Meezan Bank : TRANSMISSION OF QUARTERLY REPORT OF MEEZAN BANK LIMITED FOR THE PERIOD ENDED SEPTEMBER 30, 2023

C O N T E N T S

Corporate Information	03
Directors' Review	04
Condensed Interim Unconsolidated Statement of Financial Position	12
Condensed Interim Unconsolidated Profit and Loss Account	13
Condensed Interim Unconsolidated Statement of Comprehensive Income	14
Condensed Interim Unconsolidated Statement of Changes in Equity	15
Condensed Interim Unconsolidated Cash Flow Statement	17
Notes to and Forming Part of the
Condensed Interim Unconsolidated Financial Statements	18
Condensed Interim Consolidated Statement of Financial Position	51
Condensed Interim Consolidated Profit and Loss Account	52
Condensed Interim Consolidated Statement of Comprehensive Income	53
Condensed Interim Consolidated Statement of Changes in Equity	54
Condensed Interim Consolidated Cash Flow Statement	56
Notes to and Forming Part of the
Condensed Interim Unconsolidated Financial Statements	57

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C O R P O R A T E I N F O R M A T I O N

AS OF SEPTEMBER 30, 2023

Board of Directors	Riyadh S. A. A. Edrees	Chairman
	Faisal A. A. A. Al-Nassar	Vice Chairman
	Bader H. A. M. A. Al-Rabiah
	Saad Ur Rahman Khan
	Faisal Fahad Al-Muzaini
	Tariq Mahmood Pasha
	Mohamed Guermazi
	Mohammad Abdul Aleem
	Nausheen Ahmad
	Yousef S.M.A Al-Saad
	Irfan Siddiqui	President & CEO
Shariah Board	Justice (Retd.) Muhammad Taqi Usmani	Chairman
	Dr. Muhammad Imran Ashraf Usmani	Vice Chairman
	Sheikh Esam Mohamed Ishaq
	Mufti Muhammad Naveed Alam
Management	Irfan Siddiqui	President & CEO
	Ariful Islam	Deputy CEO
	Syed Amir Ali	Deputy CEO
Board Audit Committee	Mohammad Abdul Aleem
	Faisal A.A.A. Al-Nassar
	Mohamed Guermazi
	Saad Ur Rahman Khan
Board Risk	Faisal A. A. A. Al-Nassar
Management Committee	Saad Ur Rahman Khan
	Bader H. A. M. A. Al-Rabiah
	Yousef S.M.A Al-Saad
Board Human Resources,	Riyadh S. A. A. Edrees
Remuneration & Compensation	Mohammad Abdul Aleem
Committee	Nausheen Ahmad
Board Information	Saad Ur Rahman Khan
Technology Committee	Riyadh S. A. A. Edrees
	Faisal A. A. A. Al-Nassar
	Irfan Siddiqui
Board IFRS 9 Implementation	Riyadh S. A. A. Edrees
Oversight Committee	Faisal Fahad Al-Muzaini
	Irfan Siddiqui
Resident Shariah Board Member	Mufti Muhammad Naveed Alam
Chief Financial Officer	Syed Imran Ali Shah
Company Secretary	Muhammad Sohail Khan
Auditors	A. F. Ferguson & Co., Chartered Accountants
Legal Adviser	Haidermota & Co. Advocates
Registered Office	Meezan House
and Head Office	C-25, Estate Avenue, SITE, Karachi - 75730, Pakistan
	Phone: [phone], Fax: [phone]
	24/7 Call Centre: (92-21)111-331-331 & 111-331-332
E-mail	[e-mail]
Website	www.meezanbank.com
	www.meezanbank.pk
Shares Registrar	THK Associates (Pvt.) Ltd
	Plot No, 32-C, Jami Commercial, Street 2, DHA, Phase VII, Karachi - 75500, Pakistan
	Phone: [phone]
	Email: [e-mail], [e-mail]
	Website: www.thk.com.pk

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MEBL SEP-2023

D I R E C T O R S ' R E V I E W

The Board of Directors is pleased to present the condensed interim unaudited unconsolidated and consolidated financial statements of Meezan Bank Limited for the nine-months ended September 30, 2023.

