Commercial Banks: UNION BANK LIMITED - Half Year Ended June 30, 2005 (Unaudited)
Union Bank Limited (Union Bank), incorporated at Lahore on 9th October 1991 as a public limited company, is listed on all the stock exchanges of Pakistan. Union Bank is backed by a Middle Eastern Group and Dr Abdullah Basodan owns 49 % of its equity.
The bank, engaged in commercial banking activities, operates under the supervision of the SBP. With 53 branches (2004: 53 branches) in Pakistan and two branches (2004: one branch) outside Pakistan, it is rapidly gaining ground in the financial market.
Its top management comprises of seasoned professionals in the fields of banking and finance and its vision is to provide clients with complete banking solutions. The present review is that of the half yearly financial statements of Union Bank alone without consolidation with its 66% owned subsidiary, Union Leasing Limited.
In the Review of Affairs, the management has informed the shareholders that the SECP and the SBP have granted permission to Union Bank to shift its Registered Office to Karachi.
Pacra has upgraded its credit rating for long term to AA- (Double AA Minus) from previous A+ (A Plus) and short term rating to A1+ (A One Plus) from previous A1 (A One).
Total assets of Union Bank increased by 13 % to Rs 88 billion on June 30, 2005 compared to Rs 78 billion on December 31, 2004. Investments showed 86% increase to reach Rs 12.5 billion (14% of Total Assets) from Rs 6.7 billion (9% of TA) on December 31, 2004. Advances increased by a moderate 15 % to Rs 58.7 billion (67% of TA) compared to previous Rs 50.9 billion (66% of TA).
These increases were made possible partly through adjustments in cash balances and partly due to increase in total liabilities particularly the deposits which rose to Rs 69.6 billion (79% of TA) as on June 30, 2005 compared to Rs 62.9 billion (81% of TA) as on December 31, 2004. In the meantime, equity also increased to Rs 4.1 billion (5% of TA) from previous Rs 3.3 billion (4% of TA). The stakeholders might already be taking measures to raise level of equity which is relatively small for a medium size but progressive bank.
Union Bank has more than doubled its profit after tax for the six months ended June 30, 2005 to Rs 800 million as compared to Rs 358 million for the corresponding six months of last year. This has been made possible by increases in net mark-up income as well as non-mark up income comprising fees, commissions, etc. ROE at 19.4% for the six months period is highly attractive compared to 10.7 % for the corresponding period last year.
Union Bank had NPLs at 7% of Advances on June 30, 2005, the same level as that of the previous balance sheet date of December 31, 2004.
The provisions against doubtful loans work out to 2 % of Advances for 2005 (2004: 2%). The provision made by the bank, however, is in excess of the prescribed requirement under Prudential Regulations. As some doubtful loans have the tendency to stay under cover for sometime due to different reasons, a prudent policy would be that the management makes higher general provision against doubtful loans. The NPLs have a tendency to grow as the banks / DFIs have been in operation for a few years. The management may institute risk management procedures to keep NPLs within acceptable level.
The balance sheet size of Union Bank makes it a significant player in the financial market. The management team has to maintain focus on superior service to all its customers, depositors and stakeholders.
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Performance Statistics (Rs million) (Audited)
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Balance Sheet (Unaudited) On December 31
As on June 30 2005 2004
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Total Assets: 87,939 77,711
Cash, balances with banks: 9,850 10,694
Lending to financial institutions: 2,126 4,934
Investments-Net: 12,504 6,739
Advances-Net: 58,780 50,908
Borrowing from fin. Institutions: 9,441 7,659
Deposits, other accounts: 69,629 62,955
Total Liabilities: 83,821 74,365
Share Capital: 2,452 1,967
Reserves, Retained earnings: 1,682 1,369
Surplus on Revaluation of Assets: -16 10
Total Equity: 4,118 3,346
Subordinated Loan: 1,488 1,486
Equity and Sub. Loans: 5,606 4,832
NPLs at end of period: 4,081 3,559
Contingencies and Commitments: 23,440 24,767
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Ratios:
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Cash and bank/Total Assets: 11% 14%
Investments/Total Assets: 14% 9%
Advance/Total Assets: 67% 66%
NPLs/Advances-Gross: 7% 7%
NPLs/Total Equity: 99% 106%
NPLs/Total Equity and sub. Loans: 73% 74%
Provision required/Advances Gross: 2% 2%
NPLs Prov. Req./Provision Held: 121% 110%
Deposits/Total Assets: 79% 81%
Total Liabilities/Total Assets: 95% 96%
Total Equity/Total Assets: 4.7% 4.3%
Equity and S. Loans/Total Assets: 6.4% 6.2%
Deposits/(Equity+S.Loans)-X: 12.4 13.0
Advances/Deposits: 84% 81%
Investments/Deposits: 18% 11%
Contin.& Comm./(Equity+SL)-X: 4.18 5.13
Book Value Per Share: 16.79 17.01
Quoted Share Price (14-9-05) - Rs: 46.25 -
Price/Book Value Ratio: 2.75 -
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Income State. (HY end June 30) 2005 2004
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Markup/interest earned: 3,237 1,951
Markup/interest expensed: 1,170 704
Net Markup/interest income: 2,067 1,247
Total non-markup income: 1,119 767
Admin expenses: 1,501 1,211
Profit before Taxation: 1,282 582
Profit after taxation: 800 358
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Ratios: (Half Yearly Basis):
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Net Markup Income/Total Assets: 2.4% 1.6%
Non-Markup Income/Total Assets: 1.3% 1.0%
Admin expenses/Total Assets: 1.7% 1.6%
Profit before Taxation/Total Assets: 1.5% 0.7%
Profit after taxation/Total Assets: 0.9% 0.5%
Profit after tax/Total Equity: 19.4% 10.7%
EPS- (HY end paid up) - Rs: 3.26 1.82
Price/Earnings Ratio: 14.18 -
Proposed bonus Shares: 15% 10%
Cash dividend: 10% 10%
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Cash flow Summary (Half Year) 2005 2004
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Net Cash flow from Operations: 5,614 2,522
Net Cash flow from Investing: -6,410 -1,248
Net Cash flow from financing: -48 -48
Net Cash flow position for period: -844 1,226
Cash and bank at beginning: 10,693 6,681
Cash and bank at end of period: 9,849 7,907
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COMPANY INFORMATION: Chairman: Choudhri Mueen Afzal H.I.; President and Group CEO: Shaukat Tarin; Director: Dr Abdullah Mohammad Abdullah Basodan; Chief Operating Officer International Operations: Muneer Kamal; Company Secretary: Syed Liaquat Ali; Registered Office: 6th Floor, PIC Towers, 32-A, Lalazar Drive, MT Khan Road, Karachi; Main Office: 5th Floor, New Jubilee Insurance House, II Chundrigar Road, Karachi; Auditors: Taseer Hadi Khalid & Co, Chartered Accountants; Legal Advisors: M/s Cornelius, Lane & Mufti, Advocates & Solicitors Web Address: www.unionbank.com.pk
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