Global Bank Equity Specialist, Creative Portfolios

Paul Hollingworth

Global Bank Equity Specialist

Creative Portfolios

Equity Bottom-Up

United Bank Ltd/Pakistan / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/united-bank-ltd-pakistan" target="_blank" data-smartkarma-citation="entities:28904:1" rel="noopener">United Bank Ltd/Pakistan (UBL PK)</a> PH Score™   9.7UBL dedicates itself to a mainly short-term corporate lending (84% of portfolio) which includes manufacturing, utilities and energy and government segments, with some limited consumer credit (mainly secured auto), backed by rising CASA funding (76% of Deposits).The bank’s network stands at 1,370 branches (2019: 1,376 branches). This includes 100 Islamic branches (2019: 100 branches) with over 187 Islamic banking windows (2019: 162 Islamic banking windows). Omni, a flagship branchless banking proposition supports the mass unbanked population to conduct basic banking transactions. UBL prides itself in its technological innovations, including a “UBL Digital App”, one of the fastest growing Banking apps in the market with a digital subscriber base of over 1.5 million.Higher remittances of late support further deposit inflows and foreign-currency liquidity. Higher remittances contribute to higher domestic deposits, providing lenders with stable and low-cost funding while boosting their foreign-currency liquidity. Remittances have the potential to increase over the next few years, backed by the Pakistan Remittances Initiative and technical advances that materially reduce transaction costs. UBL commands a 23% share in remittances.FY20/19 results show positive fundamental momentum and trends with improvement in Profitability, in NIM/Spread, in Liquidity, in Capitalization, in Efficiency and in Provisioning though there was erosion in headline Asset Quality. “Core Income” showed robust growth YoY, supported by reduced Funding Costs from Interest-bearing Liabilities, helped by vibrant CASA funding growth, margin enhancement, and Efficiency gains which partially offset a sizeable increase in LLPs which exerted a negative impact on Net Income which expanded by 9.1% YoY.Management appears to have prioritized Profitability, Capital Adequacy, Liquidity, Efficiency and de-risking over Balance Sheet growth which looks astute given systemic Asset Quality issues. Capitalization and Liquidity Ratios are as a result extremely healthy.<div class="content-highlight">A FV of 10%, a PBV of 0.8x, a Dividend Yield of 7.2%, an Earnings Yield of 13.1% and a Total Return Ratio of 1.35x are far from unappealing. The bank commands a top quartile PH Score™ (9.7) which captures value-quality trends.</div>We note a shareholder roster of some quality: Baillie Gifford, Schroders, BlackRock, Jupiter Asset Management, Vanguard, Standard Life Aberdeen, and Union Asset Management.

United Bank Ltd/Pakistan (UBL PK) PH Score™   9.7UBL dedicates itself to a mainly short-term corporate lending (84% of portfolio) which includes manufacturing, utilities and energy and government segments, with some limited consumer credit (mainly secured auto), backed by rising CASA funding (76% of Deposits).The bank’s network stands at 1,370 branches (2019: 1,376 branches). This includes 100 Islamic branches (2019: 100 branches) with over 187 Islamic banking windows (2019: 162 Islamic banking windows). Omni, a flagship branchless banking proposition supports the mass unbanked population to conduct basic banking transactions. UBL prides itself in its technological innovations, including a “UBL Digital App”, one of the fastest growing Banking apps in the market with a digital subscriber base of over 1.5 million.Higher remittances of late support further deposit inflows and foreign-currency liquidity. Higher remittances contribute to higher domestic deposits, providing lenders with stable and low-cost funding while boosting their foreign-currency liquidity. Remittances have the potential to increase over the next few years, backed by the Pakistan Remittances Initiative and technical advances that materially reduce transaction costs. UBL commands a 23% share in remittances.FY20/19 results show positive fundamental momentum and trends with improvement in Profitability, in NIM/Spread, in Liquidity, in Capitalization, in Efficiency and in Provisioning though there was erosion in headline Asset Quality. “Core Income” showed robust growth YoY, supported by reduced Funding Costs from Interest-bearing Liabilities, helped by vibrant CASA funding growth, margin enhancement, and Efficiency gains which partially offset a sizeable increase in LLPs which exerted a negative impact on Net Income which expanded by 9.1% YoY.Management appears to have prioritized Profitability, Capital Adequacy, Liquidity, Efficiency and de-risking over Balance Sheet growth which looks astute given systemic Asset Quality issues. Capitalization and Liquidity Ratios are as a result extremely healthy.A FV of 10%, a PBV of 0.8x, a Dividend Yield of 7.2%, an Earnings Yield of 13.1% and a Total Return Ratio of 1.35x are far from unappealing. The bank commands a top quartile PH Score™ (9.7) which captures value-quality trends.We note a shareholder roster of some quality: Baillie Gifford, Schroders, BlackRock, Jupiter Asset Management, Vanguard, Standard Life Aberdeen, and Union Asset Management.

UBL: Jump on the Quality Shareholder Bandwagon