Company News - United Bank Limited

United Bank Limited OVERVIEW (December 10, 2013) :Founded in 1959, UBL is the third largest bank of Pakistan with an asset-base of over Rs1 trillion. The bank operates over 1,200 branches across Pakistan which includes 22 Islamic banking branches and 1 branch in the export processing zone. Besides, the bank also runs 18 branches outside Pakistan. With a credit rating of AA+, and a customer base of over 3.5 million customers, UBL is in the limelight banking and financial services in Pakistan. UBL has played a vital role to provoke financial inclusion in Pakistan through its branchless banking division "UBL Omni". Omni is the only Branchless Banking service in Pakistan which provides an ATM Card instantly. UBL Omni Dukaans are located in more than 650+ cities and towns across Pakistan Omni Account can be opened anytime from any of 8,500+ Omni Dukaans spread nationwide. It can be operated easily using mobile phone and offers various services like Money Remittance, Utility Bill Payments and Mobile Voucher purchases. UBL Omni has won the GSMA Global Mobile Award 2012 for "Best Use of Mobile in Emergency or Humanitarian Situations". In 2012, UBL-led consortium acquired 67.45 percent stake in Khushhali Bank Limited, the largest Microfinance bank of Pakistan, of which UBL holds 29.7 percent share. The bank's ordinary shares are listed on all three stock exchanges in Pakistan and its Global Depositary Receipts (GDRs) are on the list of the UK Listing Authority and the London Stock Exchange Professional Securities Market. Financial Performance, 9M CY13 The low discount rate backdrop and tilt of asset-mix towards low-yielding investments took its toll on the top line of UBL during 9M CY13 which dipped by 2 percent year on year. Coupled with the drop in mark-up income, the growth in mark-up expense owing to a healthy 19 percent year-on-year jump in deposits plopped down the Net Interest Margin (NIM) by 5 percent year on year. During the period under consideration, the bank remained focused on investments which grew by 19 percent year on year. Conversely, the modest year-on-year growth of 4 percent in the advances is representative of loans advanced outside Pakistan with incremental corporate lending in UAE and Qatar. UAE represents the largest market of UBL outside Pakistan with a share of around 66 percent in the banks' international loan book. As of September 2013, domestic loans account for 65 percent of UBL's gross loan book tallying around Rs287 billion while international loan book clocks in at Rs152 billion. Looking at the classified advances (non-performing loans) domestic loans bring in a classified portfolio of Rs43.8 billion as against the international classified advances of Rs10.8 billion. This implies an infection ratio of 17 percent on the domestic loan book and 8 percent on the international loan book. Bearing in mind the hefty proportion of non-performing loans on the domestic loan portfolio, UBL caution in lending in domestic market makes sense. Non-Performing Loans (NPLs) reduced by 2 percent year on year in 9M CY13 with improvements witnessed in both domestic and international markets. Resultantly, the bank booked 44 percent lower provisions in 9M CY13 than it did in the similar period of last year. As of September 2013, UBL's bad debt coverage stands at 86 percent as against 79 percent in the similar period of last year. Non-mark-up income continued to play its role in bringing in diversified income. During 9M CY13, non-core income grew by 9 percent year on year with a representation of 21 percent in bank's total revenue as against the constitution of 19 percent in the corresponding period of last year. Among the major growth

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Company News - United Bank Limited

