KARACHI: Deposit growth for the Meezan Bank has been 1.6x of the industry. The deposit growth in 2020 clocked in at 35% YoY, taking 2020 deposits to Rs 1.254 trillion.
The management feels that this kind of growth is unlikely. The deposit growth is expected in the range of 12-16% for 2021.
As per the management, the exceptional 49% YoY growth in Current Account (CA) deposits is attributed to limited business activity due to COVID-19 outbreak. The bank aims for CA as a percentage of Total Deposits to hover around the 39-40% mark.
The deposits comprise 69% of Individuals, 28% of Private sector and 3% of Public/government.
IDR has increased to 35% from 30% in third quarter 2020. Increased exposure to government guaranteed investments have reduced Risk Weighted Assets.
Financing products offered primarily include auto financing and mortgage financing. Auto financing during lockdown came to a virtual standstill, but a strong revival has been seen in the latter half.
The demand is expected to pick up going forward given the prevalent low interest rate environment. Sectors such as cement and steel have already seen a strong pick up.
Loan growth target is between 10-12% for 2021.
Development on mortgage financing is ongoing in light of the SBP housing directives. The bank has deferred principle amounting to Rs 29 billion, which is 6% of the total portfolio.
Specific provision of Rs 4.4 billion has been booked related to one concern. The management has taken an extremely cautious stance.
Net Interest Income have increased due to higher volumes of earning assets, and lower cost of funds due to immediate re-pricing of deposits amid interest rate cuts.
Fourth quarter 2020 saw Non-Funded Income increase by 36% QoQ. This was driven by trade income, debit card charges and SMS charges, the management said.
The management does not expect major impact of IFRS-9 on profitability as significant amount has been provided under General Provisioning.
Payout ratio is targeted to be in the range of 35%-40% which is an optimal for balance sheet growth along with maintaining CAR position. Additionally, the management has budgeted an average ROE of 20-25% for 2021.