United Bank Limited (UBL) has reported its highest-ever quarterly profit in the third quarter of 2024 (3Q2024), posting earnings of Rs. 18.3 billion, with an Earnings Per Share (EPS) of Rs. 14.96. This achievement represents a significant 24% increase year-over-year (YoY) and quarter-over-quarter (QoQ), solidifying UBL’s position as a robust player in Pakistan’s banking sector. Research conducted by Topline Securities confirms that this milestone marks the bank’s most profitable quarter to date.
With this record-breaking quarter, UBL’s year-to-date (9M2024) earnings have climbed to Rs. 40.12 per share, reflecting an 18% YoY increase. Alongside this achievement, the bank declared a third interim cash dividend of Rs. 11 per share, raising the total dividend for the first nine months of 2024 to Rs. 33 per share, a notable reward for shareholders amid the bank’s strong financial performance.
A key contributor to UBL’s outstanding performance in 3Q2024 has been the impressive growth in Net Interest Income (NII), which reached Rs. 52 billion, a 30% increase YoY and a 77% QoQ rise. This surge is largely attributed to favorable conditions in asset yields, asset repricing gaps, and improved yields on repo borrowing. This strong NII, reflecting strategic asset management, provided a substantial boost to UBL’s revenue base in the quarter.
The bank also saw a remarkable expansion in Non-Interest Income, which grew by 102% YoY to Rs. 16 billion in 3Q2024. This growth was primarily driven by gains on securities, which amounted to Rs. 5.9 billion, compared to Rs. 284 million in the previous year. Additionally, UBL recorded gains in fees and commissions, which rose by 32% YoY, and foreign exchange income, which increased by 49% YoY. These gains underscore UBL’s ability to diversify income streams beyond traditional interest-based revenue.
In its unconsolidated accounts, UBL reported a gain of Rs. 7.3 billion for 3Q2024, a large portion of which resulted from the sale of its subsidiary, United National Bank Limited (UNBL UK). However, the bank also recorded a provision expense of Rs. 894 million in 3Q2024, following a reversal of Rs. 664 million in 2Q2024 and a provision of Rs. 993 million in the same quarter the previous year. This provision reflects prudent risk management practices amidst an evolving economic landscape.
Despite inflationary pressures and branch expansion, UBL managed to improve its cost-to-income ratio, reducing it to 35% in 3Q2024 from 40% in 3Q2023 and 42% in the preceding quarter. While operating expenses increased by 26% YoY and 18% QoQ, this decline in the cost-to-income ratio demonstrates the bank’s efficiency in balancing operational costs with revenue growth.
UBL’s effective tax rate reached 57% in 3Q2024, averaging 52% for the first nine months of the year. This heightened tax rate is partly due to additional levies related to the bank’s low Advances-to-Deposits Ratio (ADR), which stood at 25.2% as of June 2024, the lowest in Pakistan’s banking sector. The low ADR, while posing tax implications, also suggests conservative lending practices.
In the stock market, UBL’s strong financial performance is reflected in its valuation. The bank’s stock currently trades at a 2024 estimated price-to-earnings (PE) ratio of 5.4x and a price-to-book value (PBV) ratio of 1.3x. With a dividend yield of 15%, the bank remains an attractive choice for investors seeking reliable returns in Pakistan’s financial sector.
UBL’s impressive earnings showcase its strategic adaptability and growth potential in Pakistan’s competitive banking environment, further positioning it as a leader in delivering value to both its customers and shareholders.