Corporate results: UBL tops performance among big four banks
United Bank Limited profits grew by an impressive 49% during January to March 2012, making it the top performing private bank among the big four.
The bank posted net profit of Rs4.87 billion in the first quarter of 2012 against Rs3.27 billion posted in the same period last year, according to unconsolidated results sent to the Karachi Stock Exchange.
In line with the industry trend, the growth was led by jump in non-interest income and a drop in bad loans, said analysts.
The result is at least 16% higher than expectation as analysts expected net profit, on average, to stand around Rs4.2 billion. The deviation stems primarily from higher than expected other income and lower than expected provisioning, according to Global Securities. The result could not help the stock close in the green as all 23 listed banks closed in the red following news of prime minister’s conviction in the contempt of court case.
Net interest income (NII) – core area of earnings – grew marginally by 5% to Rs9.6 billion despite contracting margins.
Announced earlier this week, Habib Bank and Allied Bank profits grew by 22% while MCB Bank followed with an increase of 12% during January to March 2012.
UBL’s better dividend income from treasury and trading related led overall growth in non-interest income to Rs4.1 billion. The banking industry’s focus has recently shifted towards government securities rather than private sector dealing. Allied Bank, one of the top four banks, had 70% of its total investment portfolio skewed towards government securities in 2011.
Fee and commission income also supported non-markup growth, up by 17% while income from foreign exchange declined 24%.
Controlled lending along with improved paying capacity of borrowers after decline in interest rates led overall provisioning to decline to Rs800 million from Rs2.3 billion.
The bank’s board of directors in its meeting held in Abu Dhabi, UAE also declared an interim cash dividend of Re1 per ordinary share of Rs10.
Published in The Express Tribune, April 27th, 2012.
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Government borrowing away 70% of the deposits of Allied Bank deprives companies in the private sector from access to capital needed for growth. Retail depositors are largely extending credit to fund the ongoing operations of government, rather than to invest in businesses where they, the depositors, may be working.