UBL continued with its rich dividend payout, doling out another Rs4/share in final cash dividend, taking the full year CY17 dividend to Rs13/share. The top line grew alright. Bottom-line did not, mostly because of higher charges on account of provisioning for loans and advances. But the real deal is the smooth balance sheet expansion. UBL further consolidated its asset base by a considerable 27 percent over December 2016.
While the up tick in private sector credit off-take has been the talk of the town, it was again the tried, trusted and tested government securities that continue to form the bulk of UBL’s earning assets. The investments portfolio soared by a huge 34 percent over December 2016 and remarkably stands comfortably over a trillion rupees.
The massive surge in investments must not come as a surprise as the risk free parking lot still has to offer a lucrative yield north of 8 percent. Not that the advances portfolio did not grow. It grew and grew brisk at 19 percent over December 201, standing at Rs642 billion. But almost two-third of mark-up income was driven from investment, while the other third came from advances. UBL has done a commendable job to post a top line growth in times of thin spreads and low interest rates. The ADR continues to hover in the high 40s, whereas the IDR has now crossed 80 percent.
The deposit growth continues to be strong, without being spectacular. UBL has been putting in efforts to reduce its cost of deposits, as adding the right kind of deposit to the mix has been termed as a key focus area. The bank’s CASA remained strong, yet, there is more room to further increase it. UBL’s massive provisioning expense in the last quarter was one blip in an otherwise clean income statement.
The infection ratio has slightly inched up and the bank would do well to provide more adequately, than the current coverage ratio which sits under 80 percent. Administrative expenses were kept well in check, in line with inflation, and much under the industry average growth.
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