio stands at PKR 1.64trn, with PKR 1.48trn invested in GoP Sukuks. This portfolio comprises 80% variable sukuk and 20% fixed sukuk. The weighted average yield on a fixed portfolio is 11% with a duration of 2 years.

•        The cost-to-income ratio improved to 29% in 1HCY24, down from 31.5% in SPLY.

•        ROE of the bank stands at 52.9% as at 2QCY24 end compared to 56.3% in Dec’23. MEBL has the highest ROE in the banking sector.

•        MEBL recorded a CAR ratio of 24.68% by June ’24, well above the minimum requirement of 11.5%.

• The infection ratio stood at 1.45%, while the coverage ratio was 192% at the 2QCY24 end.

•        The bank opened six branches in 1HCY24 and plans to open 30-40 more branches by the end of CY24.

• As of 1HCY24, the current ADR stands at 47.7%. The bank aims to increase this ratio to 50-52% by the end of CY24 to avoid ADR-related taxes.

•        However, to remain prudent in case it does not achieve an ADR above 50%, MEBL has created a provision of PKR 2.5bn.

Courtesy – AHL Research