Economy

Pakistan's economy continues to navigate through a spectrum of challenges encompassing fiscal disparities, low foreign exchange reserves, political unrest and elevated global energy and commodity prices amid the ongoing Russia-Ukraine war. The Government of Pakistan (GoP) in the wake of macroeconomic pressures, rationalised imports and substantially raised domestic energy prices whilst increasing taxes to stabilize the national economy. Consequently, Pakistan's Gross Domestic Product (GDP) growth was restricted to a modest 0.3% p.a. Inflation reached an all-time high with headline Consumer Price Index (CPI) averaging at 31.4% in September 2023.

The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) has also raised its Policy Rate by a cumulative 600 basis points since December 2022, bringing the policy rate to 22.00% in June 2023. In July 2023, the Executive Board of the International Monetary Fund (IMF) granted Pakistan a 9-monthStand-By Arrangement (SBA) totalling $3 billion to serve as a stabilizing force, addressing both fiscal and trade imbalances thereby enabling financial assistance from other international and bilateral partners.

The GoP has undertaken certain measures which have successfully arrested the free fall of the Pakistani Rupee (PKR) against the United States Dollar (USD). As a result, the PKR to USD exchange rate after depreciating by 36% since January 2023 to 307 in early September 2023 has recovered to 280 in October 2023. The corrective measures have narrowed down the difference in rates between the inter-bank and open market and also partially curbed the inflationary rise. However, the pace of decline in inflation trend has been subdued by the rising energy prices. The national bourse has recently experienced a positive upturn, as the index closed at 46,232 points, surpassing the 41,452 points recorded in June 2023 and 40,420 points in December 2022. Pakistan is on track to secure the International Monetary Fund's (IMF) first economic review under its $3 billion loan programme in November, paving the way for the release of the second tranche of $700 million. The policies under the new IMF programme (SBA) would help in stabilising the country's economy and strengthen its financial buffers with the IMF expecting GDP growth of 2.5% for Pakistan in FY24.

Financial Highlights

With the grace of Allah, Meezan Bank has achieved impressive results for the nine-month period ending September 30, 2023 with a Profit After Tax of Rs 58 billion, compared to Rs

28.6 billion in corresponding period last year, a remarkable growth of 103%. This growth in profitability was driven by both volumetric expansion and higher benchmark rate. The basic Earnings per Share reached Rs 32.42 compared to Rs 15.98 in September 2022. Meezan's consistent profitability growth has led to robust internal equity generation, resulting in a healthy Capital Adequacy Ratio (CAR) of 23.37% - substantially higher than the minimum regulatory requirement of 11.50%, demonstrating our unwavering commitment to maintaining a strong financial foundation.

We are delighted to announce that the Board has approved an interim cash dividend of Rs 5.00 (50%) for the third quarter ended on September 30, 2023. This brings the total cash

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dividend for the nine months to Rs 12.00 (120%), encompassing the earlier payment of an interim cash dividend of Rs 7.00 per share (70%) during the first half of 2023. We take pride in our enduring tradition of continuous dividend distribution, dating back to our listing on the Pakistan Stock Exchange. The financial highlights of Meezan Bank are given below:

Rupees in millions

	Profit & Loss Account	Jan - Sep	Jan - Sep	Growth %
	2023	2022
	Profit / return earned on financing,
	investments and placements	303,817	153,879	97%
	Profit on deposits and other dues expensed	(149,171)	(76,730)	94%
	Net spread earned	154,646	77,149	100%
	Fee, commission and other non -funded income	15,168	15,046	1%
	Operating income	169,814	92,195	84%
	Operating and other expenses	(50,833)	(34,077)	49%
	Provision against NPLs and others - net	(4,416)	(1,735)	155%
	Profit before tax	114,565	56,383	103%
	Taxation	(56,528)	(27,787)	103%
	Profit after tax	58,037	28,596	103%
	Basic Earnings per share - Rupees	32.42	15.98	103%
	Number of branches	983	940	5%
		Rupees in millions
	Statement of Financial Position	September 30,	December 31,	Growth %
	2023	2023
	Total Assets	2,941,380	2,577,397	14%
	Investments	1,550,600	1,283,210	21%
	Islamic financing and related assets - Gross	956,699	1,018,102	(6%)
	Deposits	2,010,356	1,658,490	21%
	ADR (Gross Advances to Deposits)- %	48%	61%	(14%)
	Equity	154,144	115,321	34%

