Meezan Bank Limited (PSX: MEBL), Pakistan’s largest Islamic bank, is projected to reach a share price of Rs448.3 by June 2026, representing an upside potential of 28% from its recent closing price of Rs350.7. This forecast comes from Arif Habib Limited (AHL), which continues to rate the stock as a ‘Buy’ due to Meezan’s strong fundamentals and its strategic handling of upcoming regulatory developments.
The banking sector is bracing for the implementation of the Minimum Deposit Rate (MDR) on Islamic banks beginning January 2025. Initially, this regulatory change sparked concerns across the industry regarding potential margin pressure and spread compression. However, Meezan Bank has shown notable resilience. Its saving rates on Profit and Loss Sharing (PLS) accounts stabilized at 7.8% in the first quarter of calendar year 2025, mitigating fears of earnings volatility.
Meezan Bank has also benefited from recent regulatory support, such as the State Bank of Pakistan’s (SBP) decision to allow the inclusion of fixed assets in gross yield calculations. This move has helped cushion the sector from some of the shocks associated with MDR enforcement, enhancing overall financial stability.
AHL emphasized that Meezan’s strategic deposit framework remains a pivotal strength. The bank is poised to surpass Rs3 trillion in total deposits, fueled by a five-year average deposit growth of 23%. This growth is underpinned by an increasingly favorable deposit mix, with current accounts expected to constitute over 50% of total deposits. Consequently, Meezan’s cost of deposits is projected to remain at 3.4%, significantly lower than the industry average, ensuring greater margin flexibility.
Looking ahead, interest rates are expected to normalize, with forecasts suggesting a decline to around 10%. As a result, Meezan’s net interest margins (NIMs) are anticipated to reduce from 9.6% in 2024 to 6.7% in 2025. Despite this contraction, the bank’s earnings outlook remains positive due to its growing low-cost deposit base and disciplined approach to asset deployment, which collectively support sustained profitability.
Asset quality continues to distinguish Meezan Bank from its peers. The bank’s non-performing loan (NPL) ratio stood at a low 2.1% in 1QCY25, in contrast to the sector average of 6.4%. AHL projects this ratio will improve further to 1.6% by the end of 2025, backed by a healthy coverage ratio of around 162%. These figures underscore the bank’s prudent risk management strategy and robust provisioning, which have enabled it to maintain portfolio strength even amid a high-interest rate climate.
Meezan also remains operationally efficient, with a cost-to-income ratio projected at 35% in CY25. This efficiency is driven by controlled expense growth and a conservative branch expansion policy. Furthermore, the bank is expected to sustain a healthy dividend payout of Rs28 per share, supported by its strong capital position and solid core profitability.
With sector-leading asset quality, a cost-efficient structure, and a growing, low-cost deposit base, Meezan Bank is well-equipped to adapt to the changing banking environment. AHL’s reaffirmation of its ‘Buy’ rating reflects confidence in the bank’s long-term value creation for shareholders.