The countrys third-largest financial lender, United Bank Ltd, reported first-quarter profits of Rs3.2 billion, up 18 percent year-on-year, thanks to the gain in both markup and non-markup income.
UBLs result is similar to its competitors including MCB, ABL and HBL, where profits for the quarter registered year-on-year double digit growth.
Supported by expansion in its investment portfolio, UBLs top line advanced by 18 percent. With government securities yielding better returns these days, UBL massively increased its exposure in its investment portfolio last year, lifting its IDR ratio (investment-to-deposit ratio) to 41 percent at the end of 2010, an annual jump of 13 percentage points.
Compared to other peer banks, UBL witnessed the highest year-on-year growth in markup expenses, which jumped by 27 percent to Rs7.5 billion. Therefore, the bank booked 11 percent gain in its net mark-up income as against an average growth of 17 percent for all five largest commercial banks.
Provision against loans and advances (net) surged by 27 percent to Rs2.2 billion. Although the detailed balance sheet numbers have not been published at the time of writing this note, it seems that the bank might have increased provisioning expenses to improve its coverage ratio. UBLs coverage ratio stood at around 72 percent at the end of 2010.
As UBL remained the most tightfisted in lending in 2010, it may witness lower growth in NPLs in 2011.
The growth in non-markup income was overwhelming, strengthened by a whopping 27 percent to Rs3 billion on the heels of growth in brokerage fees and income from dealing in foreign currencies.
In line with growing inflationary pressure, UBLs administrative expenses jumped by 14 percent to Rs4.64 billion year-on-year. However, the growth in administrative expenses was high, considering that the bank just registered an annual growth of 7 percent in CY10.
However, the ratio of operating revenue to administrative expenses; a key measure of a banks efficiency, remained close to last years level of around 2.6.
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United Bank Limited
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Rs(mn) 1QCY11 1QCY10 Chg
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Markup earned 16,702 14,195 18%
Markup expensed 7,597 5,996 27%
Net markup income 9,105 8,199 11%
Provisioning 2,339 2,116 11%
Net markup income 6,766 6,083 11%
after provisions
Other income 3,009 2,361 27%
Operating revenues 12,114 10,560 15%
Other expenses 4,763 4,184 14%
Profit before taxation 5,012 4,260 18%
Profit after taxation 3,273 2,784 18%
EPS (Rs) 2.67 2.27
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Source: Company Accounts
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