Meezan Bank Limited

Meezan Bank Limited (KSE: MEBL) is the pioneer when it comes to Islamic banking and finance in Pakistan. On top of being the largest provider of Islamic banking services in the country, Meezan's growth in recent years trumps that of most conventional banks in their heyday.
The firm commenced operations in 2002 following SBP's green light for commercial Islamic banking. In the first decade of its operations - from December 2002 to December 2012 - the bank saw its deposits grow at an average rate of 46 percent per year. Its growth is also reflected by the expansion in its branch count, which stood at 494 as of September-end.
More recently - in the past six years, the premier Islamic bank has seen both its branch count and employee count double. In the same period, Meezan's after-tax profit has jumped over four times to Rs 4.57 billion in CY14. Bulk of the boom in Pakistan's Islamic banking industry can be traced to Meezan. Being the first firm to be given the commercial Islamic banking license in the country, Meezan rapidly started catering to the then-niche Islamic banking market with Shariah-compliant products. Now, little over a decade later, Islamic banking has gone mainstream, forcing conventional banking giants to enter this domain as well to stay competitive.
In 2002, Meezan launched its car financing product dubbed 'Ijara.' The following year, EasyHome was introduced. New products and services kept surfacing as the firm gained recognition. By the end of last year, the firm ranked eighth in terms of the size of its branch network in Pakistan. Last month, Meezan formed a strategic partnership with Ufone to launch a branchless banking venture dubbed Meezan-UPaisa.
Meezan is backed by major institutions like Kuwait's Noor Financial, Pak-Kuwait Investment Company and Islamic Development Bank Jeddah, which together account for nearly 90 percent of the company's shareholding.
RECENT PERFORMANCE Still in its early years, Meezan has seen solid double-digit growth in its spread and profit in recent years. Since 2009, the bank has managed a 21 percent CAGR in its net spread (net of provisions). Dividend income and capital gains have expanded at double the rate in the same period. Meezan's after-tax profit rallied from Rs 1.03 billion in CY09 to Rs 4.57 billion in CY14 - a CAGR of 35 percent.
Meezan's deposits and assets have seen steep upside as well - both growing at around 30 percent per annum since 2010. Return on assets, which peaked at 1.91 percent in CY11, has come down to 1.19 percent in CY14 as profit growth decelerated in the past couple of years.
The Islamic banking giant put up a strong show in the ongoing CY15 as well, at least in core business. Net spread (after provisions) soared 39 percent year-on-year to Rs 13.3 billion in the nine months ended September. Operating income grew 29 percent in the same period.
Other key metrics however, experience deceleration in growth. In the three quarters, deposits and assets grew 15 percent and 12 percent respectively, while PAT was up 10 percent - all much lower as compared to growth in the past five years. Continuous reduction in SBP's policy rate this year led to a squeeze in the overall banking sector's income from financing transactions.
This relatively tough scenario caused Meezan (and other banking giants) to underperform the benchmark index in the past twelve months. In the prior years though, investors have seen sizeable capital gains. After trading at sub-Rs 20 in early 2012, Meezan stock soared to over Rs 50 in late 2014. Increasing competition in Shariah-compliant products has also affected Meezan's growth. Still, the bank is managing a double digit growth in most of its key metrics as it nears its goal of making Islamic banking the banking of first choice in Pakistan.