propellers was fee commission and brokerage income which grew by 21 percent over the corresponding period of last year in line with higher transaction volumes across the corporate and retail segments, improved general banking fees, higher collection volumes, greater cross sell activity, commission in home remittance and Bancassurance sales. Capital gains increased by over Rs2 billion as the Bank milked the opportunities in the stock and bond markets. During the period, administrative expensive swelled by 10 percent year on year. The bottom line ended up dropping off by 8 percent year on year, however, the bank gave an interim dividend of Rs2 taking cumulative to Rs6 in nine months. UBL's Performance in 2012 In CY12, UBL's top line performed well despite low interest rate backdrop which speaks volume of the buoyant growth in earning assets. During the year, investments and advances grew by 27 percent and 13 percent, respectively. However, a drop in CASA and increase in the minimum profit rate on saving deposits from 5 percent to 6 percent in 2012 plopped down UBL's NIM by 1 percent year on year. NPLs grew by 14 percent year on year to tally Rs58 billion in 2012; however, the fresh loans advanced during the period kept the infection ratio in check. The bank booked 42 percent less provisions than it booked in 2011 which reduced the coverage ratio to 77 percent in CY12 from 80 percent in CY11, yet the bank boasts that it holds a provision of Rs48 million which is in excess to the requirements of SBP. In CY11, the buffer provisioning was Rs100 million. Non-mark-up income showed a staggering growth of 31 percent year on year primarily driven from increased revenue from Omni, improved income from domestic and home remittances, higher corporate service charges and Bancassurance commission. During 2012, UBL also partnered with State Life Insurance Company under Bancassurance agreement. Dividend income also showed a growth of 82 percent year on year due to increased investment in mutual funds. UBL also made significant capital gains during the period mainly on the sale of ordinary shares of listed companies and government PIBs. Mark-up expenses showed a massive 20 percent year-on-year growth on the back of annual branch expansion plan, core banking implementation and Omni expansion. Rupee devaluation also produced a detrimental impact on international business expenses. Despite high mark-up and non-mark-up expense, the bottom line mustered significant support from growth in gross revenues and drop in provisioning expenses. The bottom line grew by 30 percent year on year with a cash dividend of 85 percent for the year. Future Outlook The rate hike journey is expected to bode well for the bank. With its deposit base comprising of 33 percent saving deposits, an impending rate hike of 100 basis points is expected to widen UBL's spreads. Besides, bank's growing exposure in international market is expected to produce better results on its asset quality. Besides, international deposits now constitute 28 percent of the bank's total deposits (as of 2012). International deposits of the bank are also exempt from SBP's regulation to link MDR with SBP repo rate, minimizing the impact of rising cost of deposits. Being a pioneer of branchless banking, UBL will continue to fetch stellar growth in non-mark-up income which will buttress the bottom line. ============================================================= UNITED BANK LIMITED (CONSOLIDATED P&L) ============================================================= Rs (mn) CY11 CY12 9MCY13 ============================================================= Markup

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Earned 71,377 75,380 55,487 Markup Expenses 31,305 35,737 27,066 Net Markup Income 40,072 39,643 28,421 Provisioning/(Reversal) 7,275 4,247 1,778 Net Markup Income after provisions 32,797 35,396 26,643 Non Mark-up / Interest Income 13,130 17,195 14,329 Operating Revenues 45,927 52,591 40,971 Non Mark-up / Interest Expenses 22,068 26,578 21,495 Profit Before Taxation 23,634 28,410 20,510 Taxation 8,747 9,131 6,475 Profit After Taxation 14,887 19,280 14,035 EPS (Rs) 12.13 15.71 11.15 ------------------------------------------------------------- Source: Company Accounts =============================================================

==================================================== UBL (KEY PERFORMANCE INDICATORS) ==================================================== Key Ratios CY11 CY12 9MCY13 ==================================================== Advances-to-Deposits Ratio 54% 51% 47% Investments-to-Deposits Ratio 47% 50% 52% CASA 67% 65% 65% Spread Ratio 56% 53% 51% Infection Ratio 15% 15% 14% Coverage Ratio 80% 77% 86% ---------------------------------------------------- BR Calculations Based on Company Accounts ====================================================

==================================================== TOP SECTORS IN TERMS OF ADVANCES ==================================================== Sectors Share in Advances ==================================================== Energy Production & Transformation 16% Textile 15% Agribusiness 14% Consumer Finance 10% Construction & Contractors 7% Trade 5% ---------------------------------------------------- Source: Company Accounts ====================================================

Copyright Business Recorder, 2013

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