United Bank; 2Q2024 EPS at Rs12, up 17% YoY (Earnings in line with expectations)

United Bank (UBL) posted 2Q2024 consolidated earnings of Rs12.1/share, up 17% YoY while down 7% QoQ. The result came in line with our expectations.
This takes 1H2024 earnings to Rs25.15/share, up 14% YoY.
Alongside the result, the bank also announced a second interim cash dividend of Rs11/share, taking the 1H2024 dividend to Rs22/share.
On QoQ basis, earnings declined as UBL recorded relatively lower gain of Rs9.2bn on account of securities and financial assets, compared to a gain of Rs12.8bn in 1Q2024.
Net Interest Income (NII) for 2Q2024 settled at Rs29bn, down 22% YoY, mainly due to negative yield on Repo borrowings. However, on a QoQ basis, NII is up by 4%.
To highlight, UBL’s Repo borrowings from SBP are Rs2.9trn as of Mar-2024.
UBL’s fees and commission income were up 13% YoY while down 6% QoQ, at Rs5.6bn in 2Q2024. Foreign exchange income increased by 44% YoY and 38% QoQ, at Rs3.8bn in 2Q2024.
UBL recorded a provision reversal of Rs664mn in 2Q2024, compared to a reversal of Rs1,718mn in 1Q2024 and a provision expense of Rs298mn in 2Q2023.
Operating expenses increased 16% YoY and 2% QoQ, which was driven by inflationary pressures, we believe.
UBL’s cost to income ratio jumped to 42% in 2Q2024 as compared to 39% in 2Q2023 and 40% in 1Q2023.
The bank’s effective tax rate was 47% in 2Q2024, compared to 52% in 2Q2023 and 48% in 1Q2024.
We have a buy stance on UBL, which currently trades at a 2024E PE ratio of 4.8x and a PBV ratio of 1.2x.

Courtesy – Topline Pakistan Research