Meezan Bank Limited (MEBL) has posted consolidated earnings of Rs 24.5 billion (EPS: Rs 13.65) for the second quarter of 2025 (2QCY25), marking a 9% year-on-year (YoY) decline. Despite the drop in profitability, the bank’s deposits hit an all-time high of Rs 3.0 trillion, reflecting strong customer confidence and a resilient funding base.
For the first half of 2025 (1HCY25), Meezan Bank’s profit stood at Rs 46.6 billion, down by 10% YoY. Alongside the financial results, the bank declared a cash dividend of Rs 7.0 per share for Q2, taking the total payout for the first half to Rs 14.0 per share.
Decline in NII and Higher Provisions Pressured Earnings
The weaker bottom line was largely driven by a fall in net interest income (NII) and elevated provisioning charges. Profit earned fell 22% YoY, while profit expense dropped 37% YoY, leading to a 9% YoY drop in net profit earned to Rs 63.9 billion.
In contrast, non-funded income acted as a buffer. The bank recorded a 34% YoY rise (and a 5% QoQ increase) in this segment. This was primarily fueled by a 26% YoY jump in fee income, which reached Rs 2.8 billion, and a sharp surge in foreign exchange income, which soared 16.2 times YoY to Rs 1.6 billion. Other income climbed 58% YoY, although dividend income slumped 76% YoY to Rs 116 million.
Cost Efficiency Improves
Meezan Bank continued to demonstrate strong cost discipline. Operating expenses dropped 24% YoY to Rs 17.4 billion, improving the cost-to-income ratio to 23.7%, compared to 29.6% in the same quarter last year. This efficiency helped mitigate some of the impact from weaker interest margins and higher provisions.
Provisions, however, were a notable drag. The bank booked Rs 1.5 billion in charges during Q2CY25, in contrast to a reversal of Rs 935 million in Q2CY24. This was slightly lower than the Rs 1.9 billion booked in Q1CY25.
On the taxation front, the effective tax rate rose to 55.1% from 50.8% last year, further weighing on net profitability.
Deposits Reach Rs 3 Trillion – A Significant Milestone
A major highlight of the quarter was the expansion of deposits to Rs 3.0 trillion, the highest in Meezan Bank’s history. This growth underscores strong depositor trust and positions the bank favorably for future lending and investment activities.
Industry-wide, deposit growth has been a focal point, with larger banks like HBL surpassing Rs 5 trillion in deposits. Meezan’s achievement narrows the competitive gap and strengthens its market position, particularly in the Islamic banking segment.
Sector Context – Banks Face Margin Compression
The banking sector has been navigating a challenging environment in 2025. Lower policy rates have compressed net interest margins (NIMs) across the board, making non-interest income increasingly important.
Analysts had projected subdued Q2 performance for banks such as Meezan, HBL, UBL, MCB, and Bank Alfalah due to margin pressures and expected a greater reliance on fee-based and treasury income. Meezan’s results align with this trend, as growth in non-funded income partially offset interest income declines.
Strategic Insights – How Meezan Bank Stands Out
1. Resilient deposit growth – Reaching Rs 3 trillion during a period of earnings pressure signals robust customer trust.
2. Diversified income streams – The jump in FX and fee income reflects strong non-funded income generation capability.
3. Cost efficiency – A significant drop in operating expenses boosts operational resilience.
4. Provisioning discipline needed – Managing credit risk remains a priority to protect future profitability.
5. Competitive edge in Islamic banking – As the largest Islamic bank in Pakistan, Meezan continues to capture a loyal customer base.
Outlook for the Remainder of 2025
Meezan Bank’s performance in the coming quarters will likely hinge on:
- Sustaining deposit growth to maintain liquidity strength.
- Expanding digital banking channels to enhance fee-based income.
- Managing asset quality to limit provisioning spikes.
- Leveraging its Islamic banking brand to deepen market penetration.
With the State Bank of Pakistan maintaining a more accommodative policy stance, banks will need to lean on cost control and diversified income sources. Meezan Bank’s Q2 results suggest it is well-positioned to adapt, but margin pressures will continue to test profitability.
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