UNITED BANK LIMITED

S.KAMAL HAYDER KAZMI,
(feedback@pgeconomist.com)
Research Analyst
, PAGE
Jan 2 - 8, 2012

UNITED BANK LIMITED (UBL) IS ENGAGED IN COMMERCIAL BANKING AND RELATED SERVICES.

The bank has four business segments. Corporate banking offers services in connection with mergers and acquisition, underwriting, privatization, securitization, research, debts, equity, syndication, initial public offering and secondary private placements.

Trading and sales includes fixed income, equity, foreign exchanges, commodities, credit, funding, own position securities, lending and re-purchase and prime brokerage.

BALANCE SHEET (RS. '000)

INDICATORS (UN-AUDITED)
SEP 30, 2011
(AUDITED)
DEC 31, 2010
Lending to financial institutions 15,489,254 11,934,778
Investments 267,350,281 224,578,556
Advances 325,742,831 333,732,172
Deposits and other accounts 557,210,336 550,645,767

Retail banking includes retail lending and deposits, banking services, trust and estates, private lending, deposits, banking service, and trust and estates investment advice and merchant/commercial/corporate cards. Commercial banking includes project finance, real estate, export finance, trade finance, and factoring.

In addition, the bank operates 1200 branches all over Pakistan including seven Islamic banking branches, one branch in Karachi export processing zone, and 17 branches outside Pakistan.

UBL has assets of over Rs747 billion and a solid track record of over fifty years.

For the nine months ending September 30, 2011, UBL achieved a profit after tax of Rs11 billion. This is 36 per cent higher than the corresponding period last year and translates into earnings per share of Rs8.95 (Sep 2010: Rs6.58).

For the same period, UBL's profit before tax is Rs16.8 billion, 30 per cent higher than the same period last year. This has been achieved through growth in the balance sheet and continued improvement in operating efficiency and margins.

On a consolidated basis, UBL achieved a profit after tax of Rs10.6 billion, an increase of 34 per cent over the nine months ended 30th Sep 2010.

Net interest income before provisions increased to Rs29.6 billion, 18 per cent higher than the same period last year, driven largely by a 15 per cent growth in the balance sheet.

Spreads also improved as the yield on earning assets increased by 72 bps, while the growth in cost of funds was contained to 43 bps. As a result, net interest margin increased from seven per cent in Sep 2010 to 7.3 per cent in Sep 2011.

Provisions for the nine months increased by Rs0.4 billion compared to the corresponding figure last year. However, this was mainly due to the aging of already classified accounts and resulted in improvement in the bank's coverage ratio from 72 per cent in Sep 2010 to 75 per cent in Sep 2011. Nonetheless, with balance sheet growth and improved margins, net interest income after provisions increased by 22 per cent to Rs231 billion.

INTEREST RATES IN PAKISTAN

DATE RATES (%)
30-Jan-10 12.5
27-Mar-10 12.5
24-May-10 12.5
2-Aug-10 13
30-Sep-10 13.5
30-Nov-10 14
1-Aug-11 13.5
9-Oct-11 to date 12

The capital adequacy ratio (CAR) of the bank improved to 15.2 per cent in Sep 2011 (Sep 2010: 14.4 per cent).

The bank managed to keep its administrative expenses flat to the prior quarter due to tight cost controls. For the nine months, administrative expenses grew by 14 per cent despite significant inflation, escalating utilities costs and the bank's significant investments in network expansion and technology.

The prevailing power and gas shortage continues to severely hamper all sectors of the economy and is an issue that needs to be resolved on priority basis.

The stock market has shown mixed trends in 2011. Deposits for the banking sector grew 5.7 per cent over the nine months, although they were 3.2 per cent below June 11 levels.

With subdued economic activity across the country, the banking sector remains cautious, as evidenced by a 2.3 per cent decline in advances during the nine months with the additional liquidity fuelling a 32 per cent rise in investments. Non-performing loans (NPLs) formation appears to be easing as NPLs increased by less than one per cent during Q2 2011, compared to a growth of 3.9 per cent in Q1.

FUTURE OUTLOOK

The macroeconomic landscape in Pakistan is beginning to show signs of improvement as inflation numbers eased and stability prevailed on the external account.

Revision of the base year and the inflation basket along with the high prior year base effect led to year-on-year (YoY) inflation for September 2011 declining to 10.46 per cent.

The macroeconomic outlook is dependent on the ability of the government to improve revenue collection and control inflation, energy shortages and the law and order situation across the country.

UBLís focus areas in 2012 will be on expanding its network, growing its balance sheet through acquisition of low cost deposits, selectively enhancing its lending portfolio and continuing to focus on asset quality and strengthening the capital base.

The bank will continue to invest in brand building activities and technology, especially in the area of non-traditional banking channels, to implement cost effective and innovative customer solutions.