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Company Update United Bank Ltd Result Preview ‐ 9MCY14 United Bank Ltd (UBL) has scheduled its board meeting on October 28, 2014 for the an‐
nouncement of 3QCY14 financial results. We are estimating the bank to post earnings of PKR6.19bn (EPS of PKR5.06) for the 3QCY14 up by 7% Q/Q taking cumulative earnings for the 9MCY14 period to PKR17.52bn (EPS of PKR14.31) depicting a 25% Y/Y growth in earn‐
ings. Along with financial results, we expect the bank to declare cash dividend of PKR2.5/
share taking cumulative dividend payout for the 9MCY14 period to PKR7.5/share. Better core income on account of high yield long term bonds is likely to augment the core in‐
come while yield on gross advances are likely to remain flat. In the outgoing quarters, UBL booked greater capital gains of PKR1.54bn in the 1HCY14 while in the outgoing quarter market remain flat with a marginal return of merely 0.25% hence we expect little lower returns from capital market for the bank. Oct 27, 2014 Market Data KATS Code : UBL Current Price (PKR) : 187.29 52 Week Hi (PKR) : 198.39 52 Week Low (PKR) : 120.70 Avg Turnover : 1.23mn Free Float : 40% Share in Issues (PKR) : 3QCY14 Expected Performance • UBL deposits are likely to witness a growth 1.6% Q/Q in contrast with industry de‐
posits witnessed a contraction of nearly 1%. Primarily the branch expansion in the recent past may be considered as the reason behind the deposit growth. Further‐
more the bank is likely to maintain a CASA base deposits of nearly 70% 1,224.18mn Market Capitalization (PKR) : 229.27bn • Advances during the quarter may post a marginal uptick of 0.5% Q/Q hence ADR for the bank is likely to move lower to 52% vs preceding quarter level of 52.85% • Marginal changes are expected in overall classified loans while improvement in loan loss coverage may keep the provision expenses higher. In the preceding quarter the bank booked greater provisions while in the current quarter net provisioning for the bank to reduce by 44%Q/Q • UBL continued to benefit from the strong base of Fee and Commission Income backed by Home Remittances, Trade, Bancassurance and General Banking Services. Nevertheless we are not expecting substantial capital gains from the stock market back by the stock market performance in the preceding quarter Investment Perspective UBL with a projected ROE of 23.4% (5‐Year) offered at a discount of 5% to our revised target price for June’15 of PKR196/share. Furthermore UBL also offers a dividend yield of 5.6% taking cumulative return to nearly 10%. At current Prices level, UBL is trading a PEx of 10x and PBVx of 2.25x. We recommend Accumulate stance on the stock. Relative Performance Note: Please refer to the last page for Analyst Certification and other important disclosures. 70%
50%
30%
10%
KSE‐100
Oct‐14
Sep‐14
Jul‐14
Jun‐14
Apr‐14
‐10%
Mar‐14
QoQ 3% 3% ‐44% 7% 0% 2% 7% 8% 7% ‐ Jan‐14
2QCY14 21,626 9,830 929 10,867 5,491 7,816 8,543 2,743 5,800 4.74 Dec‐13
Oct‐13
Earnings Summary (PKR Mn) 9MCY14 9MCY13 YoY 3QCY14 Mark‐up Return 64,017 55,486 15% 22,276 Mark‐up Expense 29,788 27,066 10% 10,102 Net Provisioning 1,759 1,776 ‐1% 523 Net Mark‐up income 32,470 26,644 22% 11,651 15% 5,491 Non‐Mark‐up income 16,465 14,329 Expenses 23,093 20,462 13% 7,996 Profit Before Taxation 25,842 20,510 26% 9,146 Taxation 8,321 6,475 29% 2,949 Profit after Taxation 17,521 14,035 25% 6,196 EPS 14.31 11.46 ‐ 5.06 Source: HMFS Research & Company accounts Bilal Asif AC [email protected] UBL
Source: HMFS Research HABIBMETRO Financial Services Company Update Analyst Certificate The research analyst denoted AC on the cover of the report on with the name of analyst who has written the report. The analysis and views express in this report exclusively reflect his/her personal views about the subject, company or security. Furthermore his/her compensation was, is or will not be directly related to the recommendation or views articulated in this report. The infor‐
mation provided in this report is based on information available to the analyst and in accordance with best of his/her knowl‐
edge. Disclaimer This report has been prepared and circulated by Habib Metropolitan Financial Services Limited ("HMFSL") for information only, and is not intended to provide investment advice and does not take into account the specific investment objectives, financial situa‐
tion and the particular needs of the recipients. It may be noted that information presented and opinions expressed in this report do not constitute a proposition for or solicitation of any offer to buy or sell any securities or futures. While information collected for the report has been through sources believed to be accurate and reliable at the time of publication, HMFSL nonetheless makes no representation or warranty as to its accurateness and/or completeness. Investors should always seek financial advice and make their own judgment regarding the appropriateness of investing in any securities or other investments and should understand that statements regarding future prospects of investments or investment strategies may not be realized. Investors should note that income from such securities or other investments, if any, may fluctuate and that price or value of such securities and investments may rise or fall. Accordingly, investors may receive back less than originally invested and HMFS accepts no responsibility or liability whatsoever for any type of subsequent and significant loss arising from any use of this report or its contents. To the extent per‐
missible by law HMFSL and any of its officers, employees or directors may take or have a position, or otherwise be interested in any transaction in any securities or futures directly or indirectly forming the subject of this report. HMFSL may be also interested or may have business relationships with the companies profiled in this report. This report may not be distributed and published without HMFSL's consent. www.hmfs.com.pk HABIBMETRO Financial Services 2