United Bank posts highest-ever quarterly profit in 1QCY23

United Bank posts highest-ever quarterly profit in 1QCY23

United Bank Limited (UBL) has reported the highest-ever quarterly profit in the first quarter of 2023, with consolidated earnings of Rs11.62 per share, up 53 percent year on year and 9 percent quarter on quarter.

According to analysts at Topline Securities, this is a remarkable achievement for the bank, and the industry was not expecting such high results. Alongside this, the bank has also announced a higher interim cash dividend of Rs11 per share, which exceeded the industry’s expectations for the first quarter of 2023.

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There were several reasons for UBL’s outstanding performance in the first quarter of 2023. Firstly, higher than expected Net Interest Income (NII) contributed to the bank’s success. NII settled at Rs35 billion for the first quarter of 2023, depicting strong growth of 56 percent year on year and 10 percent quarter on quarter, indicating rising asset yields.

Additionally, lower provisions and higher than expected FX income also played a significant role in UBL’s success. Provisions increased on a year on year basis, but the increase was lower than expected.

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However, there was a significant decline of 75 percent quarter on quarter, mainly due to low provision on Eurobond. Non-Interest Income grew by 37 percent year on year, primarily driven by FX income of Rs4.4 billion, which was up 3.3x year on year for the quarter. It is worth noting that the bank recorded FX income of Rs832 million in the fourth quarter of 2022.

Despite an increase in operating expenses of 25 percent year on year and 1 percent quarter on quarter, the cost to income ratio of the bank improved to 37 percent in the first quarter of 2023, compared to 45 percent in the same period in 2022. This improvement was achieved despite inflationary pressures that have affected many other businesses in the region.

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The effective tax rate of the bank for the first quarter of 2023 was 42 percent, up from 40 percent in the same period in 2022, but down from 25 percent in the fourth quarter of 2022. Overall, UBL’s outstanding performance in the first quarter of 2023 can be attributed to a combination of factors, including rising asset yields, higher than expected NII, lower provisions, and higher than expected FX income. These results reflect the bank’s strong fundamentals and its ability to navigate through challenging economic conditions, and position it well for future growth.