JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of United Bank Limited (UBL) at 'AA+/A-1+' (Double A Plus/A-One Plus). Ratings of the four outstanding subordinated debt instruments, TFC-1, TFC-2, TFC-3 and TFC-4, issued by UBL have also been reaffirmed at 'AA' (Double A). Outlook on the assigned ratings is 'Stable'.
UBL is ranked as the third largest commercial bank in the country in terms of deposits. Over the last few years, increasing competition in the banking sector and a strategic re-profiling of the bank's deposit base is manifested in a decline in market share in deposits, though it is still sizeable at 8.6% at year-end 2010. As a result of the re-profiling, UBL achieved meaningful improvement in cost of deposits during 2010. While UBL's domestic deposit mix features a high proportion of retail deposits, overseas deposits are characterised by higher concentration. Apart from conventional delivery channels, deposit growth is also being targeted through the bank's branchless banking operations, which are focused at the unbanked population of the country. Further expansion of the agent network is being pursued to achieve higher transaction volumes.
While growth in lending has been stagnant on account of prevailing economic conditions, the growing asset base is characterised by an increasing amount of non-performing assets continue to burden the bank's earnings. In addition to accretion of fresh NPLs in the corporate loan book, SME and consumer portfolios have suffered considerable delinquency, necessitating a change in underwriting guidelines.-PR
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