Karachi, October 23, 2024 – United Bank Limited (UBL) has reported its highest-ever quarterly earnings, posting an impressive profit of Rs18.3 billion for the third quarter of 2024 (3Q2024). This translates to earnings per share (EPS) of Rs14.96, marking a significant 24% increase year-on-year (YoY) and quarter-on-quarter (QoQ). The bank’s performance aligns with market expectations, showcasing its robust financial health and strategic growth.
For the first nine months of 2024 (9M2024), UBL’s earnings surged to Rs40.12 per share, reflecting an 18% YoY growth, as noted in research by Topline Securities Limited. Additionally, UBL announced a third interim cash dividend of Rs11 per share, bringing the total dividend payout for 9M2024 to Rs33 per share. This dividend reflects the bank’s commitment to rewarding its shareholders while maintaining a strong capital position.
Key Drivers of Earnings Growth
The substantial growth in UBL’s 3Q2024 earnings was driven primarily by a notable increase in Net Interest Income (NII), which reached Rs52 billion. This figure represents a 30% YoY and an impressive 77% QoQ rise. The growth in NII was largely attributed to higher yields on assets, favorable asset repricing gaps, and better returns on Repo borrowings. These factors allowed UBL to leverage its asset base more effectively, contributing significantly to the bank’s overall profitability.
Additionally, UBL’s Non-Interest Income in 3Q2024 saw a remarkable rise of 102% YoY, reaching Rs16 billion. This surge was mainly due to a substantial gain on securities, amounting to Rs5.9 billion, a sharp increase from the Rs284 million recorded in the same period last year. The bank also achieved strong growth in fees and commissions, which increased by 32% YoY, alongside a 49% YoY rise in foreign exchange income. These non-interest revenue streams provided a diversified income base, reinforcing UBL’s earnings stability.
Impact of Strategic Transactions
The bank’s unconsolidated accounts for 3Q2024 revealed a notable gain of Rs7.3 billion, largely stemming from the sale of its subsidiary, United National Bank Limited (UNBL UK). This strategic move contributed significantly to UBL’s bottom line, providing a boost to its quarterly performance. However, the bank also recorded a provision expense of Rs894 million during the quarter, reversing the provision income of Rs664 million seen in 2Q2024. Compared to Rs993 million in 3Q2023, this figure represents a slight reduction, indicating a cautious approach to managing credit risk.
Cost Management and Efficiency
Operating expenses for UBL increased by 26% YoY and 18% QoQ in 3Q2024, influenced by inflationary pressures and the bank’s ongoing branch expansion. Despite the rise in expenses, UBL demonstrated improved operational efficiency, as evidenced by a lower cost-to-income ratio. The ratio fell to 35% in 3Q2024, compared to 40% in the same period last year and 42% in the previous quarter. This improvement reflects the bank’s focus on maintaining cost discipline while pursuing growth initiatives.
Taxation and Sector Challenges
UBL faced a higher effective tax rate of 57% in 3Q2024 and 52% for 9M2024, partly due to additional taxes resulting from its low Advances-to-Deposits Ratio (ADR). As of June 2024, UBL’s ADR stood at 25.2%, the lowest within the sector. The low ADR indicates a preference for risk-averse investments, such as government securities, in a challenging economic environment. However, the increased tax burden reflects regulatory measures aimed at encouraging banks to expand lending to the private sector.
Resilience Amid Economic Uncertainty
Despite a challenging economic environment, UBL’s record-breaking quarterly earnings demonstrate its resilience and growth potential. The bank’s strong performance in 3Q2024 highlights its ability to adapt to market dynamics and leverage opportunities for revenue growth. With continued focus on strategic initiatives, efficient operations, and shareholder returns, UBL remains well-positioned to navigate the evolving financial landscape.
As UBL looks ahead, its robust financial results provide a solid foundation for sustained growth, even amidst economic challenges. The bank’s strategic focus on maximizing asset yields, diversifying income streams, and maintaining a disciplined approach to cost management will be key to driving future performance and maintaining its leadership position in the banking sector.