United Bank Limited (UBL): 2Q2018 EPS of Rs2.8, -40% YoY (+22 QoQ); DPS Rs 3/share (Below expectations
- United Bank Limited (UBL) reported earnings of Rs2.8/share in 2Q2018, significantly lower than market consensus. Profits were below expectations due to unanticipated pension charge of Rs2bn. This brings total pension charge for 1H2018 to Rs8.4bn, much higher than the estimated range of Rs3.4-5.9bn disclosed in UBL’s 2017 annual filing.
- Net Interest Income (NII) of UBL was flat YoY in 2Q2018.
- During the quarter, total provision stood at Rs2.4bn, mainly as a result of Rs1.7bn provision for NPLs. We believe, majority of this provision to be on the international book.
- Non-markup income grew by 15% YoY to ~Rs7.2bn primarily due to ~91% increase in income from dealing in foreign currencies and 15% increase in fee and commission income.
- Similarly, non-markup expense increased by 15% YoY as administrative expenses rose by 13% YoY and other provisions increased by ~Rs400mn.
- On quarterly basis, NII was up 3% while earnings were up 22%.
- For the 1H2018 cumulatively, EPS has clocked in at Rs5.1, down by 53% YoY primarily due to Rs8.4bn in total pension charge booked by the Bank during 1H2018.
- 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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