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Meezan Bank
Financial analysis of Meezan Bank – including preliminary investment decision
Contents
● Introduction of Meezan Bank
● Industrial analysis
● Growth Prospects
● Competitive advantages
● Financial Analysis
● Preliminary Investment Decision
Introduction
● Meezan Bank was established in 1997 with a mandate to pursue Islamic
banking in Pakistan.
● Meezan Bank is a subsidiary of Noor Financial Investment, a Kuwaiti
company.
● It is the 6th largest bank in the country with a network of more than 760
branches in over 223 cities.
● It started operations in 2002 when the State Bank of Pakistan granted
the first-ever license for Islamic Commercial Banking.
● The bank is engaged in corporate, commercial, consumer, investment,
and retail banking activities.
● It operates on values such as Shariah-compliance, Integrity, and Service
Excellence.
Competitive Advantages
Meezan Bank surpassed Bank Alfalah
by generating $603.2 million in annual
revenue in 2019. Whereas, Bank Alfalah
only made $351 million as annual
revenue, which is $252.2 million less
revenue than Meezan Bank.
Annual revenue
Meezan Bank's deposits stood at Rs.
932 billion after the addition of Rs.
147 billion deposits in 2019.
Deposit Utilization
Meezan bank's system expanded to 760
branches in 223 cities across the
country. Whereas, Bank Al-Habib's
branch network stands at 718 branches
nationwide and Bank Alfalah has 687
branches nationwide with 11 branches
abroad.
Branch Network
Meezan Bank generated a profit of Rs.
15.23 billion with a year on year
growth of 70 percent recorded in 2019
which is higher than both Bank Alfalah
and Bank Al Habib.
Profitability
Meezan Bank
Industrial Analysis
● Strong position of Meezan
Bank despite high
competition in banking sector
● High price earning ratio and
high return on equity with low
debt ratio as compared with
industry averages makes it
stand among its competitors
● High barriers to entry in
market
● Scope of e-banking
● Cost-effective management
by Meezan Bank
Growth Prospects
Bank Islami
Rs. 0.291B
Al-Baraka
Rs. 0.163B
Meezan Bank
Rs. 3.57B
Only 43 million registered bank accounts
in a country of approximately 195 million
people
1. Market Gap
Meezan Bank’s profit after taxation has
reached to Rs. 15,232,074 in 2019 and
an increasing amount of dividends is
lucrative for investors.
2. Increasing Profit
Meezan Bank has almost 35 percent of
market share in Islamic banking and this
kind of banking is appealing to religious
minds of Pakistan.
3. Market leader in Islamic Banking
Top 3 Islamic Banks in
terms of Profitability
Financial Analysis
PRO-FORMA BALANCE SHEET
❖ Total assets of the bank are expected to increase by an
average of 7% over the next five years.
❖ The equity of the bank is expected to increase by an
average of 4-5% with its equity reaching the figure of 40
Billion.
❖ Increase in Liabilities.
❖ Growth in Deposits.
❖ Growth in Investments and Placements.
PRO-FORMA INCOME STATEMENT
❖ Increase in Bank’s Profit after tax of about 9-
10%
❖ Increase in Operating expenses
❖ Increase in Net spread earned
❖ Increase in Fee and commission income
Effects of Coronavirus
❖ Decrease in the Profits from the financial
institutions
❖ Decrease in Investments
❖ Increase in Bills payable
❖ Increase in overall Liabilities
❖ Increase in the Share Capital
❖ Decrease in Net spread earned
❖ Decrease in Year on Year Growth
❖ Increase in Commission and Brokerage income
❖ Increase in Welfare Fund
❖ Increase in Operating Expenses
❖ Overall, decrease in Profit after taxation for the year
2020
● Growth Prospect, Competitive advantage, and Financial Analysis
● Buy or Sell Decision
● Company’s Valuation is 2,51,255 million rupees
● Terminal Value is 2,36,208 million rupees
● Share Price based on company’s valuation is 107.90 rupees
● Current stock price is 65.63 rupees
● Capital gain of 42.27 rupees as undervalued shares
● Covid-19- a reason for undervaluation
Investment decision
SELLBUY
Investment Decision
● Beta equals 0.7475 means less responsive
● WACC (14%) is greater than Risk Free Rate (13.34%)
● Negative FCFF long term rate of 5%
Thank You
Questions ???

