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UBL earnings may double

KARACHI (July 28 2005): United Bank net earnings for the six months ended on June 30, 2005, would be more than double because of increase in net interest income and income generated through brokerage and commission.

UBL started its official marathon at the KSE from Monday (June 25) with a downward circuit breaker on its second trading day to mark its opening sprint.

Amid docile volumes at the bourses, the scrip has been able to show good turnover during its first three days of trading.

UBL is set to announce its 1H2005 results on August 1, 2005, this being its first quarterly result announcement on the stock exchange.

“We expect UBL to announce a profit after tax of Rs 2.17 billion-2.21 billion (EPS Rs4.19-4.27), which would be a growth of 104-107 percent over profit of Rs 1.1 billion (EPS Rs 2.06) in 1H2004. This growth is mainly expected to come due to the increase in Net Interest Income (NII) and growth in Brokerage and Commission Income of the bank. Other income, however, is expected to be lower”, Faisal Jiwani, research analyst at Investcapital Securities said.

Net Interest Income (NII) of the bank is expected to post a growth of 97 percent from Rs 2.99 billion in 1H2004 to Rs 5.88 billion in 1H2005. Net Interest Income is expected to grow due to growth in advances during the period along with increase in interest rates. Advances are expected to have grown by 34 percent during the period from Rs 122 billion at June 30, 2004 to Rs 164 billion at June 30, 2005.

The bank is also becoming very aggressive in consumer financing which will increase its spreads, going forward. The bank's Car Financing scheme has gained quite some popularity in the 1H2005.

Another major component of the profitability of the Bank is the Fee, commission and brokerage income, which is expected to have grown by 33-35 percent from Rs 777 billion to Rs 1,033 billion.

Other income, capital gains and dividend income are expected to decline during 1H2005 compared to 1H2004 as abnormal gains were booked during 1H2004. This income is expected to be at Rs350 million in 1H2005 compared to Rs 1.4 billion in 1H2005.

Due to aggressive entry into the consumer market the bank has been able to grow its advances quite remarkably. For 1H2005, the bank's advances are expected to amount to Rs 164 billion, which will be a growth of 12 percent from December 2004's advances of Rs 146 billion. UBL's advances make up around 9.3 percent of industry's advances, which grew by 10.7 percent during 1H2005. Deposits of the banking sector grew by 10.3 percent in 1H2005 or Rs 231 billion.

UBL's deposits are expected to grow by Rs 29 billion in the same period showing a growth of 13 percent from December 2004.

UBL has shown considerable growth in the last few years.. For 2005, the bank is expected to post 14 percent growth and report a profit of Rs 4.2 billion (EPS: Rs8.1). Growth of 2005 seems subdued due to abnormal other income booked in 2004. “We expect the bank to report a CAGR of 22 percent for the next four years in its bottomline with a four-year average ROE of 27 percent.”

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