United Bank Limited (UBL), incorporated in Pakistan on November 7, 1959 is engaged in commercial banking and related services. It operates 1057 (2003: 1062) branches in Pakistan and 15 (2003: 15) branches outside Pakistan. UBL has since been denationalised and management control is now with the consortium of Abu Dhabi Group and Bestway Group, each group holding 25.5 % of shares.
The State Bank of Pakistan holds majority of the remaining shares (48.69 %) and small holdings with other public sector institutions. Total number of employees at the end of 2004 was 9,206 (2003: 8,815).
The Board of Directors comprises Government nominees and representatives of the private sponsors. In May 2004, Amar Zafar Khan stepped down and Atif R. Bokhari joined as the President & CEO of the bank. Taking into account tough economic conditions and reducing interest rate spread, the bank management is reportedly focused on increasing revenue in 2005 and achieving steady annual growth.
The balance sheet strengthened during the year, with a sharp growth of 52% in Advances (Rs 50 billion over last year) to Rs 146 billion, one of the highest amongst the large network banks. The bank claims that its domestic market share of advances jumped to 8.6% at the end of the year (2003: 8.1%). On the liabilities side, deposits jumped by 25% to Rs 230 billion. According to the bank, its domestic market share of deposits increased to 9.1% at the end of the year (2003: 8.8%). Total equity increased to Rs 17 billion from Rs 15 billion last year, but as a proportion of Total Assets, it declined to 6% as against 7% last year.
UBL has a problem of non-performing loans as other financial institutions. NPLs at end 2004 are estimated at 12% of Gross Advances (2003: 12%). NPLs when compared with Total Equity are 116% at end of current year, an improvement over the previous year figure of 126%. The notes to the financial statements state that Advances having Gross Book Value of Rs 509.533 (2003: Rs 303.2 million) million and Net Book Value of Rs 458.225 million (2003: 266.8 million) though restructured and performing have been placed in the non-performing status as required by the revised Prudential Regulations issued by the SBP, which requires monitoring for at least one year before any up-gradation is considered.
As stated in the notes, the bank has an aggregate amount of Rs 13,733 million available as carried forward tax losses as at December 31, 2004, of which the management has recognised deferred tax debit balance on losses amounting to Rs 12,645 million. This represents the management's estimate of probable benefit which is expected to be realised in future years in the form of reduced tax liability.
UBL as on December 31, 2004 has subordinated unsecured loan of Rs 3,500 million being the first and second issues of TFCs. As per the notes to the financial statements, UBL had issued TFCs in June 2004 having tenor of eight years .The liability of the bank is subordinated as to the payment of principal and profit to all other indebtedness of the bank (including deposits) and is not redeemable before maturity without approval of the SBP. The rate of mark-up on these TFCs is 8.45% per annum payable semi-annually. The second issue of TFCs represents the Pre-IPO (private placement) amount received by the bank. The total issue amounts to Rs 2,000 million out of which Rs 1,500 million has been received from institutional investors under Pre-IPO. The remaining amount of Rs 500 million will be raised through the Initial Public Offer (IPO). The issue of these TFCs has been reportedly approved by the SBP and the approval of Karachi Stock Exchange and SECP is awaited. These TFCs are redeemable by 2013.
In 2004, the bank generated profit after tax of Rs 3.7 billion which represents 40% growth from last year. This was mainly due to reduction in mark up/interest expense, which was only 19% of the Total Mark up Income as compared to 21% last year. Increased Profit after tax has boosted the return on equity to 21.3% for the year as against 17.5% for the previous year. UBL declared 15% cash dividend for the year.
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Performance Statistics (Million Rupees)
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Balance Sheet (As on December 31) 2004 2003
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Total Assets: 272,613 216,924
Cash, Balances With Banks: 41,543 28,660
Investments-Net: 54,954 56,517
Advances-Net: 141,768 92,514
Deposits, Other Accounts: 230,257 185,071
Total Liabilities: 255,249 201,874
Share Capital: 5,180 5,180
Reserves, Retained Earnings: 9,190 6,063
Surplus on Revaluation of Assets: 2,994 3,807
Total Equity: 17,364 15,050
Subordinated Loan: 3,500 0
Equity and Sub. Loans: 20,864 15,050
NPLs: 20,103 18,917
Contingencies and Commitments: 130,600 97,716
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Ratios:
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Cash and Bank/Total Assets: 15% 13%
Investments/Total Assets: 20% 26%
Advance/Total Assets: 52% 43%
NPLs/Advances-Gross: 12% 12%
NPLs/Total Equity: 116% 126%
Provisions/Advances-Gross: 10% 9%
NPLs Provision Req./Provision Held 102% 101%
Deposits/Total Assets: 84% 85%
Total Liabilities/Total Assets: 94% 93%
Total Equity/Total Assets: 6.4% 6.9%
Equity and Sub. Loans/Total Assets 7.7% 6.9%
Deposits/(Equity +Sub. Loans)-X: 11.0 12.3
Advances/Deposits: 62% 50%
Investments/Deposits: 24% 31%
Conting.& Comm./(Equity+SL)-X: 6.26 6.49
Book Value Per Share: 33.52 29.05
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Income Statement (Y end December 31) 2004 2003
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Markup/Interest Earned: 9,234 8,944
Markup/Interest Expensed: 1,733 1,888
Net Markup/Interest Income: 7,501 7,056
Total Non-Markup Income: 4,406 4,544
Admin Expenses: 6,702 6,154
Profit Before Taxation: 4,890 4,327
Profit After Taxation: 3,702 2,636
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Ratios:
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Net Markup Income/Total Assets: 2.8% 3.3%
Non-Markup Income/Total Assets: 1.6% 2.1%
Admin Expenses/Total Assets: 2.5% 2.8%
Profit Before Taxation/Total Asset 1.8% 2.0%
Profit After Taxation/Total Assets 1.4% 1.2%
Profit After Tax/Total Equity: 21.3% 17.5%
EPS- (Year-end Paid up) - Rs: 7.15 5.09
Cash Dividend: 15% 22.5%
Dividend Payout Ratio: 21% 44%
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COMPANY INFORMATION: Chairman: His Highness Shaikh Nahayan Mabarak Al Nahayan; Deputy Chairman: Sir Mohammed Anwar Pervez OBE; President and CEO: Atif R. Bokhari; Company Secretary: Aly Abbas Shah, Barrister-at-law; Group Chief Financial Officer: Aameer Karachiwalla; Registered / Head Office: State Life Building No. 1, I.I. Chundrigar Road, Karachi- 74000, Pakistan; Auditors: 1- Taseer Hadi Khalid & C., Chartered Accountants; 2- A.F. Ferguson & Co, Chartered Accountants; Web Address: www.ubl.com.pk
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