UBL announced its 1QCY17 financial results yesterday, doling out Rs3/share as first interim dividend. The top line grew modestly, while the bottom-line stayed flattish. There was not much happening around in the first quarter it appears, but UBL would not mind it, as no news is at times, good news.

It goes without saying that registering even a 2 percent year-on-year growth in top line is an achievement of sorts, given the low spreads and interest rate scenario. There was not a great deal of balance sheet expansion witnessed during the quarter, as the investment portfolio grew nearly 8 percent over December 2016, while the advances went down by 2 percent over the same period.

The IDR is back into 70s, while the ADR continues to hover around early 40s. UBL seems to be continuing with the strategy of selectively growing the loan book. The focus seems to have shifted towards reducing the cost of deposits and improving gross spreads. The liability side too, stayed flattish, as deposits grew by a mere 0.4 percent over December 2016.

UBL has worked hard to have reduced the cost of deposits to 2.7 percent in CY16, as relentless efforts are being put in rationalizing the deposit mix and improving the CASA ratio. UBL has also done tremendously well to keep a lid on administrative expenses, further improving the cost to income ratio. Further respite came from massive reduction in provisioning charges for the period, as the bank’s focus in recoveries and prudent lending, seems to be yielding the right results. The NPLs have been well under control and are adequately provided for.

With the economic indicators on the mend, things are looking good for the banking industry and UBL seems well poised to cash in. The healthy balance sheet, reduced cost of deposits, and tightened expenses, all provide UBL with a chance to do some core banking this year, and should the interest rates pick up. If they don’t, UBL would not mind consolidating.