Karachi, July 3, 2023: Meezan Bank Limited (MEBL) has received reaffirmed entity ratings of AAA/A-1+ (Triple A/ A-One Plus) from VIS Credit Rating Company Limited, highlighting the bank’s highest credit quality and outstanding short-term liquidity.
The long-term rating of AAA signifies the highest credit quality with minimal risk factors, slightly higher than that of risk-free debt issued by the Government of Pakistan. The short-term rating of A-1+ reflects the highest certainty of timely payment and exceptional short-term liquidity, indicating that the bank has strong internal operating factors and access to alternative sources of funds.
Furthermore, VIS has reaffirmed the ratings of MEBL’s Basel 3 Compliant Tier 1 and Tier 2 Sukuk (sukuk 3 and sukuk 4) at AA+ and AAA, respectively. The outlook for the assigned ratings is stable, indicating the bank’s strong position and positive prospects.
MEBL is the first and largest Islamic commercial bank in Pakistan, with a significant market presence and franchise. With 972 branches operating in 324 cities across the country, the bank has become the fourth-largest in terms of deposits and the third-largest in terms of financings, capturing a market share of 7.60% and 8.87%, respectively. Major shareholders of MEBL include Noor Financial Investment Company (NFIC), Pakistan Kuwait Investment Company (Pvt.) Ltd (PKICL), and Islamic Development Bank, Jeddah (IDB).
The assigned ratings reflect MEBL’s robust market position, strong asset allocation, and deposit composition. The bank has shown notable growth in business assets and deposits while maintaining a robust liquidity profile. The financing and investment portfolio accounts for a dominant share of total assets, and the bank’s financing-to-deposit ratio (FDR) has increased, highlighting its efficient utilization of deposits for financing activities. MEBL’s liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) remain comfortably high.
MEBL’s asset quality stands out among its peers, with effective non-performing loan (NPL) management and high provisioning coverage. The bank’s gross infection rate of 1.47% is the lowest among large banks in Pakistan. With its exposure to blue-chip clients and substantial provisioning coverage, MEBL is well-positioned to manage emerging credit risk concerns.
In terms of financial performance, MEBL demonstrated commendable results in 2022, driven by wider spreads, improved return on average assets (RoAA), and robust fee and commission income. The bank’s strong asset quality indicators and high provisioning coverage are expected to contribute to further earnings growth in 2023.
MEBL maintains a strong capital adequacy position, exceeding the minimum requirement set by the State Bank of Pakistan (SBP) and meeting the benchmark for AAA rating. Its capitalization buffers are supported by strong profitability and a lower payout ratio. The bank’s capital adequacy ratio (CAR) is expected to remain comfortable, driven by robust internal capital generation, strong credit quality, and lower exposure to market risk compared to its peers.
The reaffirmation of MEBL’s entity ratings underscores its stable financial position, strong risk management framework, and ability to navigate market challenges. The bank’s commitment to providing Islamic banking solutions while maintaining high standards of credit quality and liquidity further enhances its reputation in the banking industry.
