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.