Research Analyst
July 12 - 18, 2010

United Bank Limited is one of the largest commercial banks in Pakistan. UBL has assets of over Rs620 billion and a solid track record of fifty years in addition to the convenience of over 1121 branches serving throughout the country and also at several overseas locations. The bank operates in corporate finance, trading and sales, retail banking, commercial banking, and asset management segments.

The bank's long term rating is AA+, which denotes good credit quality. The short-term rating is A-1+, which denotes the highest certainty of timely payment. Short-term liquidity, including internal operating factors and/or access to alternative sources of funds, is outstanding and safety is just below risk free government of Pakistan's short-term obligations.


UBL achieved a profit after tax of Rs2.8 billion which is 10 per cent higher than the corresponding period last year and this translates into earnings per share of Rs2.50 (March 2009: Rs2.28). Against the backdrop of the global financial crisis and a challenging regional environment, the bank adopted a strategy in line with its long-term objective of delivering consistent returns. The strategy was to focus on increasing low cost deposits base resulting in increased earnings from core banking businesses.


INDICATORS MARCH 31, 2010 DEC 31, 2009
Investments 141,493,305 136,145,524
Advances 331,482,412 354,091,713
Lending 13,746,114 23,162,130
Borrowings 40,034,008 35,144,823
Deposits 451,260,216 492,036,103
. MARCH 31, 2010 MARCH 31, 2009
Profit After Tax 2,783,522 2,535,909
EPS 2.50 2.28

The bank increased the level of general loan loss provisions with an emphasis on building a strong balance sheet. Accordingly, the results reflect a PAT of Rs2.8 billion in 1Q'10 compared to Rs2.5 billion in 1Q'09, an increase of 10 per cent.

Net interest income grew by 3 per cent whereas non-interest income increased by 7 per cent mainly on account of higher commissions on cash management, trade income and the higher dividend income. As a result, operating revenue is up by 4 per cent to Rs10.6 billion as compared to last year. Net interest income before provisions is up 3 per cent to Rs8.1 billion from the same period last year reflecting an increase in net interest margin of 30 basis points to 7.1 per cent from March 2009. However, net interest income after provisions is up 6 per cent at six billion rupees. Net provisions for the quarter came in at Rs2.1 billion compared to Rs2.2 billion for the corresponding period last year. However, it is important to note that the provision expense this quarter is lower than the quarterly provision expense taken in each of the last three quarters.

Advances are down by six per cent which has been the result of tighter credit policies. Deposits are also lower by eight per cent over Dec' 09, however 75 per cent of this reduction is due to the shedding of high cost deposits.

Non-interest income strengthened to Rs2.4 billion as compared to Rs2.3 billion (higher by 7 per cent). Fee and commissions increased by 14 per cent owing to higher commission on cash management and trade income. Dividend income increased to Rs138 million as compared to Rs35 million. However, exchange income declined by 25 per cent over the corresponding period last year.

Administrative expenses increased by four per cent over the corresponding period last year mainly due to personnel and premises cost. Personnel cost was only up by one per cent which was a result of headcount reduction by 875 (6 per cent) to 13,872 from Mar'09. This headcount reduction was mainly due to efficiency improvements, process restructuring initiatives, and reduction in consumer lending. Premises cost attributes to half of the increase as a result of higher gas, electricity and insurance charges. In spite of significant inflationary pressure (Feb'10 YoY CPI at 13 per cent), UBL has managed to achieve considerable cost efficiencies during the year. Total assets have decreased by Rs34 billion to Rs586 billion during the first three months of the year with investments increasing by four per cent to Rs141 billion.


The economic landscape continued to show positive signs as most of the economic indicators recorded significant improvement in the first eight months of FY10 with current account deficit down by 68 per cent, remittances up 18 per cent, trade deficit down 21 per cent, and large scale manufacturing up by 2.4 per cent. CPI for Mar'10 was recorded at 12.9 per cent YoY down from 14.4 per cent in Mar'09. However, the recent rise in international oil prices and ongoing energy crises pose significant risks to the local economic recovery.

The monthly inflation is on the rise which has prompted SBP to keep discount rate unchanged. March'10 was an eventful quarter for Pakistan.


For UBL this year, the focus should be on strengthening Casa and achieving provision write-backs through negotiations and restructuring efforts. The bank continues to develop its non-fund income streams which provided a significant cushion for them against the deteriorating asset quality environment of 2009. Given the improving macroeconomic backdrop, the improvement in asset quality as well the private sector credit off-take will help UBL in delivering a strong growth in profitability in 2010.