Research Analyst
Mar 30 - Apr 05, 2009

United Bank Ltd's (UBL) principal activities are to provide commercial banking and other financial services. The group offers personal banking, cash management, retail loans and other financial services. These services include deposits, savings/current bank account, vehicle loans, personal loans, retail trade finance, global banking, lending to priority sector and small scale sector, foreign exchange and export finance, corporate loans and equipment loans.

The bank operates 1,119 (2007: 1,078) branches including five (2007: 05) Islamic banking branches.


(Rs 000)

Total Assets 605,072,482
Deposits 483,560,062
Advances 371,139,675
Total Liabilities 561,209,723
Interest Income 28,135,659
Admin Exp 15,519,634
Profit Before Tax 13,874,424
Profit After Tax 8,333,120
EPS 8.24
Source: UBL

UBL has earned a profit before tax of Rs 13.9 bn, which is higher by 7% than the same period last year. Profit after tax at Rs. 8.3 bn translates into earnings per share of Rs. 8.24. The profitability for 2008 has been impacted by decision to route 50% of the impairment loss on the equities portfolio through the P&L.

Net interest income before provisions grew by 17% to Rs 28.1 bn from the same period last year mainly owing to a 24% increase in advances. The net provisions also take into account the Rs. 1.88 bn impairment loss booked on equities and an additional Rs. 349 mn impairment of investment in associates. Non-interest income continued to perform during the period with an increase of 16% to Rs. 10.4 bn. The volatility in the Pak rupee contributed to healthy exchange gain income, which was doubled to Rs. 1.8 bn.

Overall administrative expenses increased by 16% over the corresponding period last year despite significant inflationary pressures. Total assets have grown this year by Rs. 75 bn (up 14%) to Rs. 605 bn over the corresponding period with net advances increasing by 24% to Rs. 371 bn and deposits by 21% to Rs. 484 bn.

Deposits reflect solid growth of 21% to Rs. 484 bn with domestic deposits increasing by Rs. 49 bn (15%) to Rs 380 bn which resulted in the market share growing from 9.1% in Dec 2007 to 9.6% in Dec 2008. Low cost deposits accounted for one third of the increase. Advances grew by 24% at Rs 371 bn. Domestic advances have accounted for 46% of this increase as a result of a strong push in the corporate financing sector.


Currently, the cumulative profit of 22 listed commercial banks has declined by 21 % to Rs 50.3 bn in the year 2008 as compared to Rs 63.6 bn earned in the same period in 2007, mainly due to higher provisions for non-performing loans (NPLs) and impairment loss. Total provisions for NPLs surged to Rs 53 bn in 2008 as against Rs 42 bn in 2007, an astounding growth of 27% largely due to slowdown in economic growth.

Moreover, stock market crash in the second half of 2008 resulted in bank recognising impairment loss of Rs 12 bn as against only Rs 287 mn recognised in 2007. High spreads of 7.29% in 2008 and strong advances growth of 19% supported the net interest income, while non-interest income increased by 11% on the back of surge in exchange gain as rupee remained volatile against the dollar.

It is estimated that the banks went profitable in 2002 and thereon a consistent growth trend was witnessed till 2006 - the peak of the sector with profits of Rs 84.1 bn. In 2008, the cumulative profitability of the sample banks once again declined massively by 21% to Rs 50 bn versus Rs 64%, previously. Furthermore, the net interest income (NII) of the listed banks increased by 19% to Rs 206.6 bn, attributable to stable spreads observed during the year along with a 17% growth in advances that was mainly spurred by the banks lending for circular debt and commodity operation. Whereas, interest expense to interest income ratio stood 4pps higher at 48%, owing to half year impact of SBP's regulation requiring the banks to give minimum 5% on saving accounts deposits. Non interest income, other than capital gain, registered a growth of 35% largely supported by income from dealing in foreign currency.


UBL's e-Transaction Account is specially designed to facilitate e-banking customers. This product is targeted towards customers of all age groups and gender who are interested in using electronic banking services to manage their accounts as well as to fulfill their day to day banking needs. This product has all the benefits of the Current Account subjected to maintenance of required balance. The most important feature of this product is its structuring with UBL's 'Banking products plus the various waivers & rebates linked to the average balance maintained in these accounts.


Dec-2008 Rs 5 bn
Dec-2009 Rs 6 bn
Dec-2010 Rs 10 bn
Dec-2011 Rs 15 bn
Dec-2012 Rs 19 bn
Dec-2013 Rs 23 bn
Various sources


The global economic conditions unroll domino effects on Pakistani economy. The financial sector is facing downsides and may take a few months to recover as the corrective measures take an affect. To restore macroeconomic stability and improve credit supply, SBP took a number of measures in phases and relaxed the CRR and SLR. In 2008, the State Bank announced new paid up capital requirements for next five years. Despite these challenges, however, UBL has produced healthy results.

The strategic challenges for next year will effectively manage asset quality, maintain adequate liquidity, and strengthen the capitalization. UBL should focus on strengthening risk and liquidity management which will yield positive results.