UBL_Catalysts Besting Provisioning Risks, (AKD Daily, Aug 27, 2020)
AKD Daily
UBL: Catalysts besting provisioning risks
- Weighing United Bank Limited’s (UBL) heightened provisioning risks over a confluence of inherent earnings catalysts, UBL offers decent one year return of 20.6% where our TP stands at PkR138.5/sh incorporating a 10% discount on account of re-emergence of credit risks (epicenter remains Bank’s international operations, particularly Abu Dhabi region).
- Large unhindered FIPI outflows continued, with FY20 cumulative outflow of US$284.9mn (softer than US$351.8mn outflow in FY19) continuing the trend set in motion from FY16, while the mantle of absorbing these outflows was largely taken over by Individuals (US$213.2mn), Insurance Cos (US$127.6mn), Funds, Trusts & Others (US$31.5mn) and Companies (US$26.8mn).
- International NPLs have surged to US$353mn as of Jun’20 vs. US$332mn in Mar’20 whereas US$150mn have been restructured/rescheduled under different Central Bank schemes.
- Barring provisioning risks, UBL exhibits strong fundamentals with, i) current accounts occupying 46.0% share in total deposits as of Jun’20, ii) PIB book gaining prominence given steep fall in interest rates (PIB/deposits: 28.0% as of Mar’20), and iii) expanding digital footprint (15.8% share in total transactions in Jun’20 vs. 8.6% in Feb’20 – pre COVID) diversifying fee income base.
- UBL posted earnings of PkR8.94/sh in 1HCY20, +17.0%YoY whereas 2QCY20 earnings stood at PkR4.96/sh vs. PkR/sh 3.98/4.19 in 1QCY20/2QCY19. On a sequential basis, net interest income jumped by 25.2%QoQ attributable to NIMs improving by 69bps to 5.3% in 2QCY20 that overshadowed flat Non-funded income of the bank.
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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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