Commercial Banks: UNITED BANK LIMITED - Nine Months Ended September 30, 2005 (Un-audited)
The State Bank of Pakistan, to further strengthen the soundness and stability of the banking system, has amended the criteria for classification and provisioning for loans and advances through BSD Circular No 07 of 2005 dated November 01, 2005.
The revised criteria applicable to all types of financing facilities ie short, medium and long-term and to corporate, SME and consumer financing except Trade Bills and credit cards, has come into force with immediate effect, resulting briefly in the following changes: a) Elimination of OAEM category; b) Revision of ageing criteria whereby now the loans/advances overdue by 90 days will be classified as Substandard, 180 days as Doubtful and one year or more as Loss; c) Increase in provisioning requirement for Substandard category to 25 %; and d) Restricting the benefit of Forced Sale Value (FSV) of collateral against the financing facilities of Rs 5 million and above only.
The amended criteria mentioned above would present new challenges to the banking sector in Pakistan. The banks with relatively higher and varied loans and high NPLs are expected to make substantial additional provisions, which might adversely affect their profitability and financial position.
United bank Limited (UBL) equity as on September 30, 2005 stood at 6.2% of total assets whereas the NPLs on this date are 77% of equity. However, it may be noted that UBL had made full provision against NPLs according to the SBP criteria applicable on September 30, 2005.
Provision already made comes to 85% of total NPLs. As per the Directors' Report, cash recoveries during the nine months period under review against non-performing advances amounted to Rs 1.9 billion.
According to the notes to the financial statements, the collaterals held by UBL against classified loans and advances have been further discounted during the period in accordance with Prudential Regulations issued by the SBP.
The discounting of collaterals has resulted in additional provisioning requirement of Rs 178.323 million which have been included in these financial statements.
Moreover, general provision represents provision amounting to Rs 570.393 million against consumer financing portfolio as required by the Prudential Regulations issued by SBP and Rs 198.614 million pertaining to overseas advances to meet the requirements of monetary agencies and regulating authorities of the respective country.
UBL, incorporated on November 7, 1959 is engaged in commercial banking and related services in Pakistan and overseas. UBL operates 1043 branches (December 31, 2004: 1061) in Pakistan and 15 branches (December 31, 2004: 15) outside Pakistan. UBL has since been denationalised and its management control is now with the consortium of Abu Dhabi Group and Bestway Group, each group holding 25.5 % of shares.
The SBP holds majority of the remaining shares. In June 2005, the Privatisation Commission offered a portion of the government held shares to the general public. UBL shares were listed on the Karachi, Lahore and Islamabad Stock Exchanges on July 25, 2005.
UBL, has the following subsidiaries: (1) United National Bank Limited, UK- (NBP, Pakistan- 45% interest); and (2) United Bank AG (Zurich), Switzerland. Oman United Exchange Company, Muscat is an associated company. The overview of financial statements, however, pertains to UBL alone, without consolidation with its subsidiaries.
The short-term credit rating for the UBL by JCR-VIS Credit Rating is "A-1+", the medium to long-term credit rating of "AA" and its subordinated debt issue (TFCs) is rated at "AA-".
Total assets of UBL experienced 19% increased to Rs 324 billion as on June 30, 2005 from Rs 273 billion as on December 31, 2004. Investments increased by 13% to Rs 62 billion (19% of Total Assets) from Rs 55 billion (20% of TA) as at December 31, 2004. Advances, Total Liabilities and Deposits experienced increases in the range of 19 -21 % over the period.
Net mark up income of UBL for the nine months ended September 30, 2005 doubled to Rs 9.9 billion from Rs 4.9 billion for the corresponding nine months last year. However, non mark up income for the nine months remained almost at the previous level of Rs 3.4 billion for the corresponding nine months last year. UBL achieved a 111% growth in profit before tax for the nine months ended September 30, 2005 over the corresponding period last year which stood at Rs 6.4 billion.
UBL closed the recent nine months with after tax profit of Rs 3.8 billion as against Rs 1.6 billion for the nine months ended September 30, 2004. EPS for the period works out to Rs 7.33 as against Rs 3.10 for the corresponding nine months last year.
