UNITED BANK LIMITED

UBL is one of the most profitable banks of

Pakistan and has been ranked as number 3
on the basis of its size. UBLs balance sheet
has crossed the 1 trillion mark recently at
the 2013 year end and showed a growth of
13% over the year 2012, which makes it a
Large bank as per KPMGs classification of
big banks 2013.
UBL has the 2nd largest branch network in
Pakistan with 1,281 branches.
PAST PERFORMANCE:
The profit after tax has been continuously
increasing for UBL and in just the last year
i.e. 2013, it showed a growth of 4% which
was directly reflected in its increased share
price also.
The net interest income has been over a
period of 5 years, first showed an increasing
trend but later, during the past two years
since the interest rates have been declining
and almost declined by 500bps i.e. 5% so
therefore in 2013 and 2014 the net interest
income has been declining. But this
negative impact can be offset by looking at
the strong CASA ratio that stood at 83%.
However the non-interest income has
constantly been on the rise for UBL, among
which a major growth was seen in the fee
and commission income received. UBL has
faced a severe spread compression and
thats primarily due to increased
competitiveness in the banking sector and
the declining interest rates. But still as per
KPMG, UBL stands at no. 3 in terms of its
spread, as it has been effective enough to
cope up by increasing its non-interest
income.
A worth mentioning fact is that the NPLs
have considerably declined in 2012, and

further improves UBLs liquidity position.

Thus we can say that UBL has lowered the
credibility risk it was exposed to previously.
In terms of its liquidity, it cannot be said
that the bank is facing high liquidity risk just
because its cash on hand to total assets is
low. The bank has seen increase in its
current and saving deposits over the years
and also is trying to increase its deposit
base. So these deposits increases can be
used to meet the short term obligations
along with the most liquid investments i.e.
heavy investment by UBL in Government
securities. Also The CAR was maintained at
13.3% which was above the SBP
requirements and thus makes it a safe bank.
The advances to deposit ratio, though still
above than 50% has been declining, which
indicates the inefficiency of management in
converting deposits into high earning
advances, and that too can be attributed to
the increased deposit base but coupled with
a comparatively low growth in advances,
and most importantly the increasing NPLs
over 2008-11.
FUTURE OUTLOOK:
Primarily a banks earning depends upon
the net interest income therefore much of
UBLs profitability like any other bank will
rely on what the future holds for the
interest rates.
Since the banking sector is becoming highly
competitive with passage of time therefore,
one needs to take a little risk to earn more.
So UBL if shift from heavy investment in the
government instruments towards private
sector, that will decide its profitability in
future and its spread improvement if any in
future.