Meezan Bank Records highest ever quarterly earnings in 2Q2024**

Staff Report: Meezan Bank (MEBL) announced its 2Q2024 results today, where the bank recorded its highest-ever quarterly earnings of Rs26.7bn (EPS of Rs14.88), reflecting a 55% YoY increase and a 5% QoQ increase. The result aligned with industry expectations. This brings the 1H2024 earnings to Rs51.8bn (EPS Rs28.9), up 59% YoY.

Alongside the result, the bank also announced a second interim cash dividend of Rs7.0/share in 2Q2024, bringing the 1H2024 dividend to Rs14.0/share.Few Banks at Deep Discount Despite Rally

This strong profitability was driven by growth in net spread earned, which increased by 42% YoY and 4% QoQ to Rs70bn in 2Q2024. The growth in net spread was led by a rise in asset yields and an increase in zero-cost current account deposits. MEBL recorded a provision reversal of Rs935mn in 2Q2024 compared to a provision expense of Rs1.5bn in 2Q2023.

Other income of the bank grew by 4% YoY, while it declined by 16% QoQ in 2Q2024. Other expenses of the bank increased by 35% YoY and 4% QoQ to Rs21.2bn, driven by the growing branch network and inflationary pressures.

Despite the increase in other expenses, the cost-to-income ratio of the bank improved to 29% in 2Q2024, compared to 30% recorded in 2Q2023. The effective tax rate of the bank was 51% in 2Q2024, versus 53% in 2Q2023 and 52% in 1Q2024.

MEBL remains our preferred pick in the banking sector. The stock currently trades at a 2024E PE of 4.2x and a PBV of 1.8x with a dividend yield of 12%.