UBL at a fast clip

Corporate results are pouring in. Largely in line with market expectations, United Bank Ltd (UBL), the countrys third largest commercial bank, managed to record outstanding growth in its bottom line in CY11 compared to the last year. The Banks mark-up revenues managed to exhibit an impressive growth, likely due to a massive expansion in its investment portfolio. In line with the industry wide trend, given that the banking sector has become cautious and conservative in lending to the private sector, the Banks Advances to Deposits Ratio (ADR) fell to 60 percent at the end of CY11, nearly 7 percentage points lower relative to the same time of last year. However, the industrys ADR stood at around 53 percent as on December 31, 2011. The Banks net mark-up income accrued a gain of 15 percent, inching up the Banks net interest margin to 7.2 percent in CY11, from 7.0 percent in CY10, according to the press release issued by UBL. The average monthly KIBOR stood at around 13.27 percent in CY11, nearly 56bps higher compared to the previous year. Decline in provisioning expenses also supported the bottom-line growth, with provisions against loans and advances (net) summed up to around Rs.6 billion in CY11, as opposed to Rs.6.8 billion during the last year. On the heels of higher income from investment banking activities, dividend income, dealing in foreign currencies, gain on sale of securities and other income, the Banks non-mark-up income grew by 26 percent in CY11 compared to the previous year. The Bank attributed the growth in fees and commission generated from core banking business to increase in remittances, FI commissions and cross-sell of bancassurance. Hence, the non-mark-up incomes contribution in the total operating revenues inched up to around 24.4 percent in CY11, from 22.7 percent in CY10. The growth in non-mark-up expenses, which jumped by 11 percent compared to the last year, seems justifiable, given the inflationary environment and the Banks growing focus on infrastructure expansion. Above all, the Banks total operating revenues to expense ratio improved slightly to 2.5 in CY11 from 2.4 in CY10.

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UNITED BANK LTD
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(Rs mn)                                 CY11       CY10     chg
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Markup Earned                         70,450     59,277     19%
Markup Expensed                      (31,026)   (24,997)    24%
Net Markup Income                     39,425     34,280     15%
Provisioning                          (7,291)    (8,005)    -9%
Net Markup income after provisions    32,134     26,275     22%
Other income                          12,718     10,090     26%
Operating revenues                    52,143     44,370     18%
Other expenses                       (20,629)   (18,623)    11%
Profit before taxation                24,223     17,742     37%
Profit after taxation                 15,500     11,160     39%
EPS (Rs)                               12.66       9.12
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Source: Company Accounts
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