EUR 4.27 For Business Accounts Only

United Bank Limited (UBL): 2QCY19 EPS Rs4.1, up by 51% YoY, DPS Rs2.5 (estimates in-line)

• United Bank Limited (UBL) posted earnings of Rs4.2/share, up by 51%YoY in 2Q2019 primarily due to 1) NIMs expansion, 2) one-off additional other income of over Rs1bn pertaining to reversal of translation reserves after the closure of New York branch, and 3) absence of one-time expense of Rs2bn related to pension liability in 2Q2019. Cumulative earnings during 1H2019 of the bank clocked in at Rs9.1bn (EPS: Rs7.5); up by 48%YoY.
• Along with the results, the bank announced a cash dividend of Rs2.5/share bringing total dividend to Rs5.0/share in 1H2019.
• Net Interest Income (NII) settled at Rs15.6bn; up by mere 6% YoY owing to a higher contribution of fix rate assets. On a quarterly basis, NII grew by a mere 4% QoQ, despite 200bps hike in interest rate owing to the lagged impact of re-pricing on loans.   
• The bank’s non mark-up income grew by of 7% YoY to Rs7.6bn in 2Q2019 primarily on the back of 1) one-off reversal of translational reserve amounting to Rs 1.3bn and, 2) higher foreign exchange income; up by 40% YoY to Rs1.3 owing to exchange rate volatility.
• Non-markup expenses of the bank recorded a slight growth of 4% YoY during the outgoing quarter owing to the absence of Rs2bn pension expense and decline in other charges compared to the same period last year.
• Effective tax rate of the bank clocked in at 39% lower than 47% in 2QCY18, while in 1H2019 the said rate settled at 45% vs 25%. On Quarterly basis, effective tax rate declined by 12ppts YoY as the bank had booked super tax for the year of 2017 during 1Q2019.
• Key risks for UBL include: 1) limited NII growth owing to lower rate PIBs exposure, 2) lower than expected advances growth, and 3) deterioration of Pakistan macros.