Karachi, April 28, 2023 (PPI-OT): UBL: Mammoth payout surprises in 1QCY23

United Bank Limited (UBL) announced its 1QCY23 financial performance earlier today, wherein the bank posted NPAT of PkR14.5bn (EPS: PkR11.6) for the quarter, higher by 9%QoQ and 54%YoY. The earnings were substantially higher than our expectations.

As anticipated, the earnings growth in the quarter came from NIMs expansion, which clocked in at ~5.5% in 1QCY23, compared to 5.0% in the preceding three-month period-driven by the hike in interest rates during the period. As a result, the net interest income at UBL saw a sequential increase of 10% to ~PkR35.0bn.

On the Non-interest income front, the bank posted a QoQ dip to the tune of 28%QoQ, despite the increase in FX income from PkR832mn in 4QCY22 to PkR4.4bn in 1QCY23. This was offset by the absence of ~PkR6.8bn in other income recorded in the earlier quarter. On a YoY basis, the non-interest income increased by 35%.

Further strength to the bank's profitability during the period came from lower than expected provisioning during the period, wherein the bank posted PkR2.7bn under the head. This was lower by 75% compared to the previous quarter, wherein the bank had to provide against the foreign securities in its investment portfolio following the downgrade on Pakistan's sovereign bonds.

The aforementioned positives were somewhat offset by the relatively higher effective tax rate in the quarter, clocking in at 42% compared to 25% in the previous quarter. To recall, UBL posted a reversal in the earlier quarter against the higher taxation that it had paid in the first 9 months of the year.

After having paid out PkR9/sh in the final quarter of CY22, UBL has announced a PkR11/sh cash dividend alongside the earnings, beating our expectations-corresponding to a payout ratio of ~95%.