United Bank Limited, one of the largest commercial banks in Pakistan, recently inked a memorandum of understanding (MoU) with the German Embassy in Islamabad. Through this collaboration, Pakistani students aspiring to obtain student visas for further studies in German educational institutions, will be facilitated through UBL by blocked funds in euro accounts sustained with UBL. This will offer comfort to the Embassy that the students have sufficient funds available to cover their living expenses. These blocked funds would be later remitted to the student’s account in Germany.
No doubt, the management of the bank always continues to capture increased market share by targeting new to bank clients also deepening existing relationships. Optimizing network performance remains a main priority as the management aims to ensure that the whole estate delivers strong growth in average volumes.
The management also aims to further enhance asset quality and expedite recoveries.
United Bank posted unconsolidated profit before tax (PBT) of Rs11.16 billion during the quarter closed March 31, 2017, in line with the level of earnings in Q1 2016. Expense growth stayed well contained at 1 percent over Q1 2016, while the cost to income ratio reached at 42.6 percent (Q1’16: 38.5 percent). With the strong focus on recoveries, the overall provisioning charge was declined by Rs1.88 billion in comparison to Q1 2016.
UBL recorded profit after tax (PAT) of Rs7.26 billion in Q1 2017, 1 percent lower than the PAT registered in Q1 2016. EPS (Earnings per share) reached at Rs5.93 (Q1’2016: Rs5.96). On a consolidated basis, UBL registered profit after tax of Rs7.58 billion (Q1’2016: Rs7.56 billion). Net markup income rose by 1 percent to reach Rs13.71 billion in Q1 2017. Earning assets averaged at Rs1.29 trillion in Q1 2017, a growth of 10 percent yearly, with net interest margins registered at 4.4 percent (Q1’2016: 4.8 percent).
Balance sheet expansion has been financed through strong growth of 11 percent in average domestic deposits. The domestic cost of deposits was registered at 2.8 percent during Q1 2017 (Q1 2016: 3.0 percent) driven by a 17 percent growth in average current deposits.
The Pakistan Investment Bonds portfolio continues to yield healthy returns. In addition, a steady build-up in the loan portfolio has also assisted sustain interest earnings.
At Rs6.28 billion in Q1’2017 (Q1 2016: Rs8.36 billion), non-markup income contributed 31 percent of overall revenues. Fees and commissions amounted to Rs2.79 billion (Q1 2016: Rs3.18 billion) and stayed the largest component of non-mark-up income. With growing market penetration, bancassurance revenues were up 64 percent yearly. Furthermore, strong momentum was registered in commissions on ATMs / debit cards.
The management remains a leading player in the home remittances space, sustaining revenues yearly despite subdued volumes. Capital gains of Rs2.3 billion were realized in the current quarter (Q1 2016: Rs3.8 billion), largely on the long term government securities portfolio. Dividend income was registered at Rs0.55 billion, a growth of 28 percent over Q1 2016, with strong yield sustained on the equities book. Foreign exchange income reached lower at Rs0.4 billion as the market stayed relatively range bound, thereby restricting trading opportunities. There has been a marked reduction in provisioning expense from Rs1.96 billion in Q1 2016 to Rs80 million during Q1 2017, driven by proactive NPLs management and improved focus on recoveries. The overall NPLs ended at Rs44.5 billion, largely at the December 2016 level, with asset quality at 8.3 percent (December 2016: 8.1 percent). Coverage has enhanced from 83.9 percent at December 2016 to 84.3 percent at March 2017. UBL’s balance sheet size grew by 3 percent over December 2016, reaching Rs1.63 trillion (December 2016: Rs1.58 trillion).
Overall deposits ended at Rs1.18 trillion, slightly ahead of December 2016 levels. Average domestic deposits increased by 11 percent over Q1 2016 with market share at 8.52 percent at March 2017 (December 2016: 8.44 percent). Deposits momentum is led by active acquisition of new to bank relationships also rigorous cross sell.
Current accounts have been the primary focus of its deposits mobilization policy, depicted by a 15 percent growth in average core deposits and a 17 percent growth in average current accounts. Resultantly, domestic cost of deposits has seen a 23 bps reduction from 3.0 percent in Q1 2016 to 2.77 percent in the current quarter.
The Bank’s gross advances were recorded at Rs. 539 billion, down 2 percent over December 2016, chiefly as a result of seasonal repayments on commodity financing. Lending continues to be directed by considerations of credit quality and maximizing overall yield on relationships.
Investments stood Rs867 billion, a 7 percent growth over December 2016. The management maintains a well-balanced portfolio across fixed income securities also high yielding equities and mutual funds.
The gross revaluation surplus on investments ended at Rs23.2 billion at March 2017 (December 2016: Rs23.3 billion), despite capital gains of Rs. 2.34 billion realized during the quarter.
UBL’s capital ratios reached strong as the Tier-1 and the overall capital adequacy enhanced to 11.1 percent and 15.5 percent at March 2017 respectively.