Pakistan’s largest Islamic bank, Meezan Bank Limited (PSX: MEBL), is poised for significant stock growth, with Arif Habib Limited (AHL) projecting a target price of Rs448.3/share by June 2026, indicating a potential 28% upside from its last closing price of Rs350.7/share.
AHL has reaffirmed its ‘Buy’ rating on the stock, citing the bank’s solid fundamentals, stable margins, and exceptional ability to weather regulatory changes.
The forecast arrives ahead of the upcoming enforcement of the Minimum Deposit Rate (MDR) on Islamic banks starting January 2025 — a move that initially raised alarms across the sector about margin pressure. However, Meezan Bank has shown impressive resilience, maintaining a 7.8% savings rate on Profit and Loss Sharing (PLS) accounts in 1QCY25.
Regulatory flexibility, including the State Bank of Pakistan’s decision to include fixed assets in gross yield calculations, has further cushioned potential negative impacts and contributed to sector-wide stability.
One of Meezan Bank’s strongest assets remains its robust deposit strategy. The bank is expected to surpass Rs3 trillion in deposits, backed by an impressive five-year average deposit growth of 23%. With current accounts projected to exceed 50% of the total deposit base, the bank’s cost of deposits is expected to remain at just 3.4%, far below the industry average — ensuring healthy margins.
Although Net Interest Margins (NIMs) are forecasted to dip from 9.6% in CY24 to 6.7% in CY25 due to interest rate normalization, this is expected to be offset by volumetric growth, improved asset deployment, and an expanding base of low-cost deposits.
Meezan Bank also continues to outshine its peers in asset quality, with a non-performing loan (NPL) ratio of just 2.1% as of 1QCY25 — significantly below the sector average of 6.4%. This is projected to further improve to 1.6% by year-end, supported by a coverage ratio of 162%.
Operationally, the bank demonstrates exceptional efficiency, maintaining a cost-to-income ratio of 35%, aided by prudent expense management and a limited branch network.
Dividend payouts are expected to remain strong at Rs28/share, reflecting Meezan’s solid core profitability and capital strength.
With a sector-leading funding model, unmatched asset quality, and forward-looking risk management, Meezan Bank is firmly positioned to outperform in a changing banking environment, making it a compelling choice for investors seeking long-term value in Shariah-compliant finance.
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