United Bank Limited (UBL) reported a strong first quarter (Q1) of 2024, exceeding industry expectations with a 12% year-over-year (YoY) and 19% quarter-over-quarter (QoQ) jump in profits. Gains on securities, exceeding analyst forecasts, fueled the bank’s outperformance.
Further delighting investors, UBL declared a first interim cash dividend of Rs. 11 per share, surpassing market projections.
UBL’s Q1 2024 saw a gain of Rs. 12.8 billion on securities, with Rs. 8 billion from government securities and Rs. 4.6 billion from foreign securities.
Net Interest Income (NII) for the same period was Rs. 28 billion, reflecting a decrease of 20% YoY and 24% QoQ, primarily due to negative yield on borrowings from the State Bank of Pakistan (SBP). UBL’s Repo borrowings increased from Rs. 2.7 trillion to Rs. 2.9 trillion during this period.
The bank’s fees & commission income grew positively, reaching Rs. 5.9 billion in Q1 2024, a 24% YoY and 16% QoQ increase. However, foreign exchange income declined by 39% YoY and 19% QoQ, settling at Rs. 2.7 billion.
Contributing to the positive earnings, UBL recorded a provision reversal of Rs. 1.7 billion in Q1 2024 compared to a provision expense of Rs. 2.7 billion in Q1 2023.
Operating expenses increased by 22% YoY, likely due to market inflation, but remained flat QoQ.
UBL’s cost-to-income ratio rose to 40% in Q1 2024 compared to 37% in Q1 2023. Excluding the gain on securities, the adjusted ratio is estimated at around 54%.
The bank’s effective tax rate was 48% in Q1 2024, compared to 42% and 53% in the previous quarters.
UBL’s earnings per share (EPS) grew to Rs. 13.05 in Q1 2024 from Rs. 11.62 in the same period last year.
Topline Securities maintains a buy recommendation for UBL, with the stock currently trading at a 2024E PE ratio of 4.1x and a PBV ratio of 0.8x.
As of Wednesday, UBL’s stock price on the exchange stood at Rs. 194.88, reflecting a positive trend with healthy trading volume.