Oct 31 - Nov 13, 2005

Union Bank's spreads have kept a healthy trend as a result of high-yielding consumer assets. Profit before tax aggregated to Rs2,007 million, a healthy increase of 99 per cent over the same period last year. Profit after tax amounted to Rs1,250 million compared to Rs597 million in the corresponding period last year, registering a growth of 109 per cent. Over 95 per cent of total income of the bank is derived from its core banking operations. As a result, gross revenue has increased by 74 per cent, with Rs7,376 million compared to Rs4,236 million in the same period last year. The Pakistan Credit Rating Agency (PACRA) upgraded Union Bank's long-term rating to 'AA-' and short-term rating to 'A1+'.

Major contribution was made by net interest income (NII) of the bank, which grew by 65% to Rs3.3bn from Rs1.9bn a year earlier.

Non-interest income of the bank grew by 54 percent to Rs 1.8 billion where major share (76 percent) was made by fee commission and brokerage income of the bank. On the expense side Administrative expense of the bank increased by 25 percent to Rs 2.4 billion. As expected, Union Bank did not announce any pay out with the results. The bank has already paid 15 percent bonus shares with first half of 2005 results.

As on June 30, 2005 Union's one third advances were allocated in high yielding consumer segment whereas at the same time total share of consumer financing was 11.4% in the total advances of the banking sector. This is the reason that the interest rate spread of the Union Bank remained on the higher side as compared to the industry average. In 1H2005, net interest margin (NIM) of the bank was 5.4 percent as against the sector average of 4.3 percent.

Shaukat Tarin said in last analyst briefing the share of consumer in the advances portfolio will increase as (for 1H2005 results) that they have 9 consumer finance business (not products) and only 3 are profitable currently and remaining businesses has been reached closer to their break even.

Ever since the management change in 1999, and under the flagship of Shaukat Tarin, Union Bank has shown great commitment and professional expertise towards developing a vibrant corporate & consumer market in Pakistan. Its balance sheet size has grown from Rs. 14 billion in 1999 to around Rs. 75 billion in 2004. Union Bank is currently operating in 19 cities with 42 branches and is poised for major growth both locally and internationally in future. Union Bank has a diversified product range in the areas of Branch Banking, Corporate Banking, SME, Credit Card and Consumer Assets Category.

Union Bank's vision goes beyond local operation. The bank's aim is to become a prominent Pakistani bank with substantial international presence. With a wide range of products & services and management expertise in all functional areas of banking, Union Bank finds itself best positioned to embark on international operations.

In order to establish an international network Union Bank has been evaluating several emerging economies in Europe, Southern Africa and South Asia. The criteria for the selection of the country includes the level of economic activity, the demand for consumer products (Union Bank's core competency), and the trade and economic relations with Pakistan.

Union Bank selected Sri Lanka as the first venue for commencing its international business. The historically warm relationship between the two countries provides Union Bank a congenial platform to start its offshore operations. Sri Lanka is one of the fastest growing economy in the region and the bilateral trade agreement between Pakistan and Sri Lanka will not only help to boost trade but will further strengthen the relationship between the two countries. With economic and cultural similarities between the two countries, Union Bank believes that it will be able to leverage its success in Pakistan to Sri Lanka as well.