{"id":9342,"date":"2025-05-23T13:42:06","date_gmt":"2025-05-23T08:42:06","guid":{"rendered":"https:\/\/ksestocks.com\/blog\/?p=9342"},"modified":"2025-05-23T13:42:13","modified_gmt":"2025-05-23T08:42:13","slug":"should-you-buy-ubl-before-it-hits-rs560","status":"publish","type":"post","link":"https:\/\/ksestocks.com\/blog\/should-you-buy-ubl-before-it-hits-rs560\/","title":{"rendered":"Should you buy UBL before it hits Rs560?"},"content":{"rendered":"\n<h2 class=\"wp-block-heading\">Key takeaways:<\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>UBL\u2019s EPS revised up to Rs96 for 2025<\/strong>, up 55% from previous estimate<\/li>\n\n\n\n<li><strong>1Q2025 results beat expectations<\/strong> on stronger Net Interest Income (NII)<\/li>\n\n\n\n<li>Current account deposits up <strong>50% YoY<\/strong>, with mix improving to <strong>54%<\/strong><\/li>\n\n\n\n<li><strong>Target price raised to Rs560<\/strong>, implying a <strong>19% total return<\/strong>, including <strong>10% dividend yield<\/strong><\/li>\n\n\n\n<li><strong>BUY<\/strong> rating reaffirmed<\/li>\n<\/ul>\n\n\n\n<p><strong>United Bank Limited (<a href=\"https:\/\/ksestocks.com\/blog\/tag\/ubl\/\" target=\"_blank\" rel=\"noopener\" title=\"UBL\">UBL<\/a>) <\/strong>is showing strong signs of outperformance in the banking sector, prompting a major upward revision in earnings forecasts. Following a robust 1Q2025 showing, research analysts have <strong>increased their EPS estimate for 2025 by 55% to Rs96<\/strong>, with the 2026 EPS now expected at Rs85.4.<\/p>\n\n\n\n<p>The bullish outlook is supported by exceptional deposit growth, attractive valuations, and a stronger capital base, making <strong>UBL a top contender among listed Pakistani banks<\/strong>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Deposit growth outpaces peers<\/h2>\n\n\n\n<p>In 1Q2025, UBL recorded <strong>total deposit growth of 23% YoY and 29% QoQ<\/strong>, significantly higher than the average 15% YoY growth reported by peers such as <strong><a href=\"https:\/\/ksestocks.com\/blog\/tag\/hbl\/\" target=\"_blank\" rel=\"noopener\" title=\"HBL\">HBL<\/a><\/strong>, <strong><a href=\"https:\/\/ksestocks.com\/blog\/tag\/mcb\/\" target=\"_blank\" rel=\"noopener\" title=\"MCB\">MCB<\/a><\/strong>, and <strong><a href=\"https:\/\/ksestocks.com\/blog\/tag\/mebl\/\" target=\"_blank\" rel=\"noopener\" title=\"MEBL\">MEBL<\/a><\/strong>. More impressively, <strong>current account deposits rose by 50% YoY<\/strong>, pushing the current account mix to <strong>54%<\/strong>, up from 44% last year.<\/p>\n\n\n\n<p>This surge in low-cost deposit growth improved NII, contributing to the earnings beat. The deposit momentum is attributed to a <strong>low-base effect in 4Q2024<\/strong>\u2014when the bank deliberately reduced deposits to manage tax exposure\u2014and a <strong>more efficient strategy under new management<\/strong>.<\/p>\n\n\n\n<p>Deposit assumptions have now been revised to <strong>30% growth for 2025<\/strong> and <strong>15% for 2026<\/strong>, with a sustained <strong>current account mix of 55%<\/strong>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Strong capital gains and repo positioning<\/h2>\n\n\n\n<p>UBL\u2019s 1Q2025 results also featured a <strong>Rs5.8 billion capital gain<\/strong> from federal government securities. The bank holds <strong>Rs30 billion in unrealized gains<\/strong> post-tax on its investment book, which is heavily skewed toward <strong>floating-rate PIBs<\/strong>. With falling bond yields, more gains are likely.<\/p>\n\n\n\n<p>Capital gains assumptions now stand at <strong>Rs16 billion for 2025<\/strong> and <strong>Rs15 billion for 2026<\/strong>.<\/p>\n\n\n\n<p>Meanwhile, <strong>repo borrowings stood at Rs5.1 trillion<\/strong> in March 2025. While UBL\u2019s leverage ratio of <strong>3.06%<\/strong> is below the <strong>peer average of 5.12%<\/strong>, it now meets the<strong><a href=\"https:\/\/ksestocks.com\/blog\/tag\/sbp\/\" target=\"_blank\" rel=\"noopener\" title=\"SBP\"> SBP<\/a><\/strong>\u2019s minimum threshold. Government reliance on OMOs is expected to persist, keeping UBL\u2019s <strong>spread-based income from OMOs intact<\/strong>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Amalgamation boost from SILK<\/h2>\n\n\n\n<p>UBL has successfully <strong>amalgamated Silkbank (SILK)<\/strong>. This move helped reduce deferred tax liabilities from <strong>Rs39 billion to Rs12 billion<\/strong>, though it won\u2019t significantly impact tax expenses in 2025 due to super tax laws. <strong>Effective tax rates of 53% in 2025<\/strong> and <strong>52% in 2026<\/strong> are assumed.