United Bank Ltd

Performance Evaluation for the year ended 2018

Balance Sheet (rupees in 000)

Change in
31-Dec 2018 2017 Increase/(Decrease) Percentage

Cash and balances with treasury

banks 187,915,671 161,119,170 26,796,501 14%
Balances with other banks 41,747,060 35,549,112 6,197,948 15%
Lending to financial institutions 35,346,551 13,097,277 22,249,274 63%
Investments 831,159,100 1,124,921,300 -293,762,200 -35%
Advances 754,551,722 665,303,363 89,248,359 12%
Fixed assets 50,898,280 49,230,901 1,667,379 3%
Intangible assets 1,876,094 1,153,176 722,918 39%
Deferred tax assets 6,685,952 -
Other assets 92,312,444 80,538,689 11,773,755 13%
Total Assets - Net of Provisions 2,002,492,874 2,130,912,988 -128,420,114 -6%

Liabilities & Equity

Bills Payable 27,272,967 29,852,405 -2,579,438 -9%
Borrowings 279,918,125 517,082,159 -237,164,034 -85%
Deposits and other accounts 1,448,324,041 1,349,698,487 98,625,554 7%
Liabilities against assets subject to
finance lease 10,000 4,375 5,625 56%
Subordinated debts 9,000,000 0 9,000,000 100%
Deferred tax liabilities 0 2,980,466 -2,980,466 -
Other liabilities 69,343,882 56,801,334 12,542,548 18%
Total Liabilities 1,833,669,015 1,956,419,226 -122,750,211 -7%
Share Capital 12,241,798 12,241,798 0 0%
Reserves 60,078,870 47,203,516 12,875,354 21%
Surplus on revaluation of assets 16,992,906 33,146,476 -16,153,570 -95%
Unappropriated profit 73,749,995 76,410,128 -2,660,133 -4%
Total Equity 163,063,529 169,001,918 -5,938,389 -4%
Non-Controlling Interest 5,560,330 5,491,844 68,486 1%
Total Liabilities & Equity 2,002,492,874 2,130,912,988 -128,420,114 -6%

Resources
From a bank’s point of view, deposits are a liability to be paid back on its balance sheet and loans are
considered as assets as interest is earned from loans and interest is paid to depositors.
  Cash is the deposit from customers plus amount held on behalf of other banks. UBL has
increased its holding of cash by 14% from Rs. 161,119,170 in 2017 to Rs. 187,915,671 in 2018, a
whooping increase of Rs. 26,795,501. UBL may have improved its cash position in order to
remain liquid and in a stable position so that investors are attracted in hopes of higher
dividends.

 The significant portion of the investments comprise of equity, debt, and government securities.
In addition, investments by the Bank also include investment in subsidiaries and associates as at
December 31, 2018 amounting to Rs. 4,523.579 million and Rs. 1,088.432 million, respectively.
Investments are carried at cost / amortized cost or fair value in accordance with the Bank’s
accounting policy relating to their recognition. Provision against investments is made based on
impairment policy of the Bank which includes both objective and subjective factors. The bank’s
total equity decreased by 4% from 2017 to 2018, ending at 16.3 billion rupees. Perhaps the most
important and drastic change in surplus on revaluation of assets, a drastic decrease of 95%
ending at 16.9 billion rupees in 2018 compared to 33.1 billion rupees in 2017.

 Liabilities make up a big portion of a bank’s balance sheet and United Bank Limited’s liabilities
make up a big part of its assets. UBL has decreased its liabilities by 7% compared to 2017, having
repaid amount as big as Rs. 122,750,211. This is a huge improvement as decreased liabilities
make up a good impression on potential investors as they monitor growth of loans and the
bank’s liquidity position in order to determine its liquidity position. However, it may be frowned
upon as increase in loans can be put towards bank’s deposits so that a favorable yield can be
earned.

 Deposits make up the biggest liabilities for the bank which includes different components such
as savings, money-market accounts and checking accounts. UBL increased its deposits by Rs.
98,625,554 in 2018, an increase of 7% from Rs. 1,349,698, 487 in 2017 to Rs. 1,448,324,041 in
2018. The figures include both interest and non-interest-bearing accounts. Having sufficient
deposits is critical for the bank’s position and profitability as if the bank does not have enough
deposits, it can have trouble loaning amounts and it will result in slow growth of the bank.

 UBL’s balance sheet size reached Rs.2 trillion as at 2018, a 6% negative growth compared to
2017.

