UBL stock stands out in the banking sector based on earnings growth
Big banks, bigger profits
Pakistan’s banking sector has had to adapt quickly to changing conditions over the past year. From falling interest rates to tighter margins, banks faced plenty of challenges. Yet, most major banks still managed to grow profits in the first half of 2025, thanks to higher deposits, strong investment returns, and careful cost control. Among all the banks, United Bank Limited (UBL) has emerged as the top performer in terms of earnings growth. Let’s take a closer look at how UBL stood out from the pack.
Sector overview: profits still rising despite lower rates
The overall banking sector in Pakistan is expected to post 7% earnings growth in 2Q2025, even as the average policy rate dropped from 21.5% to 11.3% over the past year. This growth has been driven mainly by higher net interest income (NII), which rose 12% year-on-year to Rs303 billion. Banks also saw a boost in non-interest income, including fee and commission earnings, which helped offset the impact of lower capital gains. At the same time, expenses rose in line with inflation and expansion plans, while provisioning costs increased to Rs9.1 billion due to cautious lending. Overall, the sector remains in good shape, with healthy dividend payouts and strong capital buffers.
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Company overview: United Bank Limited (UBL)
UBL delivered a standout performance in 2QCY25, reporting a profit after tax of Rs28.6 billion (EPS: Rs11.4), up 87% year-on-year and the highest growth among major banks. This result was driven by a sharp 213% increase in net interest income, which reached Rs91.2 billion. The bank benefited from strong growth in deposits, rising to Rs4.2 trillion by June 2025, a 26% jump from the previous quarter. Most of this growth came from current accounts, which are low-cost sources of funds for banks.
Non-interest income, however, fell 16% year-on-year due to a slowdown in capital gains, despite a solid increase in fee-based income. Operating expenses rose by 76% year-on-year, largely due to branch expansion and possibly inflation-linked adjustments. Even with these higher costs, UBL maintained a cost-to-income ratio of 33%, reflecting solid efficiency. The bank also announced a dividend of Rs8.0 per share, up from Rs5.5 in the previous quarter.
Financial snapshot
| Metric | UBL (2QCY25) | UBL (2QCY24) | YoY Change | UBL (1QCY25) | QoQ Change |
|---|---|---|---|---|---|
| Net Interest Income (Rs mn) | 91,206 | 29,175 | +213% | 84,223 | +8% |
| Non-Interest Income (Rs mn) | 16,227 | 19,301 | -16% | 16,822 | -4% |
| Profit After Tax (Rs mn) | 28,621 | 15,268 | +87% | 36,112 | -21% |
| EPS (Rs) | 11.4 | 6.1 | +89% | 14.8 | -23% |
| DPS (Rs) | 8.0 | 5.5 | +45% | 5.5 | +45% |
| Effective Tax Rate | 61% | 47% | – | 53% | – |
Why are analysts bullish on UBL?
UBL stands out due to its strong deposit growth, better-than-expected lending margins, and efficient cost structure. The bank’s ability to grow earnings even as interest rates fall reflects its strong deposit mix, particularly in current accounts, which reduce funding costs. Its net interest income more than tripled compared to last year, and fee income also grew sharply. Analysts believe that UBL’s healthy capital ratios, strong profits, and consistent dividend payouts make it one of the most attractive names in the sector right now.
Risks to watch
While UBL’s performance has been impressive, a few risks remain. Operating expenses have increased significantly, partly due to branch expansion, which could pressure future margins if not managed well. The tax rate also jumped to 61% this quarter, up from 53% previously, which could limit net profits going forward. Non-interest income may remain under pressure if capital markets stay soft, and any slowdown in deposit growth could affect interest income gains. Lastly, if monetary easing slows down or reverses, it could impact spread and earnings momentum.
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UBL has clearly outperformed the banking sector in 2Q2025, thanks to strong deposit growth, resilient margins, and solid fee income. With nearly 90% earnings growth year-on-year and a generous dividend, UBL looks like the standout banking stock based on earnings performance this year. For investors watching the financial sector, UBL is definitely one to keep on the radar.
⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →
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