United Bank Limited (UBL)


Dear Clients,

United Bank Limited (UBL) held its conference call today to discuss financial performance of CY20 and company outlook going forward.

Key Highlights

– United Bank Limited (UBL) reported CY20 Profit after Tax (PAT) of PkR20.8bn (EPS: PkR17.1, up 9% Y/Y.

– Domestic deposits witnessed a strong growth of 13%Y/Y to PkR1.3tr and the market share resided at 7.9% in CY20. Current account deposits and savings account deposits were up 13% Y/and 15%Y/Y, respectively. CASA mix of the bank clocked in at PkR 85.4% in comparison to 86.4% in corresponding period last year.

– Domestic advances from declined from PkR497bn in Dec’19 to PkR430bn in Dec’20 and the bank booked provisioning worth PkR1.9bn in CY20. International advances were down 28% from Dec’19 to USD601mn as part of the de-rsiking strategy and the bank booked provisioning of PkR14.9bn including IFRS general provisioning of PkR3.6bn. The bank is conservatively eyeing a growth of 6% – 8% in advances in CY21.

– On its investment book, the portfolio comprises Fixed PIBs (PkR237bn) yielding 9.6%, Floater PIBs (PkR341bn) yielding 7.6% and T-Bills  (PkR345bn) yielding 7.3%. The bank is expecting a PIB maturity of PKR70-80bn this year.

– The bank expects an interest rate hike of 100-150bps in 2HCY21 largely driven by inflation and anticipates NIMs to average around 5% in 2021.

– The C/I ratio improved to 43.5% in CY20 as opposed to 48.2% in corresponding period last year.

– UBL’s CAR improved by 549bps Y/Y to 24.4% during CY20.

– The loans deferred under SBP’s COVID scheme constitute 8% of its deposits that is majorly skewed towards consumer side. However, the management highlighted its optimism on repayments as the economy is picking up.

– The management highlighted that OPEX would grow by 7% – 8% in CY21 essentially because of rebuilding team in post-Covid era.

– UBL having an exposure in power sector would benefit in light of recent set of events that would unlock liquidity.

– Unlike peers, UBL has the lowest exposure in Oil and Gas sector, therefore fortunately the provisioning under this segment has not been significant.

– We have an Outperform rating on UBL with a target price of PkR 140/sh. The stock offers a dividend yield of 9.4% and is currently trading at a one year forward P/Bv of 0.79x.

KASB Research

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