KARACHI: The United Bank Limited (UBL) has continued its de-risking strategy in its overseas operations, with the business model focused on selective lending mainly to established corporates with a longer term business relationship with the bank.
According to Director’s Report for the year 2019, it said that the economic climate remained challenging within the GCC in 2019.
Increased public sector spending, higher investment expenditure ahead of Expo 2020 and stable oil prices has provided some impetus to regional economies.
However, the pace of recovery has remained slow across the region.
During the year, the bank voluntarily closed its New York branch, liquidated its stake in Oman United Exchange Company, Muscat and has completed the asset and liabilities purchase agreement with EXIM Bank Tanzania Limited for its subsidiary UBL Bank
(Tanzania) Limited (UBTL), with UBTL currently in preparation for wind up and voluntary liquidation.
Within the overseas branches, liquidity is deployed mainly in sovereign debt investments, trade based financing and FI lending. Credit quality considerations and capital efficiencies remain the foundation of all asset deployment decisions.
“We further strengthened our risk management and compliance frameworks to enhance vigilance. Furthermore, the Special Asset Management Unit has stepped up its efforts for the recovery of non-performing accounts.”
On the funding side, we are strengthening our liabilities franchise to build a sustainable low cost deposits base and reduce concentration, particularly within expensive term deposits.
UBL International’s deposits averaged USD 1.7 billion in 2019, down 17 percent over the previous year. Cost of deposits was maintained at last year’s level of 2.2 percent.
The average loan portfolio was reduced from USD 1.4 billion in 2018 to USD 980 million in 2019, yielding 5.4 percent (2018: 5.1 percent). In terms of loan loss provisioning, a net provision charge of USD 40.1 million was taken for the year 2019 (2018: net provision charge of USD 95.0 million) in order to strengthen coverage levels.
NPLs increased to USD 319 million at Dec’19 from USD 293 million at Dec’18.
Net investments, consisting of mainly fixed income securities, averaged USD 659 million in 2019, largely in line with last year’s levels, generating a healthy yield of 6.1 percent in 2019 (2018: 6.5 percent).