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Meezan Bank

  • 1. http://www.free-powerpoint-templates-design.com Meezan Bank Financial analysis of Meezan Bank – including preliminary investment decision
  • 2. Contents ● Introduction of Meezan Bank ● Industrial analysis ● Growth Prospects ● Competitive advantages ● Financial Analysis ● Preliminary Investment Decision
  • 3. Introduction ● Meezan Bank was established in 1997 with a mandate to pursue Islamic banking in Pakistan. ● Meezan Bank is a subsidiary of Noor Financial Investment, a Kuwaiti company. ● It is the 6th largest bank in the country with a network of more than 760 branches in over 223 cities. ● It started operations in 2002 when the State Bank of Pakistan granted the first-ever license for Islamic Commercial Banking. ● The bank is engaged in corporate, commercial, consumer, investment, and retail banking activities. ● It operates on values such as Shariah-compliance, Integrity, and Service Excellence.
  • 4. Competitive Advantages Meezan Bank surpassed Bank Alfalah by generating $603.2 million in annual revenue in 2019. Whereas, Bank Alfalah only made $351 million as annual revenue, which is $252.2 million less revenue than Meezan Bank. Annual revenue Meezan Bank's deposits stood at Rs. 932 billion after the addition of Rs. 147 billion deposits in 2019. Deposit Utilization Meezan bank's system expanded to 760 branches in 223 cities across the country. Whereas, Bank Al-Habib's branch network stands at 718 branches nationwide and Bank Alfalah has 687 branches nationwide with 11 branches abroad. Branch Network Meezan Bank generated a profit of Rs. 15.23 billion with a year on year growth of 70 percent recorded in 2019 which is higher than both Bank Alfalah and Bank Al Habib. Profitability Meezan Bank
  • 5. Industrial Analysis ● Strong position of Meezan Bank despite high competition in banking sector ● High price earning ratio and high return on equity with low debt ratio as compared with industry averages makes it stand among its competitors ● High barriers to entry in market ● Scope of e-banking ● Cost-effective management by Meezan Bank
  • 6. Growth Prospects Bank Islami Rs. 0.291B Al-Baraka Rs. 0.163B Meezan Bank Rs. 3.57B Only 43 million registered bank accounts in a country of approximately 195 million people 1. Market Gap Meezan Bank’s profit after taxation has reached to Rs. 15,232,074 in 2019 and an increasing amount of dividends is lucrative for investors. 2. Increasing Profit Meezan Bank has almost 35 percent of market share in Islamic banking and this kind of banking is appealing to religious minds of Pakistan. 3. Market leader in Islamic Banking Top 3 Islamic Banks in terms of Profitability
  • 7. Financial Analysis PRO-FORMA BALANCE SHEET ❖ Total assets of the bank are expected to increase by an average of 7% over the next five years. ❖ The equity of the bank is expected to increase by an average of 4-5% with its equity reaching the figure of 40 Billion. ❖ Increase in Liabilities. ❖ Growth in Deposits. ❖ Growth in Investments and Placements.
  • 8. PRO-FORMA INCOME STATEMENT ❖ Increase in Bank’s Profit after tax of about 9- 10% ❖ Increase in Operating expenses ❖ Increase in Net spread earned ❖ Increase in Fee and commission income
  • 9. Effects of Coronavirus ❖ Decrease in the Profits from the financial institutions ❖ Decrease in Investments ❖ Increase in Bills payable ❖ Increase in overall Liabilities ❖ Increase in the Share Capital ❖ Decrease in Net spread earned ❖ Decrease in Year on Year Growth ❖ Increase in Commission and Brokerage income ❖ Increase in Welfare Fund ❖ Increase in Operating Expenses ❖ Overall, decrease in Profit after taxation for the year 2020
  • 10. ● Growth Prospect, Competitive advantage, and Financial Analysis ● Buy or Sell Decision ● Company’s Valuation is 2,51,255 million rupees ● Terminal Value is 2,36,208 million rupees ● Share Price based on company’s valuation is 107.90 rupees ● Current stock price is 65.63 rupees ● Capital gain of 42.27 rupees as undervalued shares ● Covid-19- a reason for undervaluation Investment decision SELLBUY
  • 11. Investment Decision ● Beta equals 0.7475 means less responsive ● WACC (14%) is greater than Risk Free Rate (13.34%) ● Negative FCFF long term rate of 5%