Income Statement (rupees in 000)

Increase/ Change in
(Decrease Percentag
31-Dec 2018 2017 ) e
Mark-up / return / interest 117,363,12 110,579,89
earned 4 5 6,783,229 6%
Mark-up / return / interest
expensed 59,115,489 52,487,753 6,627,736 13%
Net mark-up / return / interest
income 58,247,635 58,092,142 155,493 26%
Non mark-up / interest income
Fee, commission, brokerage, and
exchange income 15,886,753 14,831,990 1,054,763 7%
Capital gains & dividend income 1,683,678 1,733,757 -50,079 -3%
Foreign exchange income 3,662,854 2,150,117 1,512,737 70%
(Loss) / income from derivatives -87,716 32,793 -120,509 -367%

Gain on securities - net 4,484,066 4,799,883 -315,817 -7%

Other income 1,014,156 747,535 266,621 36%
Total non-mark-up/interest
income 26,643,791 24,296,085 2,347,706 10%
Total income 84,891,426 82,388,227 2,503,199 3%

Non mark-up / interest expenses

Operating expenses 42,492,994 38,455,334 4,037,660 10%
-
Workers' Welfare Fund -2,163,314 814,669 2,977,983 -366%
Other charges 114,798 59,699 55,099 92%
Total non-mark-up / interest
expenses 40,444,478 39,329,721 1,114,757 3%

Share of profit of associates 699,294 459,702 239,592 52%

Profit before provisions
10,472,74
Provisions and write-offs -net 13,101,543 2,628,801 2 398%
Unusual Item 6,657,216 0 6,657,216 -
-
15,501,92
Profit before taxation 25,387,483 40,889,407 4 -38%
-
Taxation 10,337,929 14,934,403 4,596,474 -31%
-
10,905,45
Profit after taxation 15,049,554 25,955,004 0 -42%

Profitability
 The Group has recognized a net provision against advances amounting to Rs. 11,197.132 million
in the consolidated profit and loss account in the current year.

 The Bank has recognized a net provision against advances amounting to Rs. 11,337.236 million
in the unconsolidated profit and loss account in the current year. As at December 31, 2018, the
Bank holds a provision of Rs 60,335.610 million against advances.
  UBL has posted a standalone Profit Before Tax (PBT) of Rs. 25 billion for Full Year 2018. Excluding
a one-off extraordinary pension charge for prior years, PBT reached Rs. 31.6 billion, one of the
highest in the industry. The Bank maintained its strong payout, declaring dividends of Rs. 13.5
billion (Rs. 11 per share) in total to shareholders during the year.

 Average domestic current deposits at Rs. 454 billion, up 15% vs. FY’17. Average CASA for the
period was 86.9% (FY’17: 82.8%.) Domestic cost of deposits maintained at 3.02% (FY’17: 2.73%)
– despite rate hike of 425bps in 2018. Strong build up in Domestic fees - up by 20% YoY to reach
Rs. 11.9 billion in FY’18. FX income increased by 85% to Rs 3.5 billion in FY’18. Overall Bank
revenues up by 3%, closing at Rs. 81.3 billion in FY’18. Overall expenses growth well contained at
2% - FY’18 vs FY’17 (WWF Reversal of Rs. 2.7 billion in FY’18.) CAR has improved from 15.45% in
Dec’17 to 17.74% in Dec’18.

 Domestic fees grew by 20% YoY to reach Rs. 11.9 billion in FY’18. Branch banking customer fees
up by 14% to reach Rs. 1.6 billion (FY’17: Rs. 1.4 billion.) Debit & Credit Cards fees up by 27% to
reach Rs. 1.6 billion (FY’17: Rs. 1.3 billion.) Remittances including home remittances revenues
grew by 41% to reach Rs. 2.5 billion. Home remittances market share up to 29% (FY’17: 26.5%.)
Trade commission’s growth of 8% to reach Rs. 523 million. Banca revenues up 37% to reach Rs.
1.6 billion (FY’17: Rs. 1.2 billion.) Cash management commissions grew by 17% over FY’17 to
reach Rs. 694 million. Investment Banking fees up by 17% to reach Rs. 704 million.

Expenditure
UBL’s operating expenses increased by 10%, an increase of Rs. 4,037,660 from Rs. 38, 455,334 in 2017 to
Rs. 42,492,994 in 2018. The largest decrease in expenses was due to a drastic decrease in Workers’
Welfare Fund. Other charges increased at big amount of 92%, almost doubling in amount. Total cost for
the year included in Other Operating Expenses relating to outsourced activities is Rs 3,909 million (2017:
Rs 3,772 million). Out of this cost, Rs 3,424 million (2017: Rs 3,241 million) pertains to the payment to
companies incorporated in Pakistan and Rs 485 million (2017: Rs 531 million) pertains to payment to
companies incorporated outside Pakistan.