UNITED BANK LIMITED - UBL

MARIAM NASIR
Manager Research

Apr 09 - 15, 2007

ABOUT THE COMPANY

United Bank Limited is one of the leading banks in Pakistan with assets in excess of US$6 billion. The bank has nearly 1050 branches in Pakistan, as well as offices or subsidiaries in more than ten countries. The Abu Dhabi Group is a consortium whose members make joint investments in UAE and overseas. United Bank Ltd, previously state owned, was privatized in 2002 and sold off to a consortium of Abu Dhabi Group of UAE and Bestway Group of the UK. The bank is a part of the Big five group of banks in Pakistan and the turnaround that has been witnessed post-privatization has yielded rich dividends. The bank has the distinction of being one of the first banks to offer a full range of corporate, SME and consumer products to its clients.

LAUNCH OF UBL INSURERS LIMITED

UBL launched its insurance business as 'UBL Insurers' this year on January 05, 2007, a subsidiary of United Bank Limited and jointly owned by UBL Abu Dhabi Group, UAE and Bestway Group, UK. The paid up capital of the company is Rs.300 million, which makes it the fourth largest in the industry amongst non-life, private insurance companies. The insurance sector itself is expected to achieve substantial growth (in excess of 20% p.a) over the next five years, driven by a strong banking sector, higher FDI and growth in manufacture sector. As a non-life insurance UBL is covering auto, marine, fire and general insurance. The company seeks to bring together benefits of banking and insurance service by offering a more comprehensive financial solution to the customers.

LAUNCH OF UBL AMEEN

The size of the Islamic banking industry presently stands at US$ 140 Billion and is one of the fastest growing industries in the world. UBL also ventured into the Islamic banking industry this year in the Fourth Quarter 2006 with 'UBL Ameen' branch opening in the heart of Karachi. Through this the bank will target the customers through dedicated UBL Ameen Islamic Banking branches as well as specialist Islamic Banking counters at selected UBL branches by offering a range of Riba-Free and Shariah-Compliant banking product.

STRONG OFFSHORE BANKING

Offshore banking is fast proving to be one of UBL's core selling points. While other banks have usually utilized their offshore branch network to supplement their trade activities and generate remittances business, UBL has been actively engaged in broader banking activities in countries where it has licenses to do so. The banks prime focus is on the Middle Eastern Markets. The effects are visible on the asset generation side as well. The year 2006 was no different with overseas advances portfolio growing by 24%. Tough competition and relatively low spreads in overseas operations allowed profit before tax to rise only 20%. Apart from providing diversification benefits to UBL's operations, offshore banking also enables it to offset the impact of increasing competition in local markets.

GDR ISSUE IN THE PIPELINE

Realizing the potential of nationalized assets, Government of Pakistan sought innovative ways of offloading government stakes in nationalized entities. The Privatization Commission and Securities and Exchange Commission of Pakistan permitted listed companies satisfying the prescribed norms meet their growing appetite for capital within the country - and not scout for it outside by issuing GDRs. The Government has been trying to offload part of its stake in UBL since June 2005, when it tried to sell 15 percent through an initial public offering that eventually failed to draw enough subscribers. Recently Pakistan launched an ambitious sell-off of state assets through Global Depository Receipts, beginning with Muslim Commercial Bank (MCB) followed by OGDC listing in London in December last year. Now the government is planning to do the same for UBL and for that purpose it has appointed a consortium of Merrill Lynch and local KASB Group to manage the global share sale of United Bank Ltd. UBL would be the first stock to be presented on the GDR block in 2007. Though complete details about the size and timing of the transaction have not been revealed but sources familiar with the matter said the government plans to sell a stake worth $200 million to $300 million through a global depository receipt (GDR) sale. The government is only selling part of its roughly 45 percent stake in UBL, and the deal is expected to be completed by the end of June.

FINANCIAL AND OPERATIONAL PERFORMANCE

The growth in the business was as a result of the pursuance of two pronged strategy i.e. market optimization and geographic expansion. New initiatives in Secured Products included line extensions in Auto Finance and Home Finance. UBL's VISA Credit Card crossed the 2 lac mark by the end of the year 2006. Commercial Banking Group achieved noteworthy success in the calendar year. The Investment Banking Group also contributed heavily in the banks profitability as it concluded new deals worth Rs.46 Billion. All these areas resulted in a huge jump in profitability of the bank. During the year the banks witnessed an increase in profitability by 59% to Rs.9.4bn as against Rs.5.9bn last year. Deposits rose by 16% to Rs. 335bn in 2006, after improving by 25% in 2005. Advances also witnessed a surge of 21% to Rs.247bn. Hence the Advances to Deposit Ratio in 2006 stood at 74%, last year being 71%.

(RS IN MILLIONS)

 

2005

2006

CHANGE

Interest Income

20,159

32,992

64%

Interest Expense

6,046

12,127

101%

Net Interest Income

14,113

20,865

48%

Profit Before Taxation

9,482

14,292

51%

Taxation

3,533

4,824

37%

Profit After Taxation

5,949

9,468

59%

Advances

204,810

247,310

21%

Deposits

289,226

335,078

16%

ADR Ratio (%)

71%

74%

4%

Investments

63,027

67,260

7%

Assets

347,049

423,320

22%