August 10, 2021 (MLN): United bank Limited (UBL) held its Corporate Briefing Session (CBS) yesterday, to discuss the company’s financial performance for the 1HCY21 ended on June 30, 21 and the future outlook.
To recall, the bank revealed its financial results and posted profit worth Rs15billion, depicting a massive surge of 40.3% YoY, compared to 1HCY20.This has translated into earnings per share (EPS) which clocked in at Rs12.16, increased by 36%, against EPS Rs8.95 in the same period last year (SPLY).
As per financial statement, the provision reversal was the main driver to expand the bottom line of the bank. The bank booked provision reversals of over PKR 1bn in the domestic loan book while there was a charge of approximately the same amount from the international loan portfolio, thereby negating any net impact with the remainder being made up by investments.
Provision charges are expected to remain on the lower side in the remainder of CY21 due to continued loan deferral schemes in the Middle East (deferral scheme expiring in Sept-21 in Qatar and Dec-21 in UAE and Bahrain), as per key takeaways covered by BMA Capital.
Going forward, the management expects to record lower provisions for international clients as deferral schemes (loan repayment relief for companies) to expire by Dec’21.
With regards to the 16% cut in net interest income (NII) during the review period, the management underlined that the bank’s focus is now on increasing its market share without adding costly deposits with higher double-digit growth expected going forward.
In addition, the management continues to shore up its alternate sources of income and expects robust double-digit growth to continue as expenditure in IT infrastructure bears fruit to strengthening its non-funded income.
The management iterated improving its ADR which has declined to around 31% in June’21 with particular focus on housing, agriculture and auto financing. Improving ADR will also reduce ETR which surpassed 44% in the outgoing quarter as ADR fell below 40% thereby entailing an additional 5% tax charge, BMA Capital highlighted in its report.
The management also briefed the house its exposure in HASCOL worth Rs700mn to Rs800mn but due to poor liquidity, they provided for half of the outstanding amount last year whereas
the remainder has been provided for this year so now they are fully covered.
On the taxation front, the management said that the banks will be charged additional tax on their total income from federal government securities. However, finer details related to the subject is yet to be released by the federal government, noted by Foundation Securities.
During the briefing session, the management hinted at the continuation of de-risking strategy in the Middle East however, there are no plans of exiting the market altogether. They further stated that lending will be cautious in these areas however, they will continue to
invest in sovereign bonds.
Indicating UBL’s future outlook, the management underlined that bank is more focused to continue to promote export-oriented industries and it will likely to extend its support to import substitution industries as well.
As per conference takeaways covered by Intermarket securities, UBL will continue to optimize its branch network and monitor expansion opportunities. Focus will remain on digital
infrastructure investment (DII) and outsourced technology initiatives.
Additionally, UBL will continue to focus on Islamic banking which have crossed 100 branches, and report 36% deposit growth.
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