United Bank Limited (UBL): 1Q2018 EPS Rs2.3, -63% YoY (-59% QoQ); DPS Rs3/share (Below expectations)
- UBL declared earnings of Rs2.3/share in 1Q2018, considerably lower than market consensus. Earnings fell short of expectations on the back of one-time pension charge of Rs6.4bn (Rs3.2/share after tax), booked by UBL. To note, this pension cost was slightly higher than the bank’s estimated range of Rs3.4-5.9bn (disclosed in its 2017 annual filing).
- Net Interest Income (NII) of UBL was marginally up in 1Q2018, in-line with our estimate.
- Total provision during the outgoing quarter stood at Rs2bn, primarily on the back of NPLs of Rs2bn in 1Q2018 vs. Rs56mn in 1Q2017.
- Non-markup income grew by 15% YoY to ~Rs8bn thanks to 34% increase in gain on sale of securities to Rs3.2bn. Higher gain was on account of sale of equities and bonds, we believe.
- On the other hand, fee, commission and brokerage income (~43% of non-markup income) did not witness material growth.
- On quarterly basis, NII was down 3% while net earnings decline by 59%.
- Key risks for UBL include: 1) NPL creation on international book 2) lower than expected advances growth, 3) delay in hike in interest rates, and 4) deterioration of Pakistan macros.
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.
Topline Securities is one of the fastest-growing brokerage houses in Pakistan. It has strong Equity Brokerage, Economic/ Equity Research, Commodity Trading and Corporate Finance & Advisory functions.
Topline Securities has been endowed with numerous awards by renowned international financial organizations. The highlights of which consists of the award for ‘Best Local Brokerage House of Pakistan’ by Asiamoney Brokers Poll (the largest Asia-focused equity services provider poll) in 2016 and ‘Best Equity Brokerage House’ by CFA Society Pakistan in 2015.
Previously, Topline Securities held the title for ‘Best Brokerage House’ for 4 consecutive years (2011-2014) by Asiamoney Brokers Poll. Other awards include the ‘Best Salesperson’ award by Asiamoney for 6 consecutive years (2011-2016), the ‘Arabia Fast Growth 500’ award and ‘Pakistan Fast Growth 100’ award in 2012 and 2013 by AllWorld Network.
JCR-VIS, a credit rating agency providing independent rating services in Pakistan has assigned initial rating of “A-2” for short term and “A” for long term to Topline Securities. Topline Securities is registered as Underwriter, Book Runner and Research Entity with Securities & Exchange Commission of Pakistan (SECP).
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