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Capital strength &amp; dividends<\/h2>\n\n\n\n<p>UBL\u2019s <strong>Capital Adequacy Ratio (CAR)<\/strong> improved to <strong>21.4%<\/strong>, well above the regulatory minimum of 12.5%. With profitability climbing, the <strong>expected dividend per share has been revised up to Rs52<\/strong> for both 2025 and 2026, translating to an attractive <strong>dividend yield of 10%<\/strong>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Key financial projections<\/h2>\n\n\n\n<figure class=\"wp-block-table is-style-stripes\"><table class=\"has-fixed-layout\"><thead><tr><th>Metric<\/th><th>2024A<\/th><th>2025E<\/th><th>2026F<\/th><\/tr><\/thead><tbody><tr><td>EPS (Rs)<\/td><td>60.0<\/td><td>96.0<\/td><td>85.4<\/td><\/tr><tr><td>DPS (Rs)<\/td><td>44.0<\/td><td>52.0<\/td><td>52.0<\/td><\/tr><tr><td>Dividend Yield (%)<\/td><td>9%<\/td><td>10%<\/td><td>10%<\/td><\/tr><tr><td>P\/E (x) @ Rs515<\/td><td>8.6x<\/td><td>5.4x<\/td><td>6.0x<\/td><\/tr><tr><td>ROE (%)<\/td><td>25%<\/td><td>35%<\/td><td>28%<\/td><\/tr><tr><td>PBV (x)<\/td><td>2.0x<\/td><td>1.7x<\/td><td>1.6x<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">Valuation &amp; outlook<\/h2>\n\n\n\n<p>UBL is currently trading at a <strong>2025E P\/E of 5.4x and PBV of 1.7x<\/strong>, with a <strong>35% ROE<\/strong>\u2014placing it among the most attractive names in the sector. The <strong>Dec-2025 target price has been raised to Rs560\/share<\/strong>, offering a <strong>19% total return<\/strong> including dividends.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Risks to watch<\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Faster-than-expected drop in interest rates<\/li>\n\n\n\n<li>Negative spreads on repo operations<\/li>\n\n\n\n<li>Slower-than-forecast current account deposit growth<\/li>\n<\/ul>\n\n\n\n<p>UBL\u2019s performance in 1Q2025 signals a <strong>shift in momentum<\/strong>, driven by improved deposit mix, capital gains, and management efficiency. With increased earnings visibility and stronger capital buffers, <strong>UBL looks primed for further upside<\/strong>. For investors seeking high-yield exposure to a bank with robust fundamentals, <strong>UBL remains a compelling \u201cBUY.\u201d<\/strong><\/p>\n\n\n\n<p><strong>Source: Topline Research<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>United Bank Limited (UBL) is showing strong signs of outperformance in the banking sector, prompting a major upward revision in earnings forecasts. Following a robust 1Q2025 showing, research analysts have increased their EPS estimate for 2025 by 55% to Rs96, with the 2026 EPS now expected at Rs85.4. <\/p>\n","protected":false},"author":9252,"featured_media":7044,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[154,155],"tags":[73,61,28,194,181],"class_list":["post-9342","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-analysis","category-fundamental-analysis","tag-hbl","tag-mcb","tag-mebl","tag-sbp","tag-ubl"],"featured_image_src":{"landsacpe":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/11\/UBL-STOCK-PSX-1140x445.png",1140,445,true],"list":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/11\/UBL-STOCK-PSX-463x348.png",463,348,true],"medium":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/11\/UBL-STOCK-PSX-300x188.png",300,188,true],"full":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/11\/UBL-STOCK-PSX.png",1920,1200,false]},"_links":{"self":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts\/9342","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/users\/9252"}],"replies":[{"embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/comments?post=9342"}],"version-history":[{"count":1,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts\/9342\/revisions"}],"predecessor-version":[{"id":9343,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts\/9342\/revisions\/9343"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/media\/7044"}],"wp:attachment":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/media?parent=9342"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/categories?post=9342"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/tags?post=9342"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}