UBL: Looking beyond the challenges
UBL has not had a perfect start to CY18 where an unfavorable pension case decision by SC alongwith potential investor concerns on the bank’s NYC operations have been key hurdles – limiting CYTD return to 1.8%. While regulatory/legal challenges hang in the balance, operational outlook beyond CY18F seems well in shape with the bank evidently focusing on targeting growth via 1) continuous expansion of loan book (+13% growth over the next 3yrs), 2) timely restructuring of the investment portfolio (PIB contribution scaled down to 49.6% from 70.7% in the same period last year) and 3) steps to arrest fee income decline (3%YoY/27%QoQ growth in fee income after 4%YoY dip in 9MCY17). Throwing effective CA mobilization (C/A portfolio growing by 17%YoY) and adequacy on the capital front (CY17 CAR: 15.4%; +30bps) in the mix and the bank has a proficient working combination. Asset quality however continues to pinch the bank particularly in relation to its foreign portfolio (overseas NPL addition of PkR11.2bn during CY17). With a 3yr forward NPAT CAGR of 15.3% and Tier-1 ROE crossing 20% over our investment horizon, UBL is currently available at an attractive CY18F/CY19F PB of 1.35x/1.29x. While price performance can remain limited until clarity on NY operations come through, we feel MPS in Mar’18 can be a key checkpoint where a further rate hike can resurrect investor interest in the sector and UBL particularly.
United Bank is engaged in commercial banking and related services. Co. operates five business segments: Corporate Finance, Trading and Sales, Retail Banking, Commercial Banking and Asset Management. As of Dec 31 2016, Co. operates 1,341 branches inside Pakistan including 47 Islamic Banking branches and 2 branches in Export Processing Zones, and 18 branches outside Pakistan.
AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.
AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.
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