The ROE for the nine months under review increased to 19% level considered attractive from 9.3% for the corresponding nine months last year. Performance statistics are given below. Overall, UBL appears to be poised to perform better in the coming periods.
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Performance Statistics (Rs million) (Audited)
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Balance Sheet (Unaudited) On Dec 31,
As on Sep. 30 2005 2004
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Total Assets: 323,626 272,612
Cash, balances with banks: 38,322 41,543
Lending to financial institutions: 35,804 18,361
Investments-Net: 62,060 54,954
Advances-Net: 173,091 144,151
Borrowing from fin. Institutions: 8,709 11,976
Deposits, other accounts: 278,660 230,257
Total Liabilities: 303,598 255,248
Net Assets: 20,028 17,364
Share Capital: 5,180 5,180
Reserves, Retained earnings: 12,040 9,190
Surplus on Revaluation of Assets: 2,808 2,994
Total Equity: 20,028 17,364
Subordinated Loan: 3,999 3,500
Equity and Sub. Loans: 24,027 20,864
NPLs at end of period: 18,486 20,103
Contingencies and Commitments: 197,212 130,570
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Ratios:
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Cash and bank/Total Assets: 12% 15%
Investments/Total Assets: 19% 20%
Advance/Total Assets: 53% 53%
NPLs/Advances-Gross: 10% 13%
NPLs/Total Equity: 77% 96%
NPLs Provisions/Advances - Gross: 8% 10%
NPls Provision Req./Prov. Held: 105% 102%
NPLs Provisions/NPLs: 85% 79%
Deposits/Total Assets: 86% 84%
Total Liabilities/Total Assets: 94% 94%
Total Equity/Total Assets: 6.2% 6.4%
Equity and Sub. Loans/Total Assets: 7.4% 7.7%
Deposits/(Equity+SubLoans)-X: 11.6 11.0
Advances/Deposits: 62% 63%
Investments/Deposits: 22% 24%
Contin.& Comm./(Equity+SL)-X: 8.21 6.26
Book Value Per Share: 38.66 33.52
Quoted Share Price (18-11-05) - Rs: 95.50 -
Price/Book Value Ratio: 2.47 -
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Income Statement (9M end Sep. 30) 2005 2004
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Markup/interest earned: 13,849 6,070
Markup/interest expensed: 3,989 1,199
Net Markup/interest income: 9,860 4,871
Total non-markup income: 3,404 3,381
Admin expenses: -5,600 -4,792
Profit before Taxation: 6,464 3,059
Profit after taxation: 3,798 1,607
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Ratios: (9 Months Basis)
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Net Markup Income/Total Assets: 3.0% 1.8%
Non-Markup Income/Total Assets: 1.1% 1.2%
Admin expenses/Total Assets: -1.7% -1.8%
Profit before Taxation/Total Assets: 2.0% 1.1%
Profit after taxation/Total Assets: 1.2% 0.6%
Profit after tax/Total Equity: 19.0% 9.3%
EPS- (year-end paid up) - Rs: 7.33 3.10
Price/Earnings Ratio: 13.03 -
Cash Dividend paid, previous year: 15.0% 22.5%
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Cash flow Summary (9 M. Sep. 30,) 2005 2004
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Net Cash flow from Operations: -10,671 2,477
Net Cash flow from Investing: 7,969 749
Net Cash flow from financing: -278 804
Change in Net Liquidity: -3,223 4,328
Net Liquidity at beginning: 41,544 28,660
Net Liquidity at end: 38,321 32,988
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COMPANY INFORMATION: Chairman: His Highness Shaikh Nahayan Mabarak Al Nahayan; Deputy Chairman: Sir Mohammed Anwar Pervez OBE; President and CEO: Atif R. Bokhari; Company Secretary: Aly Abbas Shah, Barrister-at-law; Group Chief Financial Officer: Aameer Karachiwalla; Registered/Head Office: State Life Building No 1, I.I. Chundrigar Road, Karachi - 74000, Pakistan; Auditors: 1- Taseer Hadi Khalid & C., Chartered Accountants; 2- A.F. Ferguson & Co, Chartered Accountants; Web Address: www.ubl.com.pk
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