Union Bank Limited (Union Bank) was incorporated at Lahore on October 9, 1991 as a public limited company. Union Bank shares are listed on all the stock exchanges of Pakistan.
The bank is backed by a Middle Eastern Group and Dr Abdullah Basodan owns 49.06 % of its equity. The bank, engaged in commercial banking activities, operates under the supervision of the SBP, through its 65 branches (2004: 53 branches) in Pakistan and two branches (2004:1 branch) outside Pakistan. The present Overview of financial statements for the year ended December 31, 2005 is that of Union Bank alone without consolidation with its subsidiary, Union Leasing Limited. Pacra ratings of Union Bank, assigned in June 2005, are: long term at "AA-" (Double AA Minus) and short term rating at "A1+" (A One Plus).
The authorised capital of Union Bank is Rs 6 billion, comprising 600 million shares of Rs 10 each. As on December 31, 2005 the paid up capital was Rs 2.280 billion, which is held by 10,729 shareholders, of which 10,493 individuals hold 27.39% shares. Dr Abdullah Basodan, the Chairman of the Board, owns 49.06 % of shares. Mr Shaukat Tarin, the President of the bank and Group CEO, owns 4.93% of shares. The rest of the shares are distributed among a number of corporate entities including banks and DFIs.
Total assets of Union Bank increased by 51% to Rs 117 billion on December 31, 2005 compared to Rs 78 billion on December 31, 2004. Investments jumped about three times to Rs 19 billion (16% of Total Assets) from Rs 6.7 billion (9% of TA) on December 31, 2004. Of the total investments, major chunk are in Available-For-Sale category at Rs 16 billion (2004: Rs 2 billion).
Advances as on December 31, 2005 were Rs 69 billion (59% of TA), registering 36% increase over previous Rs 51 billion (65% of TA). On December 31, 2005, 95% of the Advances are in local currency (2004: 93%). On this date, short term Advances are only 63% (85% of TA), yielding ground to long term Advances at 37% (2004: 15% of TA). Major exposure of the bank is in Textiles, construction, personal/self-employed, energy, financials, sugar and other sectors, as detailed below.
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Advances 2005
Sectors Amount(Rs in million)
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Textile: 13,686 20%
Cement: 1,365 2%
Construction: 3,230 5%
Consumer goods: 1,415 2%
Energy: 1,725 3%
Financials: 2,893 4%
Sugar: 1,738 3%
Telecom: 2,150 3%
Electronics: 1,656 2%
Personal/Self-Employed: 28,674 42%
Others: 10,437 15%
Total: 68,969 100%
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Union Bank's equity (including subordinated loans) as on December 31, 2005 stands at Rs 7.4 billion (6.3% of total assets) whereas gross NPLs on this date are Rs 4.0 billion (6% of Advances). However, it may be noted that Union Bank has made full provision (Rs 1.50 billion) against Gross NPLs according to the SBP criteria applicable on December 31, 2005.
On net basis, NPLs are 4% of Advances. The bank has to be vigilant in the monitoring of the Advances. 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 coupled with periodic critical review of risk management procedures instituted to keep NPLs within acceptable level.
The increases in Investments and Advances as on December 30, 2005 compared to last year were made possible mainly through increase in Deposits. During 2005, Advances as % of Deposits were rather high at 76% (2004: 81%). The depositors in a way are big stakeholders in the bank. Keeping the current low level of profit payout in view, the depositors deserve a word or two of appreciation like other stakeholders.
Union Bank has more than doubled its profit after tax for the year ended December 31, 2005 to Rs 1.78 billion as compared to Rs 0.83 billion for the 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 34% for the year is highly attractive compared to 25 % for the last year. The bank shares are currently traded at the stock exchanges at prices, about three times of the book value as on December 31, 2005.
Union Bank has joined 'the Rs 100 billion banks club' as its total assets on December 31, 2005 amounted to Rs 117 billion (2004: Rs 78 billion). Overall, Union Bank has the potential to perform even better in the coming years provided equity base is further strengthened to absorb sudden shocks. Moreover, the management team has to maintain focus, as in the past, on superior service to all its customers, depositors and stakeholders. Performance statistics are given below.
