UBL profit rises 49pc to Rs14.220 billion in January-September 2019

KARACHI: United Bank Limited (UBL) profit increased 49 percent to Rs14.220 billion for the nine months period ended September 30, 2019, translating into earnings per share (EPS) of Rs11.62, a bourse filing said on Wednesday.

UBL earned Rs9.493 billion with EPS of Rs7.96 in the corresponding period last year. The bank announced interim cash dividend for the quarter ended September 30, 2019 at Rs3/share, which was equivalent to 30 percent, in addition to interim cash dividend already paid at Rs5/share which was equivalent to 50 percent, the Pakistan Stock Exchange notice said.

Net interest income (NII) of the bank settled at Rs46.5 billion during the nine month period in 2019, rising 7.0 percent YoY. A stellar domestic current accounts base helped protect the bank from NII deterioration during the quarter (+2 percent QoQ) despite the 100bps hike in July.

Net foreign investment (NFI) depicted a decline of 8.0 percent YoY during January-September owing to low capital gains (-84 percent YoY) and lower dividend income (-25 percent YoY), as per expectations. Income from foreign operations and derivatives showed a staggering jump of 25 percent YoY.

Lower provisioning expenses (-29 percent YoY/-27 percent QoQ) for the bank provided relief to the bank’s profitability, which could be attributed to reduced provisioning on the gulf book as well as lower impairment charge (Rs2.8 billion was booked last quarter).

Arif Habib Limited in their analysis said, “Effective tax rate was set at 44 percent during the nine months compared to 43 percent in the same period last year.”

Analyst Faizan Ahmed of Optimus Capital Management called UBL’s earnings announcement for Q3CY19 disappointing. NII underperformed expectations with EPS down 9.6 percent QoQ in the third quarter.

The payout was largely in-line at Rs3.00/share which took 9MCY19 DPS to Rs8.00, he added. “Our preliminary discussion with industry sources suggest that this could likely be due to delayed loan repricing post 100bps increase in July 2019 MPS. As corporate loans dominate the bulk of UBL’s advances, the effect of repricing will likely be more visible in the coming quarters,” the analyst said.

Apart from delayed loan repricing, drag from older PIBs, slower advances growth amidst increased focus on de-risking also affected NII.

Provisioning expenses were also higher than expectations at Rs2.18 billion mainly due to increase in coverage for international NPLs. “We wait for further details on domestic NPLs and coverage build-up from the management,” Ahmed added.

“The performance on operating cost front was impressive with overall costs posting decline of 2.2 percent QoQ. Apart from costs, high foreign exchange income levels also surprised our estimates.

Our FV for UBL is Rs190 which translates into an upside of 29 percent from present levels,” an Optimus Capital Management report said.

Analyst Karim Punjani from Topline Securitise marked some key risks for UBL which included limited NII growth owing to lower rate PIBs exposure, lower than expected advances growth, and deterioration of Pakistan macros.