United Bank Limited: Conference Call takeaways

The management expects deposits to grow in line with Currency in Circulation and M2. The Bank’s deposits have grown by 2% during the 1Q2020.

The bank’s IDR has increased to 63% from 56% in December 2019. The management informed that there was a maturity of Rs50 billion under investments in PIBs during the period. The Bank’s current fixed rate PIB portfolio is at a blended yield of 9.4% between AFS investments (8.5%) and HTM investments (10.2%), floating-rate PIBs amounts to Rs190 billion.

Given the slowdown due the COVID-19 outbreak and a conscious decision by the bank to be risk averse, the management does not expect any significant growth on the loans front, with focus likely to be more towards investments.

The bulk of the provisioning charge on loans (Rs3.9 billion) is attributable to the international book, whereas there were net reversals on the domestic book.

It was informed that the companies (relating to Steel sector) from Qatar and UAE are in negotiations under the relaxation allowed by their respective Central Banks for restructuring of their loan programs.

On re-pricing of the loan book according to the agreement with the SBP, UBL will provide support to Consumers (self-employed), Agri and SME segments in the form of early re-pricing. This accounts for 10-12% of the loan book and the impact is likely to be negligible.

The Bank’s contract with Benazir Income Support Program has expired, which is visible through a decline in fee income. Further, the bank expects the head to draw down further as COVID-19 continues to dictate economic slowdown.

The Bank aims to maintain its dividend distribution strategy for the year, incorporating the restriction recommended by the SBP.

The management is of the view that there may be a further decline of 100-200bps in interest rate this year.

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