Return from financing, investments and placements witnessed a significant surge, reaching Rs 303.8 billion as compared to Rs 153.9 billion in the corresponding period previous year, marking an impressive increase of 97% - driven by the higher underlying benchmark rate and higher average volume of earning assets. Throughout this period, the Policy Rate averaged at 20.25% vis-a-vis 12.47% in September 2022, an increase of 778 basis points. Similarly, return on deposits and other dues also jumped from Rs 76.7 billion in September 2022 to Rs 149.2 billion, indicating a 94% rise which is attributable to higher average deposit and borrowing volume as well as an uptick in depositors' profit rates.

Fee and commission income also demonstrated a robust growth of 29% reaching Rs 12.4 billion from Rs 9.6 billion in September 2022, primarily attributable to a rise in number of debit cards, branch banking and trade-related income. Foreign exchange income clocked in at Rs 2.1 billion which was lower than September 2022 levels of Rs 3.9 billion. However, on a quarter over quarter basis, the foreign exchange income grew by 1.3x from second quarter

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to Rs 1.6 billion. It is pertinent to mention here that the Pakistani currency market remains volatile thereby affecting the foreign exchange income. On an overall basis, the non-funded income remained in line with September 2022.

Operating and other expenses increased from Rs 34.1 billion to Rs 50.8 billion, primarily due to persistently high inflation, rupee devaluation and strategic investments in IT-related projects. Nevertheless, the rise in expenses was absorbed by the growth in income leading to a further improvement in our income efficiency ratio. We remain committed to our cost rationalization and process automation strategy in order to achieve a more streamlined and efficient operating cycle.

Total assets have reached Rs 2.94 trillion, marking a growth of 14% or Rs 364 billion from December 2022. Investment portfolio surged by 21% compared to the previous year to Rs

1.55 trillion. This expansion is a direct result of regular Sukuk auctions of GoP. In a historical development this year, the Ministry of Finance introduced 1-year Sukuk instruments for both fixed and variable-rate rentals, marking the first time such instruments have been introduced for short term liquidity deployment for the Islamic Banking Industry (IBI). The market exhibited strong interest in these instruments, with total participation reaching Rs 259 billion, surpassing the target of Rs 170 billion across four issuances.

Due to the prevailing economic challenges and slowdown in private sector credit amidst monetary contraction, Meezan has proactively made strategic adjustments by slowing down credit lending activities and emphasizing the preservation of our financing portfolio. Consequently, our gross financing portfolio declined by 6% from Rs 1.02 trillion in December 2022 to Rs 957 billion in September 2023 depicting an Advances to Deposits Ratio (ADR) of 48%. We remain committed to retaining a high-quality and well-diversified asset mix strategically distributed across various segments, including Corporate, Commercial & SME, and Consumer markets. Meezan continues to maintain its exemplary asset quality surpassing industry standards with a non-performing financing ratio below 2%. On a prudent approach, general provision levels were increased by Rs 3.5 billion during the nine months in response to a decline in borrowers' repayment capacity, exacerbated by historically high benchmark interest rates.

