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Topline Flash Note: United Bank Limited (UBL): Conference Call takeaways – 3Q2020

• UBL recently announced its 3Q2020 result, where it recorded provisions worth Rs5.1bn for the quarter. It takes 9M2020 total provision charge to Rs15.4bn. Out of these provisions, Rs3.3bn pertains to the international book in the quarter taking 9M2020 figure to Rs11.3bn.
• The international Non Performing Loans (NPLs) stand at Rs59.4bn with a Coverage Ratio of 84%, higher from 78% seen in the previous quarter. The management clarified that the situation is largely due to macros of GCC and if the situation does not improve then the stream of provisions is likely to continue. The management also aims to continue improving coverage as seen sequentially.
• Loan book has seen a further contraction of 5% QoQ, bringing the ADR down to 36%. The year-end ADR target of 41% indicated in the last briefing is still achievable if the economy continues recovery momentum.
• Additionally, less than 5% of the loan portfolio has been deferred under the State Bank’s relief measures.
• On the investment front, the bank currently sits on a fixed PIB book of Rs279bn, carrying a yield of 9.3% with a duration of ~2 years. Floating rate PIBs stand at Rs317bn, yielding 8% after re-pricing in Aug-2020. To recall in Jun-2020, floaters were at Rs197bn, yielding 13.4%. This will likely impact the NIMs in the next 2 quarters with compression in the range of 40-60bps.
• Although QoQ deposits were stagnant, the mix remains strong with Current Accounts comprising 41% along with a YoY growth of 13% and a YTD growth of 8%.
• Fee Income of the bank increased by 18% QoQ as resumption of branch operations took place after lifting of COVID-19 lockdowns. The management is keen on offering new product for customers in a two pronged strategy to increase customer satisfaction along with enhancing revenues from the head.
• The bank has developed a new strategy given the arrival of new President, Mr. Shazad G. Dada, whose initial focus will be on (1) people and culture, (2) operationally efficiency and (3) performance. In addition to the core triangle the bank is also aiming to improve the technology platform through further investment and development programs.

The bank aims to maintain historic payout ratio.