Meezan Bank 2Q Earning Falls 10%
Meezan Bank posted a Rs13.4 EPS for 2Q2025, down 10% year-on-year but up 9% quarter-on-quarter, with a Rs7/share interim dividend, in line with expectations.
Staff Report
Earnings have Slipped but Beat Forecasts. Meezan Bank Limited (MEBL) reported earnings of Rs24 billion for the second quarter of 2025, translating into earnings per share (EPS) of Rs13.4. The result reflects a 10% decline year-on-year but a 9% increase compared to the previous quarter. Analysts attributed the slightly better-than-expected performance to reduced operating expenses and a modest improvement in spread income.
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The bank declared a second interim cash dividend of Rs7.0 per share for the quarter, matching industry forecasts. This takes the total payout for the first half of 2025 to Rs14.0 per share.
Key Financial Drivers
Spread and Deposits
Net spread earnings fell 9% year-on-year but rose 4% from the previous quarter to Rs64 billion in 2Q2025. The quarter-on-quarter growth was supported by an 18% year-to-date and 6% quarterly increase in deposits, which exceeded Rs3 trillion. Further details on the deposit mix are awaited.
Cost Reduction
Operating expenses declined sharply, falling 25% year-on-year and 15% quarter-on-quarter to Rs16.7 billion. Industry sources indicated that this was partly due to a reversal of variable compensation expenses amounting to Rs10.9 billion in the first half of 2025, spread across both quarters.
Provisions and Income Streams
Provisioning expenses stood at Rs1.5 billion for the quarter, compared with a reversal of Rs935 million in 2Q2024 and expenses of Rs1.85 billion in 1Q2025. Other income surged 54% year-on-year to Rs8.2 billion, buoyed by higher foreign exchange gains of Rs1.6 billion and a 21% rise in fee and commission income to Rs5.3 billion.Bulls Lose Grip as Bears Sneak In
Tax and Balance Sheet Trends
The effective tax rate increased to 55.3% from 54.5% in 1Q2025 and 51% in 2Q2024. On the balance sheet side, investments rose 17% quarter-on-quarter to Rs2.4 trillion, while advances declined 18% to Rs1.14 trillion.
Market View
Analysts continue to view MEBL as a preferred pick in the banking sector. The stock trades at a 2025 estimated price-to-earnings ratio of 8.1x and a price-to-book value of 2.4x, with a dividend yield of 7%.
