United Bank (UBL) announced its 3Q2024 result today. The bank recorded its highest-ever quarterly earnings of Rs18.3bn (EPS of Rs14.96), up 24% year over year and quarter over quarter. The result came in line with industry expectations. This takes 9M2024 earnings to Rs40.12/share, up 18% year over year.

Alongside the result, the bank also announced a third interim cash dividend of Rs11/share, taking the 9M2024 dividend to Rs33/share.

§  Net Interest Income (NII) for 3Q2024 settled at Rs52bn, up 30% YoY and 77% QoQ. This strong growth was mainly led by higher asset yields, a favorable asset repricing gap, and a positive yield on Repo borrowings.

§ Non-interest income of the bank grew by 102% YoY to Rs16bn in 3Q2024, primarily driven by the gain on securities, which clocked in at Rs5.9bn in 3Q2024 vs Rs284mn in 3Q2024. UBL’s fees & commission income are also up 32% YoY, and Foreign exchange income is up by 49% YoY in 3Q2024.

§  In its unconsolidated accounts, UBL recorded a gain of Rs7.3bn in 3Q2024, primarily related to the sale of its subsidiary, United National Bank Limited (UNBL UK).

§  UBL recorded provision expense of Rs894mn in 3Q2024 as compared to reversal of Rs664mn in 2Q2024 and Rs993mn in 3Q2023.

§  Operating expenses increased 26% YoY and 18% QoQ, driven by inflationary pressures and an expanding branch network.

§  UBL’s cost-to-income ratio improved to 35% in 3Q2024 as compared to 40% in 3Q2023 and 42% in 2Q2024.

§  Effective tax rate of bank clocked in at 57% in 3Q2024 and 52% in 9M2024. This indicates bank have recorded additional tax on account of lower ADR. o recall, UBL’s gross ADR stood at 25.2% as of June 2024, the lowest in the sector.

§  We have buy stance on UBL, with the stock currently trading at a 2024E PE ratio of 5.4x, PBV ratio of 1.3x, and dividend yield of 15%.  

Courtesy – Topline Pakistan Research