A review of United Bank Limited performance in 9MCY21

The UBL Management held a conference call earlier this week to discuss the bank’s performance post release of 9MCY21 results and its strategy going forward. The briefing was led by the bank’s CFO, Mr. Aameer Karachiwalla, Head of Investor Relations, Mr. Arif Saifie and Mr. Imran Sarwar, CRO.

Below are the key takeaways from the discussion:

· UBL announced earnings 9MCY21 at PKR 21.7bn (EPS: PKR 17.76), depicting an uptick of 39% YoY while down 9% QoQ (3QCY21 EPS: PKR 5.52). Reversals and stronger NFI have supported the bank’s earnings while a reduction in net interest income has put pressure on earnings in 9MCY21. The bank announced a dividend of PKR 4.00/share taking total payout to PKR 12.00/share for 9MCY21.

· CAR stands at 22.9% with a buffer of almost 10% over the minimum regulatory requirement of 12.5%

· PKR 470bn maturities are in the 4th quarter and remaining in the next quarter. The overall duration of PIB book is 2.5 years. Fixed PIBs (PKR 244bn) are yielding 9.1%, Floater bonds (PKR 413bn) are yielding 7.9% and T-Bills (PKR 697bn) are yielding an average of 7.5%.

· The major charge for discontinued operations mainly pertained to UBL’s Switzerland business that has winded up as a part of their de-risking in international businesses.

· Effective tax rate was on the higher side this quarter (42%) due to an additional 2.5% charge as bank ADR is below 40%.

· An uptick of 22.7% was recorded in NFI mainly on the back of fee income that was strong this quarter as ATM card fees grew along with home remittances and bancassurance. The management feels that ATM card fees will support fee income going forward supported by the aggressive build-up in new accounts.

· The reversals shown in 9MCY21 are mainly due to significant domestic recoveries of around PKR 1.4bn. However some of this was offset by provisioning on the international front (USD 5.9mn during 9MCY21). Domestic infection stands at 5.7%.

· The bank expects an interest rate hike of around 150bps by the end of FY22, 25-50bps in next monetary policy.

· Impact of IFRS-9 is expected to be around 30-40bps on CAR.

· The bank targets deposit growth of around 20%.

· Domestic NIMs are at 4% while International stand at 2.5%. Domestic NIMs are expected to increase next year on the back of growth in Current Accounts, while International NIMs are expected to squeeze.

· Outlook for GCC, Qatar and UAE looks favorable therefore, there is no threat of any major provisioning from this end as per the management.

· Risk Weighted Assets were up mainly due to FX translation on international book.

· Dividend Payouts are likely to remain between 60-70%.

· In order to improve ADR, the bank will focus more on disbursement against TERF, real estate sector and commodity operations.

· International NPLs were mostly from Qatar (Infrastructure related sector) and UAE region (Sectors: hospitality, services and trading).

Courtesy – AHL Research

Posted in Article & Features.

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