KARACHI, July 31, 2024 – United Bank Limited (UBL) posted impressive consolidated earnings of Rs12.1 per share for the second quarter of 2024 (2Q2024), marking a 17% year-on-year (YoY) increase, although reflecting a 7% quarter-on-quarter (QoQ) decline. The results were in line with market expectations.
This brings UBL’s earnings for the first half of 2024 (1H2024) to Rs25.15 per share, up 14% YoY. Alongside the results, the bank announced a second interim cash dividend of Rs11 per share, taking the total dividend for 1H2024 to Rs22 per share.
The QoQ earnings decline was attributed to a lower gain of Rs9.2 billion on securities and financial assets, compared to a gain of Rs12.8 billion in 1Q2024. Net Interest Income (NII) for 2Q2024 settled at Rs29 billion, down 22% YoY due to negative yield on Repo borrowings. However, on a QoQ basis, NII increased by 4%.
“UBL’s performance remains strong despite some quarterly setbacks,” said a financial analyst. “The consistent YoY growth showcases the bank’s resilience and strategic positioning.”
UBL’s Repo borrowings from the State Bank of Pakistan (SBP) stood at Rs2.9 trillion as of March 2024. Fees and commission income increased by 13% YoY but fell 6% QoQ to Rs5.6 billion in 2Q2024. Meanwhile, foreign exchange income saw substantial growth, rising 44% YoY and 38% QoQ to Rs3.8 billion in 2Q2024.
The bank recorded a provision reversal of Rs664 million in 2Q2024, compared to a reversal of Rs1,718 million in 1Q2024 and a provision expense of Rs298 million in 2Q2023. Operating expenses increased by 16% YoY and 2% QoQ, driven by inflationary pressures. Consequently, UBL’s cost-to-income ratio jumped to 42% in 2Q2024 from 39% in 2Q2023 and 40% in 1Q2024.
The effective tax rate for the bank clocked in at 47% in 2Q2024, compared to 52% in 2Q2023 and 48% in 1Q2024.
“Inflationary pressures and tax adjustments have impacted the cost structure, but UBL continues to demonstrate operational efficiency,” remarked another market expert.
Despite the mixed results, market analysts maintain a positive outlook on UBL, highlighting its robust financial health and strategic initiatives. “We have a buy stance on UBL, with the stock currently trading at a 2024E PE ratio of 4.8x and a PBV ratio of 1.2x,” noted a leading analyst.
UBL’s performance in 2Q2024 reflects a balanced approach to growth and risk management, ensuring sustained profitability and shareholder returns. As the bank navigates economic challenges, its strategic initiatives and strong financial foundation position it well for future growth.
Investors will be closely monitoring UBL’s upcoming quarterly results and strategic developments to gauge its continued trajectory in the evolving financial landscape.