The Board of Directors of Meezan Bank in its meeting held in Karachi on February 15, 2017 approved the audited unconsolidated financial statements of the Bank and its audited consolidated financial statements for the year ended on December 31, 2016. The meeting was presided by Mr. Riyadh S.A.A. Edrees – Chairman of the Board, Mr. Faisal A. A. A. Al – Nassar – Vice Chairman of the Board also attended the meeting.
By the Grace of Allah (SWT), Meezan Bank has continued its growth momentum and recorded good results for the year 2016. Profit after tax increased to Rs 5,562 million as compared to Rs 5,023 million last year, a growth of 11% even in the backdrop of lower interest rates and despite intense competition in the Banking Industry. The Bank recorded Earnings per Share (EPS) of Rs 5.55.
The Board recommended the final cash dividend of Rs 1.25 per share (12.5%) for the year 2016. This declaration, together with the earlier interim cash dividend of 17.5% paid in the third quarter of 2016, brings the total payout for the year to Rs 3.00 per share (30%). The Bank has maintained its unbroken payout record since the date of listing on the Stock Exchange.
A significant achievement during the year was the impressive increase in the financing portfolio of the Bank that increased by 50%, from Rs. 208 billion to Rs. 312 billion. This growth in financings has outpaced the 17% average financing growth of the Banking industry in the same period. The Bank’s focused remained on successfully capturing quality credit opportunities in a relatively stagnant private sector market and actively pursued growth in financings in all segments especially in SME/Commercial and Consumer Financing (primarily Car Ijarah and Easy Home) that grew by 62% and 66% respectively over last year. Advance to Deposits Ratio (ADR) of the Bank now stands at an impressive 55%, as compared to 44% in 2015. Another significant achievement is the reduction in the Bank’s ratio of non-performing financings to total financing (NPL ratio) that now stands at 2.14%, down from 3.27% in 2015 as a result of major recoveries made by the Bank during 2016 which highlights quality of Bank’s portfolio. Meezan Bank’s NPL ratio is one of the lowest in the banking Industry and bears testimony to the Bank’s prudent financing strategy backed by a sound risk infrastructure and rigorous remedial and recovery efforts. The average NPL ratio for the banking industry is 11%. The focus remains to build a high quality and well-diversified portfolio targeting top tier corporate, commercial and retail clients.
The Bank’s equity closed at Rs 28.15 billion and the Bank’s Capital Adequacy Ratio (“CAR”) sits at comfortable level of 12.91% as compared to 10.98% in 2015. The Bank’s CAR is well above the minimum mandatory level of 10.65%. During the year, the Bank successfully issued of Sub-ordinated Sukuk (Tier II) amounting to Rs. 7 billion that has further strengthened the CAR and will support the future growth strategy of the Bank. The issue received an overwhelming response from investors as a result of which the Bank exercised its Green shoe option and accepted offers Rs. 3 billion more than the initial issue size of Rs. 4 billion. The Bank was able to issue the Sukuk at a very attractive price and this is indicative of the strong brand value and standing of Meezan Bank. The Sukuk has been rated AA- (Double A-), by JCR-VIS Credit Rating Company Limited, an affiliate of Japan Credit Rating Agency, Japan.
Notwithstanding the overall decline in country’s exports, the trade business (both import and export) handled by the Bank crossed half a trillion benchmark and grew by an impressive 20% to Rs. 552 billion in 2016 as compared to Rs. 461 billion in 2015. An extensive network of correspondent banks and significant foreign exchange lines with international banks has allowed the Bank to compete aggressively for trade business. On account of this increased trade business volume, and enhanced service quality, the fee, commission and brokerage income grew by 38%.
There have been only two new issues of the Government of Pakistan Ijarah Sukuks during the year. Moreover, the issue size was so small as compared to the demand for such instrument that it led to a price war and the cut-off yield was lower than the equivalent instrument available for conventional banks. This has negatively impacted the Islamic Banking industry.
The Bank reported 20% growth in deposits which increased by Rs. 92 billion, closing the year at Rs. 564 billion from Rs. 472 billion – in line with the average deposit growth rate in banking industry. More importantly, the Bank has successfully re-aligned its deposit mix and achieved a lower cost of funds through strong relationship management and customer – centric approach. The current account in the deposit mix improved to 35% in the 2016 from 32% in 2015: accordingly, the Bank’s CASA (Current and Saving Account) mix improved to 75% as compared to 72% in 2015.
Administrative and other expenses increased to Rs. 15.6 billion from Rs. 13.8 billion, a rise of 13%. The rise in expenses is primarily due to increase in staff expenses, rent and associated costs as a result of addition of 123 new branches during 2015 – an investment which has reaped fruits for the Bank, as is evident from the strong growth in deposits and profits over the years. The Bank remained focus on deepening the existing branch network and converting newly opened branches into profitable ventures as early as possible.
The Bank maintained its position as the leading Islamic bank in Pakistan (amongst both Islamic as well as conventional banks) with a branch network of 571 branches in 146 cities.
The JCR-VIS Credit Rating Company Limited, an affiliate of Japan Credit Rating Agency, Japan has reaffirmed the Bank’s long-term entity rating of AA (Double A) and short-term rating at A1+ (A One Plus) with stable outlook. The short-term rating of A1+ is the highest standard in short-term rating. Meezan Bank is the only Islamic bank in Pakistan with AA and A1+ credit rating.