UBL has attracted a lot of interest from the investing big-wigs in the past few months. Mian Mansha made a bid for it, but was checked by the Bestway Group, which managed to keep the Abu Dhabi Group on board, though with a restructured shareholding.
The Board of Directors met in the UAE to review the managements performance in 2010 and announced a higher-than-expected cash dividend of Rs4 per share. That, combined with the interim dividend of Re1, took the full year payout to Rs5/share.
The third largest bank posted earnings of Rs9.12/share, largely in line with market expectations. But UBL slipped 2.9 percent on the local bourse after the announcement.
What is traditionally seen as the core business of a bank seemed to suffer as mark-up income decreased. It is likely that the advance-to-deposit has declined during the year; ADR stood at 72 percent at the end of CY09 and was already down to 68 percent by the end of the third quarter.
Industry-wide aggressive efforts to attract short-term deposits is likely to have improved the CASA which had improved by 100 bps in the first nine months from 69 percent in December 2009. Mark-up income has shed more than 10 percent year-on-year. As a result, net interest income has improved 3.5 percent in the period under review.
But what really helped boost the bottom line of the lender is the continued scaling back of provisions. Risk managers have likely cast away a gloomy outlook, as provisions were slashed by 37 percent, pumping a healthy 28 percent return on mark-up net of provisions.
Pressure on asset quality doesn seem to be easing, despite the bank only lending to select clients. Impact of the floods and overhang of bad loans had seen the infection ratio increasing from 3 percent in 2009 to 4 percent in the first nine months of the year.
While detailed accounts have not yet been made available, it may be safe to assume that folks in the treasury have been busy deploying liquidity in the ever-so-popular government securities, particularly with the government now looking towards commercial banks. Investments as a percentage of deposits (IDR) stood at 27 percent in December 2009. The same metric grew by nearly 4 percent in the first three quarters and the trend is likely to continue in the near future.
UBL must be commended for its rewarding watch on administration, which inched up by just 4.3 percent, while its peers saw operating expenses increase in step with inflation. Overhauling the model of its sales force may be a key reason for the success under this head.
Despite the slowing core business, UBL posted after tax profits of Rs11.2 billion for the year ended December 2010.
Being the bank with one of the largest consumer presence, UBL plans to expand to international destinations within the region in the current year. A reconfigured ownership may just breathe a renewed resilience into the lender.
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United Bank Limited(UBL)
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P&L (Rs mn) 9M10 9M09 chg 3Q10 3Q09 chg
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Mark-up earned 43,251 46,163 -6.3% 14,771 14,535 2%
Mark-up expenses (18,170) (22,259) -18.4% (6,204) (6,315) -2%
Net Mark-up Income 25,081 23,904 4.9% 8,566 8,219 4%
Provisioning (6,250) (9,395) -33.5% (2,156) (2,691) -20%
Net Mark-up income after provisions 18,831 14,509 29.8% 6,410 5,528 16%
Non Mark-up income 7,294 8,251 -11.6% 2,565 2,042 26%
Operating revenues 32,375 32,155 0.7% 11,132 10,261 8%
Non Mark-up expenses (13,200) (12,808) 3.1% (4,616) (4,387) 5%
Profit before taxation 12,925 9,952 29.9% 4,359 3,183 37%
Profit after taxation 8,060 6,367 26.6% 2,860 2,080 37%
EPS 6.58 5.20 2.34 1.70
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Source: Company Notice
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