UBL_Quality 4Q earnings deserve another look, (AKD Daily, Mar 10, 2023)
UBL posted strong financial performance in 4QCY22, wherein the bank recorded NPAT of PkR13.3bn (EPS: PkR10.9) for the final quarter, higher by 102% compared to 3QCY22.
4QCY22 earnings were spearheaded by core banking operations, wherein the bank posted NII of PkR31.8bn, increasing by 10%QoQ and 67%YoY, driven by NIM expansion (4QCY22: 5.0% vs. 3QCY22 4.6%).
The bank was able to increase its ADR to north of 50%, which culminated in a reversal of the excess taxation charged earlier in the year. The bank was able to increase its ADR through a 13%QoQ reduction in deposits, majorly shedding high-cost term deposits.
UBL’s net advances increased by 31%QoQ to PkR1.1tr at CY22 end, with the sector mix skewing away from relatively riskier industries in the current economic situation. Textile sector’s share in advances was reduced from 14.2% in CY21 to 10% in CY22.
At the end of CY22, UBL’s consolidated CAR stood at 17.4%, giving the bank substantial room for pursuing growth opportunities. Furthermore, the asset quality of the bank is intact, with an infection ratio of 8% and coverage of 96.6% at the end of the year.
We have a “Buy” rating on the stock, with an updated Dec’23 TP of PkR150/sh, offering an upside potential of 30% from the stock’s last close. In addition to this, the stock provides a dividend yield of 19.9% in CY23.
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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