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Performance Statistics -
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Balance Sheet (Audited) (Rs million)
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As on December 31, 2005 2004
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Total Assets: 117,101 77,711
Cash, balances with banks: 10,336 10,694
Lending to fin. Institutions: 13,717 4,934
Investments-Net: 19,231 6,814
Advances-Net: 68,969 50,833
Borrowing from fin. Institutions: 14,731 7,659
Deposits, other accounts: 91,187 62,955
Total Liabilities: 111,966 74,365
Net Assets: 5,135 3,346
Share Capital: 2,820 1,967
Reserves, Un-app. Profit: 2,255 1,369
Surplus on Revalue. Assets: 60 10
Total Equity: 5,135 3,346
Subordinated Loan: 2,239 1,486
Equity and Sub. Loans: 7,374 4,832
Advances-Gross: 70,914 52,071
Gross NPLs: 4,024 3,559
Total Provision: 1,945 1,238
Conting. & Commitments: 34,140 30,670
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Ratios:
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Cash and bank/Total Assets: 9% 14%
Investments/Total Assets: 16% 9%
Advance-Net/Total Assets: 59% 65%
G. NPLs/Advances-Gross: 6% 7%
Net NPLs/Advances-Net: 4% 5%
NPLs/Total Equity: 78% 106%
NPLs Pro./Advances-Gross: 3% 2%
Deposits/Total Assets: 78% 81%
Total Liabilities/Total Assets: 96% 96%
Total Equity/Total Assets: 4.4% 4.3%
Equity & S. Loans/T Assets: 6.3% 6.2%
Deposits/Equity-Times: 17.8 18.8
Advances/Deposits: 76% 81%
Investments/Deposits: 21% 11%
Contin.& Com./Equity -Times: 6.65 9.17
Book Value Per Share: 18.21 17.01
Quoted Price (14-03-06) - Rs: 54.50 -
Price/Book Value Ratio: 2.99 -
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Income Statement 2005 2004
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Markup-interest earned: 8,143 4,295
Markup-interest expensed: 3,658 1,442
Net Markup-interest income: 4,485 2,853
Provisions and write offs: 1,055 453
Net mark up after provisions: 3,430 2,400
Total non-markup income: 2,576 1,604
Total Income bef. Admn. Exp.: 6,006 4,004
Admin Expenses, etc: 3,228 2,594
Profit before Taxation: 2,778 1,410
Current & deferred tax: 1,033 580
Profit after taxation: 1,745 830
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Ratios: (Annual Basis)
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Net Markup Income/T Assets: 3.8% 3.7%
Net markup income (Pro.)/TA: 2.9% 3.1%
Non-Markup Income/TA: 2.2% 2.1%
Total Income before AE/TA: 5.1% 5.2%
Admin Expenses/TA: 2.8% 3.3%
Profit before Taxation/TA: 2.4% 1.8%
Profit after taxation/TA: 1.5% 1.1%
Profit after tax/Total Equity: 34.0% 24.8%
EPS- (year-end paid up) - Rs: 6.19 4.22
Price/Earnings Ratio: 8.81 -
Cash Dividend: 20% 10%
Bonus Shares: 35% 25%
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Cash flow Summary 2005 2004
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Net Cash flow, Operations: 12,027 2,297
Net Cash flow, Investing: -13,053 1,824
Net Cash flow, financing: 668 -108
Change in Net Liquidity: -358 4,013
Net Liquidity at beginning: 10,693 6,680
Net Liquidity at end: 10,335 10,693
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COMPANY INFORMATION: Chairman: Dr Abdullah Mohammad Abdullah Basodan; President and Group CEO: Shaukat Tarin; Director: Mustapha Amir Chinoy; Company Secretary: Muhammad Akram; Registered Office: 6th Floor, PRC Towers, 32-A, Lalazar Drive, MT Khan Road, Karachi; Main Office: 5th Floor, New Jubilee Insurance House, I.I. Chundrigar Road, Karachi; Auditors: KPMG Taseer Hadi & Co, Chartered Accountants; Legal Advisors: M/s Cornelius, Lane & Mufti, Advocates & Solicitors; Web Address: www.unionbank.com.pk
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