UBL posted a profit of PKR 54.99 billion in 9MCY24 (EPS: PKR 44.92), a 35% YoY increase from PKR 40.87 billion (EPS: PKR 33.38) in SPLY.
Standalone revenue rose by 29% to PKR 166.52 billion, driven by non-funded income, a diversified investment portfolio, and cost-control measures.
Operating expenses grew 23% to PKR 57.96 billion in 9MCY24. UBL paid a record 188% dividend, with a 217% capital gain, and achieved a 405% total return, the highest in the industry, since January 2023.
Management reported that the ADR ratio has been met as of today by reducing high-cost deposits and lending around PKR 200 billion to PASCO. Additionally, the bank is engaged in other secure private lending activities. UBL’s NII slightly declined by 1% YoY to PKR 105.23 billion. Non-markup income surged to PKR 61.29 billion in 9MCY24 compared to PKR 22.91 billion in the SPLY.
This growth was attributed to a 22% increase in fee & commission income, trade & guarantee income up by 59%, card fee by 18%, and remittance commission by 61% YoY. Capital gains included PKR 27 billion, along with a PKR 7.1 billion gain from selling United National Bank Limited (UK subsidiary).
Deposits grew 21% YoY to PKR 2.83 trillion, with current accounts up 32% in 9MCY24. Current to total deposit ratio improved to 53% (CY23: 49%) and the CASA ratio to 92% (CY23: 88%). Domestic performing advances reached PKR 524 billion, improving infection ratio to 4.5% (CY23: 4.7%).
The investment portfolio rose 47% to PKR 6.43 trillion, composed of fixed and floating rate investments, positioning UBL’s balance sheet for further repricing.
The fixed income portfolio totaled PKR 1.16 trillion with a 2.03-year duration and a yield-to-maturity of 15.92%. OMO borrowings stand at PKR 4.16 trillion, with a T-bills portfolio of PKR 3.27 trillion at a 20.51% yield-to-maturity. T-bills worth PKR 2.63 trillion will mature by end-CY24, followed by PKR 525 billion by April 2025, totaling PKR 3.15 trillion in maturities by April 2025. Floating PIBs stand at PKR 1.56 trillion with a yield-to-maturity of 20.91%.
Management highlighted aggressive T-bill and fixed bond positions as a hedge against declining rates, providing an 18-24 months cushion. The investment portfolio holds PKR 103 billion of unrealized gains, with PKR 52 billion net of tax, impacting EPS by PKR 43.
Management noted a government-heavy investment book, while the lending book includes government and private sectors. Management indicated a strategic shift toward investment-grade bonds, now comprising over 90% of their portfolio.
The lending strategy is aligned with the risk profile of individual companies rather than sectors. The leverage ratio will reach 3% in January 2025, with T-bills maturing by end-CY24. The conversion of conventional banks ti Islamic banks in KPK is under discussion, awaiting SECP approval, likely to be completed by November. UBL reported a 21% growth in digital app registrations (4.6 million), a 49% growth in app transactions (95.7 million), and a 53% increase in app throughput (PKR 5.1 trillion). Digital app payments rose 55% YoY.
Transaction volumes in 9MCY24 were split across branch counters (23%), digital apps (47%), and ATMs (30%). Consolidated and standalone CAR stands at 19.15%, with a 6.7% buffer above the regulatory requirement of 12.5%.Consolidated RWA declined by 22% to PKR 1.22 trillion due to the sale of the UK subsidiary, while standalone RWA rose 2% to PKR 1.2 trillion.
UBL operates 1,407 branches, including 241 Islamic branches, with over 500 windows and a presence in UAE, Bahrain, and Qatar. Management affirmed strong liquidity for long-term bonds, with a focus on high-yield bonds. UBL closed PKR 1 trillion in buyback deals as the government repurchased T-bills, realizing a gain in 3QCY24. Management expects policy rates between 12-13%, with a large spread between inflation and interest due to SBP’s FX fluctuation reservations. UBL aims to maintain higher growth in current account deposits and expand market share in trade (currently 8.7%), with a focus on UAE within the GCC. Management anticipates deposits growth exceeding the market average of 15-16%.
Important Disclosures
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