Karachi: United Bank Limited (UBL) has posted an impressive 36% earnings growth during 9MCY11. The bank’s earnings cloaked in at PKR 10,952mn (EPS: PKR 8.95) compared to PKR 8,060mn (EPS: PKR 6.58) during the same period last year.
According to Arif Habib Limited, this growth is attributed to higher NIMs, up by 16bps to 7.1%, as lending rate was up by 121bps YoY and 22% jump in non funded income. In 3QCY11 alone, the profitability has witnessed a rise of 24% QoQ to PKR 4,248mn (EPS: PKR 3.47) as provisioning witnessed a decline of 39% QoQ. The bank is currently trading at CY12 P/B of 0.8 and offering a potential upside to Arif Habib’s June 2012 Target Price of PKR 73.8/share. Arif Habib’s earnings expectation for CY11 is PKR 11.36 and final dividend payout of PKR 4.0/share.
Net Interest Income rises by 18% YoY
UBL’s net interest income grew by 18% YoY to PKR 29,582mn as average earnings assets during the period augmented by 18% YoY and 121bps YoY rise in the lending rate. The bank’s interest bearing investments during the period has risen by 71% YoY (11% since December 2010), however, advances contracted by 0.5% to stand at PKR 366bn. The bank’s deposits rose by 13.4% YoY to PKR 557bn from 491bn in the 9MCY10 with CASA deposit ratio standing at 79%. This effectively resulted in the UBL’s ADR to stand at 66% compared to 75% in 9MCY10. During the period the bank’s cost of funds appreciated by 43bps to 4.3%
NPLs increases by 17% YoY while provisioning rises by 4.2% YoY
UBL’s Non Performing Loans (NPLs) by 9MCY11 have reached PKR 54.5bn in 9MCY11, depicting a rise of 17.6% YoY (5.5% QoQ). This subsequently has resulted in the bank’s infection ratio to reach 14.9% (9MCY10: 12.6%) and coverage ratio to stand at 74.6%. Arif Habib Limited believes this expansion in NPLs will likely witness a reversal with the conversion of circular debt related loans of Power Holding Limited into PIBs and T-bills. During the 9MCY11, the bank’s provisioning against NPLs has increased 12.7% YoY to PKR 5,922mn, primarily due to aging of NPLs.
Non-funded income jumps by 22% YoY
Non-funded income depicted a rise of 22% YoY to PKR 8,920mn. This growth is mainly driven by 27% YoY increase in income from dealing in foreign currencies, 100% YoY jump in derivative income and fee & commission income augmented by 6% YoY.
|Financial Highlights PKRmn|
|Provisions against NPLs||5,922||5,255||12.7%||1,438||2,279||-36.9%|
|Fees and commission||4,992||4,710||.0%||1,712||1,681||1.8%|
|Non Interest income||8,920||7,294||22.3%||3,038||2,872||5.8%|