Meezan Bank’s Profit Down by 12% to Rs. 22 Billion in Q1 2025

Meezan Bank (MEBL) announced its 1Q2025 result today, where the bank recorded earnings of Rs. 22 billion (EPS of Rs. 12.3), which is down 12 percent year-on-year and down 8 percent quarter-on-quarter. The earnings came in line with industry expectations, Topline Securities said in a brief review. Alongside the result, the bank also announced its first interim cash dividend of Rs. 7.0 per share in 1Q2025, in line with industry expectations. Net spread earned by MEBL fell by 8 percent year-on-year and 15 percent quarter-on-quarter to Rs. 62 billion in 1Q2025. This decline in spread is due to a decrease in interest rates, along with the imposition of the Minimum Deposit Rate (MDR) on the individual portfolio. MEBL recorded provision expense of Rs. 1.85 billion in 1Q2025 as compared to Rs. 263 million in 1Q2024 and Rs. 7.3 billion in 4Q2024. Other income of the bank increased by 29 percent year-on-year to Rs. 8.2 billion in 1Q2025. The year-on-year uptick is due to an increase in Fees and Commission income by 10 percent year-on-year to Rs. 5.5 billion and FX Income by 3.3 times to Rs. 1.6 billion in 1Q2025. Other expenses of the bank declined by 7 percent year-on-year while up 9 percent quarter-on-quarter to Rs. 19.6 billion in 1Q2025, driven by the expanding branch network and the impact of inflation. Effective tax rate of the bank clocked in at 55 percent in 1Q2025 compared to 52 percent in 1Q2024 and 58 percent in 4Q2024. On the balance sheet side, Deposits grew by 11 percent quarter-on-quarter to Rs. 2.97 trillion, Investments up by 10 percent quarter-on-quarter to Rs. 2.1 trillion, while Advances are down by 8 percent quarter-on-quarter to Rs. 1.4 trillion in 1Q2025. MEBL remains our preferred pick in the banking sector. The stock currently trades at a 2025E PE of 6.5x and PBV of 1.7x with a dividend yield of 11 percent.