Karachi, February 22, 2023 (PPI-OT): UBL: CY2022 Result Review

United Bank Limited (UBL) has announced its CY22 earnings earlier today, wherein the bank has posted earnings of PkR13.3bn (EPS: PkR10.9) for the latest quarter, higher by 102%QoQ, substantially higher than our estimate.

The surprise in earnings was largely driven by better than expected earnings spread, wherein the bank has posted net interest income of PkR31.8bn, 10% higher than the earlier quarter. This indicates that the net interest margin for UBL has improved from ~4.6% in 3QCY22 to ~5.3% in 4QCY22.

In addition to this, the earnings for the final quarter were further buoyed by the non-interest income, wherein the bank posted PkR12.7bn, higher by 69%QoQ.

The earnings were somewhat dented by the high provisioning during the quarter, with the bank reporting PkR10.8bn under the head, compared to PkR5.5bn in the earlier quarter.

On the cost side, the bank’s non-markup expenses have grown by PkR16.1bn, which were higher by 9%QoQ. Despite this, the bank’s cost-to-income dropped to 36% in 4QCY22 vs. 41% in 3QCY22.

Earnings during the quarter were also substantially supported by a lower tax rate, wherein the bank has recorded an effective tax rate of 25% for the final quarter, compared to ~59% in the earlier quarter. For the full year, the bank posted an effective tax rate of 53%.

For the full year, the bank reported earnings of PkR32.1bn (EPS: PkR26.2/sh), which were higher by 4% compared to the SPLY. The net interest income grew by a substantial 44% during the period, which was offset by higher taxation expenses during the year.

Alongside the earnings, the bank announced a cash dividend of PkR9/sh for the quarter, taking the full year payout to Pkr22/sh or 84% of earnings. The payout for the year poses a dividend yield of 21.5% over the stock’s last close.