UBL posts profit of Rs7.15 billion, up 1.85%

Earnings per share increase to Rs5.77, interim dividend of Rs3 also announced

KARACHI: UBL posted a net consolidated profit of Rs7.15 billion in the third quarter (Jul-Sep) ended September 30 (3Q2016), up just 1.85% compared with Rs7.02 billion in the same period last year, according to a company notice sent to the Pakistan Stock Exchange (PSX).

Earnings per share (EPS) increased to Rs5.77 compared with an EPS of Rs5.58 in the period under review. In the first nine-month (Jan-Sep) period, the bank posted a net profit of Rs21.75 billion, 6.4% compared with Rs20.44 billion in the same period last year.

The company also announced an interim cash dividend of Rs3 per share in addition to Rs6 per share announced in the first half of 2016 (1H2016). Net Interest Income (NII) of the bank declined by 2% year-on-year (YoY) and 14% quarter-on-quarter to Rs14.1 billion in 3Q2016. The decline was largely expected as the major chunk of high-yielding Pakistan Investment Bond (PIB) matured for UBL and the entire banking sector in 3Q2016.

To recall, UBL invested its major proportion of investments in PIBs in 2013 and 2014 when interest rates were over 12%. Since then, the interest rates have come down sharply to 6%, which is expected to keep NII and Net Interest Margins (NIMs) in check in the near term, according to a Topline Securities report.

In July 2016, PIBs worth of around Rs80 billion (14% of total outstanding PIBs) matured for UBL.

The bank saw provisioning reversals of Rs556 million (Rs0.3 per share) against non-performing loans (NPLs) in 3Q2016 as against provisioning expense of Rs471 million in 3Q2015. This remained the key earnings driver for the bank in 3Q2016.

Non-interest income of the bank was down 12% YoY mainly due to lower unrealised gain on revaluation of held to maturity securities and lower dividend income.

Non-interest expense was down by 2% YoY to Rs8.4 billion due to strict cost controls by the bank. “It remained lower than our expectations of Rs8.9 billion,” said Topline Securities.

“The key risk to the stock include the deterioration in Pakistan’s macro economy, further cut in interest rates, and worsening of UAE’s economic fundamentals,” it added.

Published in The Express Tribune, October 19^th, 2016.

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