UBL_Earnings disappoint on the back of lower NFI, (AKD Off the Analyst's Desk Aug 03, 2022)
AKD, Off the Analyst's Desk
UBL: Earnings disappoint on the back of lower NFI
United Bank Limited (UBL) announced its 1HCY22 result today, where the bank posted consolidated earning of PkR12.2bn (EPS: PkR9.7), down 20%YoY. Along with the result the bank also announced a quarterly dividend of PkR4.0/sh. The earnings were slightly lower than anticipated on the back of lower funded income, however, the management surprised street estimates on the higher side by announcing a dividend of PkR4.0/sh (expectations of PkR2.5/sh). Here are the key takeaways from the result.
- UBL’s Net Interest Income (NII) grew by ~28%YoY during 1HCY22 on the back of robust book growth and favorable asset pricing but disappointed our expectations, resulting in the earnings miss.
- Non Funded Income (NFI) clocked in at PkR15.6bn owing to strong performance of FX trading desk which clocked in at PkR4.6bn (up 3.8x YoY). Other notable contributions came from Fee and Dividend Income which increased 17.4%YoY and 61.9%YoY (low base effect) respectively.
- Admin expenses reportedly jumped by 19.5%YoY during the period under review on the back of rising inflation, taking the cost-to-income ratio to ~44.8% during the period under review.
- Provisioning expenses clocked in at PkR1.4bn during 1HCY22, on the back of hefty provisioning expenses in the quarter of ~PkR1.4bn.
- Effective tax rate for the quarter clocked in at ~85%, attributable to imposition of super tax and poverty alleviation tax announced in federal budget.
- Along with the result, the bank announced a quarterly dividend of PkR4.0/sh which took the total payout during the period to PkR9.0/sh. The payout announcement surprised our estimates on higher side. We have a buy call on the scrip with a TP of PkR155/sh. The scrip trades at a forward multiple of 0.6x
AKD Research
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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