Karachi, September 12, 2023 – In a strategic move, the board of directors at United Bank Limited (UBL) has given their unanimous approval to establish an exchange company and sell shares in United National Bank Limited UK (UNBL UK).
UBL, one of Pakistan’s leading banks, has informed the stock exchange about its decision, which includes the sale of a 55 percent stake in UNBL UK to the Bestway Group.
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According to analysts at Topline Securities, this decision aligns with UBL’s growth strategy. UNBL UK had a significant impact on UBL’s financials, contributing Rs0.57 to the Consolidated Earnings Per Share (EPS) for the first half of 2023 and an EPS of Rs0.48 for the full year 2022.
United National Bank Limited UK, a banking institution incorporated in the United Kingdom, was formed in 2001 following the merger of the UK branches of United Bank Limited and National Bank of Pakistan. UNBL UK specializes in providing retail banking, wholesale banking, treasury services to financial institutions, and trade finance facilities to businesses of all sizes. It currently operates a single branch in the United Kingdom under the trade name of United Bank UK.
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This strategic move by UBL comes at a time when the bank is keen to strengthen its financial position. As of the first half of 2023, UBL’s consolidated Capital Adequacy Ratio (CAR) stood at 14.81 percent, whereas the unconsolidated CAR was higher at 16.92 percent. The bank’s management attributed this difference to the impact of rupee devaluation on its subsidiaries outside Pakistan.
Upon the successful completion of the sale of its stake in UNBL UK, UBL anticipates a positive impact of 200 basis points on its consolidated CAR, bringing it closer to the levels of the unconsolidated CAR. This could potentially enhance the bank’s dividend-paying capacity in the future. In the first half of 2023, UBL had announced a dividend of Rs22 per share.
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In addition to the sale of its stake in UNBL UK, the board also approved the establishment of an Exchange Company with an initial paid-up capital of Rs1 billion. This new entity will function as a wholly-owned subsidiary of UBL, subject to approval by the State Bank of Pakistan (SBP) and other regulatory compliances.
The decision to establish the Exchange Company comes in response to recent directives from the SBP encouraging banks to establish wholly-owned exchange companies to meet the legitimate foreign exchange needs of the general public. The SBP expressed concerns over the operational structure and compliance levels of category ‘B’ exchange companies and has advised them to either merge with established full-fledged entities or sell their businesses to stronger counterparts. Failure to comply within the stipulated three-month window will result in the automatic cancellation of licenses for standalone category ‘B’ firms.
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Furthermore, the SBP has mandated that exchange companies increase their paid-up capital to a minimum of Rs500 million (excluding losses) by December 31, 2023, up from the current minimum requirement of Rs200 million.
UBL’s strategic moves are indicative of its commitment to adapt to evolving regulatory requirements and strengthen its financial position while aligning itself with the SBP’s vision for a more robust and compliant financial sector.
