UBL accredits largest NPL accumulation in a quarter to GCC slowdown

February 21, 2019 (MLN): United Bank Limited (UBL) announced its annual financial earnings yesterday, within which the rising bad loans internationally drew quite some attention.

In the course of July-December 2018, the bank accumulated the largest magnitude of Non-performing loans (NPL) in a quarter which caught the eye instantly.

Overseas NPL as of December 31 were Rs.41.5 billion reflecting an accumulation of over Rs.10 billion during last quarter.

This also explains the abrupt rise in provisions during last quarter (form around Rs.22.8 billion to Rs.30.5 billion). Moreover, in light of this predicament and higher potential infection ratio in future, markets believe that the bank’s provisions are expected to rise further in the coming quarters.

In its analyst briefing today, UBL apprised that overseas NPL increased due to rupee devaluation and fresh NPL’s from GCC driven by a slowdown.

Arif Habib Limited in its overview of the result elaborated that, “International NPLs have seen an uptick of around PKR 10bn QoQ primarily on the gulf region loan book where deteriorating economic conditions have stressed liquidity of large businesses.”

In addition to this, there has been a classification of Rs.8 billion during 4QFY19, in substandard category.

In conversation with Mettis Link News, Analyst Faizan Karman said that he expects further NPL rises in foreign loan books I upcoming quarters since the conditions in GCC regions are not expected to improve anytime soon. “Further NPL accretion cannot be ruled out, but since major classifications have already been made, the bank does not expect any more surprises on that front,” he added

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