Meezan's deposit portfolio demonstrated a robust growth of 21% and crossed the Rs 2 trillion landmark for the first time ever in the history of the Bank. This achievement is a testament to the trust and confidence our customers have placed in us and underscores the collective efforts of our teams who have consistently worked towards fostering strong customer relationships, delivering service excellence and upholding the core values that define our banking legacy. Current Account (CA) deposits represent nearly half of the deposit book, amounting to Rs 981 billion, recording a growth of 20% from last year. Similarly, Savings Account (SA) deposits also surged by 24% to Rs 798 billion taking our CASA deposits to Rs 1.8 trillion representing 88% of the deposit base. Meezan expanded its clientele by acquiring approximately 598,000 new-to-bank customers, supplementing its existing deposit relationships, taking the overall customer-base to 3.9 million by the end of September - an 18% growth from 2022. Meezan recently marked a triumphant three-year milestone as the dominant leader in the market in terms of funds flowing into Roshan Digital Accounts (RDA) with RDA remittances surpassing $1.7 billion since inception and commanding a significant market share of 26%. We express our sincere appreciation to the Pakistani diaspora for entrusting Meezan as their preferred banking partner.

Meezan Bank has embarked on an ambitious digital transformation strategy that not only aims to enhance customer experiences but also digitalise back-office operations to deliver smooth and speedy service to clients from all walks of life. A hybrid growth model allows for expansion of our physical presence in under-served areas of the country whilst simultaneously on-boarding customers digitally. Our branch network is strategically spread across the country with a total of 983 branches in 327 cities. The Bank's ATM network of

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over 1,100 touchpoints nationwide provide convenient access to our services 24x7. Our Merchant Acquiring business initiative, in a short span of eighteen months, has successfully empowered around 15,000 merchants across 330 cities nationwide, to accept POS and E-commerce payments digitally.

The VIS Credit Rating Company Limited has reaffirmed Meezan with highest possible credit rating - 'AAA' (Triple A) rating for the Long Term and an 'A1+' (A-One Plus) rating for the Short Term, maintaining a stable outlook.

Outlook

Meezan remains steadfast in its dedication to contribute to the nation's economic growth and stability. Our focus is on fortifying the Islamic Banking Industry and supporting the government's transition towards Islamic Finance, in line with the Honourable Federal Shariat Court (FSC)'s directive to fully transform the economy into a Shariah-Compliant financial system within the next five years. Our strategic focus is to further expand our deposit base and maintaining highest level of Shariah and quality standards. We are committed to upholding financial stability ratios that exceed regulatory requirements and aim to bolster our equity in alignment with our future growth plans.

In line with our strategy to ensure smooth succession and transition planning of our leadership team, we welcome Syed Amir Ali, one of our past colleagues in Meezan, as Deputy CEO alongside Mr. Ariful Islam until his retirement early next year. Over the next six months, he will closely shadow Mr. Ariful Islam, immersing himself in the role to assimilate organizational intricacies. Following this, Syed Amir Ali will eventually succeed Mr Irfan Siddiqui, our Founding President & CEO upon his retirement by the end of 2025. We take immense pride in the fact that our 'homegrown' Meezan Banker returns to us with a unique blend of ingrained Meezan experience, as well as broader exposure at the CEO level within the Islamic Banking industry.

We extend our heartfelt appreciation to the State Bank of Pakistan, the Ministry of Finance and the Securities and Exchange Commission of Pakistan for their unwavering commitment to establishing a sustainable Islamic financial system in the country. Our significant accomplishments would not have been possible without the proactive support of our diverse customer base, to whom we are deeply indebted. We also express our gratitude to the members of the Shariah Board, our shareholders, holders of Additional Tier I Sukuk and Subordinated Sukuk (Tier II) for their continuous patronage for establishing Meezan Bank as the leading Islamic Bank in the country.

We extend our gratitude to each member of our dedicated team for their hard work and unwavering commitment to advancing the cause of Islamic Banking. Most importantly, we bow our heads in gratitude to Allah Almighty for His continued blessings on our Bank and all of us, which have enabled us to achieve this remarkable performance in a short period. We pray that He gives us more strength and wisdom to further realize our vision of establishing Islamic banking as banking of the first choice.

On behalf of the Board

Riyadh S.A.A. Edrees	Irfan Siddiqui
Chairman	President & CEO
Karachi:
October 19, 2023

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