United Bank Limited (UBL) Q1 earnings preview
Akseer Research has just released an update on its coverage of United Bank Limited (UBL) stock. The research house has raised its Dec 24 UBL target price to Rs. 217 per share.
Key Points from the Report:
1. Financial Performance Expectations:
- UBL’s Board of Directors meeting is scheduled on April 17, 2024, to discuss the financial results for 1QCY24.
- Expected unconsolidated EPS of PKR 9.33, marking an 18% YoY decline.
- Anticipated interim cash dividend of PKR 9.00 per share for 1QCY24 due to the bank’s comfortable CAR and minimal impact of IFRS 9 implementation.
2. Revenue and Income:
- Net Interest Income (NII) likely to increase by 3% YoY to PKR 34.3bn, driven by elevated interest rates and strong balance sheet growth.
- Non-interest income expected to surge by 28% YoY to PKR 11.3bn, led by Fee & commission income growth.
3. Provisions and Expenses:
- Provisioning expense estimated at PKR 369mn for 1QCY24 compared to PKR 2.6bn in the same period last year, reflecting the bank’s enhanced focus on recoveries.
- Operating expenses projected to reach PKR 18.1bn, up 21% YoY due to higher inflation, staff hiring, and IT infrastructure investment.
4. Taxation and Profitability:
- Expected effective tax rate of 58% in 1QCY24 compared to 43% in the same period last year, primarily due to higher Super Tax charge.
- Profit Before Tax estimated to be PKR 27.0bn, reflecting an 11% YoY increase.
5. Investment Recommendation:
- Analysts maintain a ‘BUY’ stance on UBL stock with a Dec-24 Price Target of PKR 217/share, offering a capital upside of 13% and a dividend yield of 19%.
Financial Estimates (PKR mn)
| 1QCY23 | 1QCY24E | YoY | |
|---|---|---|---|
| Mark-up Earned | 89,837 | 192,009 | 114% |
| Mark-up Expense | 56,582 | 157,752 | 179% |
| Net Interest Income | 33,255 | 34,256 | 3% |
| Non-Interest Income | 8,781 | 11,269 | 28% |
| Total Provisions | 2,615 | 369 | -86% |
| Admin Expenses | 15,023 | 18,140 | 21% |
| Profit Before Tax | 24,399 | 27,016 | 11% |
| Taxation | 10,496 | 15,594 | 49% |
| Profit After Tax | 13,903 | 11,422 | -18% |
| EPS | 11.36 | 9.33 | -18% |
| DPS | 11.00 | 9.00 | -18% |
Source: Company Accounts, Akseer Research
Key Financial Ratios
| CY21A | CY22A | CY23A | CY24F | CY25F | CY26F | |
|---|---|---|---|---|---|---|
| EPS | 25.2 | 26.2 | 43.4 | 43.1 | 42.83 | 42.55 |
| EPS Growth | 47.8% | 3.8% | 65.9% | -0.7% | -0.7% | -0.6% |
| DPS | 18.0 | 22.0 | 44.0 | 36.5 | 34.5 | 34.5 |
| BVPS | 167.2 | 170.7 | 206.3 | 212.3 | 221.1 | 231.6 |
| PER | 7.7 | 7.4 | 4.4 | 4.5 | 4.5 | 4.5 |
| Dividend Yield | 9.3% | 11.4% | 22.8% | 18.9% | 17.9% | 17.9% |
| P/B | 1.1 | 1.0 | 0.9 | 0.8 | 0.8 | 0.8 |
| ROE | 15.9% | 15.5% | 23.0% | 20.6% | 19.8% | 18.8% |
Source: Company Accounts, Akseer Research
Investment Thesis
Analysts recommend a ‘BUY’ on UBL stock based on a Dec-24 Price Target of PKR 217/share, offering a 13% upside along with a dividend yield of 19%. This recommendation is supported by strong balance sheet growth and favourable positioning to benefit from monetary easing.
Risks
Key risks to the investment thesis include lower-than-expected growth in advances and deposits, as well as higher-than-anticipated provisioning.
Financial Highlights – UBL
Income Statement (PKR mn)
| CY21A | CY22A | CY23A | CY24F | CY25F | CY26F | |
|---|---|---|---|---|---|---|
| Mark-up/interest earned | 147,974 | 250,679 | 521,374 | 640,561 | 394,707 | 345,471 |
| Mark-up/interest expensed | 76,216 | 147,469 | 378,490 | 496,895 | 249,620 | 199,784 |
| Net interest income | 71,759 | 103,209 | 142,884 | 143,666 | 145,086 | 145,687 |
| Non-interest income | 23,379 | 34,443 | 22,869 | 42,867 | 43,204 | 46,098 |
| Provision charged | (955) | 15,669 | (9,042) | 1,768 | 2,026 | 2,226 |
| Operating expenses | 43,966 | 53,673 | 66,677 | 81,225 | 83,453 | 87,416 |
| Profit/loss to shareholders | 30,882 | 32,063 | 53,180 | 52,805 | 52,434 | 52,093 |
Balance Sheet (PKR mn)
| CY21A | CY22A | CY23A | CY24F | CY25F | CY26F | |
|---|---|---|---|---|---|---|
| Cash & Treasury Balances | 267,937 | 143,004 | 277,330 | 263,464 | 289,810 | 318,791 |
| Investments | 1,496,542 | 1,415,194 | 4,385,217 | 1,733,552 | 1,473,414 | 1,599,033 |
| Advances | 646,188 | 921,837 | 613,566 | 1,040,012 | 1,149,418 | 1,269,771 |
| Operating Fixed Assets | 70,769 | 73,223 | 76,044 | 84,471 | 93,833 | 104,233 |
| Other Assets | 136,729 | 205,495 | 222,842 | 165,905 | 182,495 | 200,745 |
| Total Assets | 2,618,166 | 2,758,753 | 5,574,998 | 3,287,403 | 3,188,970 | 3,492,573 |
| Borrowings from FIs | 563,285 | 564,519 | 2,815,471 | 645,214 | 298,958 | 328,854 |
| Deposits | 1,750,944 | 1,838,367 | 2,350,541 | 2,233,014 | 2,456,315 | 2,701,947 |
| Other Liabilities | 99,295 | 146,847 | 156,486 | 149,296 | 163,069 | 178,186 |
| Total Liabilities | 2,413,523 | 2,549,733 | 5,322,497 | 3,027,524 | 2,918,342 | 3,208,987 |
| Equity | 204,643 | 209,020 | 252,501 | 259,879 | 270,628 | 283,556 |
| Total Liabilities & Equity | 2,618,166 | 2,758,753 | 5,574,998 | 3,287,403 | 3,188,970 | 3,492,573 |
Source: Company Accounts, Akseer Research
Disclaimer:
The information in this article is based on research by Akseer Research. All efforts have been made to ensure the data represented in this article is as per the research report. This report should not be considered investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.
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