Earnings Report /
Pakistan

United Bank: 2QCY22 Result Review: CAR buffers lead to payout surprise

  • High effective tax rate leads to earnings miss, but DPS of PKR4.0/sh is a beat

  • The payout is driven by a strong capital profile (1QCY22 T1: 14.5%, CAR: 19.2%)

  • We maintain our Buy stance on UBL with a TP of PKR160/sh

Yusra Beg
Yusra Beg

Senior Investment Analyst

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Intermarket Securities
3 August 2022

UBL has posted consolidated 2QCY22 NPAT of PKR2.65bn (EPS: PKR2.17), down 64%YoY. This brings 1HCY22 NPAT to PKR11.96bn (EPS: PKR9.77), down 20%YoY. The 2Q result was below our projected EPS of PKR3.20, but the deviation is due to high effective taxation of 85% vs. our projected 78%. Pre-tax earnings are above estimates, and so is the 2nd interim dividend of PKR4.0/sh vs. our expected PKR2.50/sh dividend.

2QCY22 Results Highlights:

Net interest income is up a strong 31%YoY / 10%MoM to PKR24.7bn. Margins should continue to expand going forward, with tailwinds coming from higher interest rates.

Non-interest income has clocked in at PKR8.9bn, up 66%YoY. This is largely due to much higher fx income, similar to other banks that have benefitted from the PKR volatility. Core fee income of PKR4.2bn is up a more modest 14%YoY.

Admin expenses are up a swift 21%YoY, tracking the higher inflation environment. Due to strong revenue generation however, the Cost/Income has come off to 41% vs. 45% in the previous quarter.

Total provisions have come in at PKR1.0bn, modest but a departure from the reversals seen last year. It is unclear if this number has been driven by loans (e.g. buildup in general provisions like other banks) or the investment book.