United Bank Limited

Results season can be one charged with emotions at the local stock market. This time around, the upward trend in the KSE-100 depicts improved investor confidence. Top commercial banks have seen a mixed response from the investors.
Falling largely in line with market expectations, United Bank Limited (UBL) announced its nine months results on Wednesday. But investors weren flattered with the 30 percent growth in profits over the previous year as the stock price dipped nearly 1.5 percent in the days trading sessions at the local bourse.
Buoyed by efficient asset-liability management, the third largest lender was able to post a net interest income, net of provisions increase of nearly 30 percent over the same period last year. Barring one-third lower provisioning, the core income increased by a mere 4 percent.
A tilt towards cheaper short term demand liabilities, improved the deposit mix and reduced the costs of funds by 110 bps.
The less risky appetite of the bank towards government securities and reluctance to enhance credit to the private sector, in line with industry trends curbed the gross advances by 3.8 percent in the first nine months while the deposits virtually remained at December 2009 levels.
This asserts that the advance-to-deposit ratio may fall further from 68 percent by end the first half of the calendar year. Still, it would have kept pace with the industry average of around 67 percent.
Analysts watching the market believe the slowdown in advances may be attributed to seasonal slowdown in credit off take. "Seasonal credit demand is most strong the second and fourth quarters of the calendar years", Hamza Marath, analyst at KASB Securities told BR Research.
Provisioning for the NPLs has been slashed by 33 percent, over the same period last year. Coverage ratio which has been on an upward trend, up to 74.5 percent at the end of June, is likely to continue in the third quarter.
Significant growth in income from forex operations was unable to improve non-core income for the United Bank as it fell more by about 11 percent year-on-year.
Consistent efforts to curtail non-core expenses have once again put UBL in the leaders spot amongst its peers when it comes to belt tightening. Expenses on administration grew a thin 4.7 percent, well below other banks.
UBL has continued to consolidate its credit team in view of the scale back in advance mobilization that has been the consistent theme in the banking industry in the last couple of years.
Given the depth of UBLs consumer presence, it has played an instrumental role in the distribution of flood relief funds. But, as the impact of the floods starts reflected on banks balance sheet, the tail end of NPLs might last just a bit longer than originally anticipated.