UBL Posts Highest Ever Quarterly Profit in 3Q 2024

United Bank (UBL) announced its 3Q2024 result today, where the bank recorded earnings of Rs. 18.3 billion (EPS of Rs. 14.96), which is up 24 percent YoY and QoQ. According to Topline Securities, this is the highest ever quarterly profit posted by the bank. This takes 9M2024 earnings to Rs. 40.12/share, up 18 percent YoY. Alongside the result, the bank also announced a third interim cash dividend of Rs. 11/share, taking the 9M2024 dividend to Rs. 33/share. Net Interest Income (NII) for 3Q2024 settled at Rs. 52 billion up 30 percent YoY and 77 percent QoQ. This strong growth is mainly led by higher asset yields, favorable asset repricing gap, and positive yield on Repo borrowings. Non-Interest Income of the bank grew by 102 percent YoY to Rs. 16 billion in 3Q2024, primarily driven by gain on securities which clocked in at Rs. 5.9 billion in 3Q2024 vs Rs. 284 million in 3Q2024. UBL’s fees & commission income are also up 32 percent YoY and Foreign exchange income is up by 49 percent YoY in 3Q2024. In its unconsolidated accounts, UBL recorded a gain of Rs. 7.3 billion in 3Q2024, primarily related to the sale of its subsidiary, United National Bank Limited (UNBL UK). UBL recorded provision expense of Rs. 894 million in 3Q2024 as compared to a reversal of Rs. 664 million in 2Q2024 and Rs. 993 million in 3Q2023. Operating expenses saw an increase of 26 percent YoY and 18 percent QoQ, which was driven by inflationary pressures and an expanding branch network. UBL’s cost-to-income ratio improved to 35 percent in 3Q2024 as compared to 40 percent in 3Q2023 and 42 percent in 2Q2024. The effective tax rate of the bank clocked in at 57 percent in 3Q2024 and 52 percent in 9M2024. This indicates bank have recorded additional tax on account of lower ADR. To recall, UBL’s gross ADR stood at 25.2 percent as of June 2024, the lowest in the sector. The UBL stock is currently trading at a 2024E PE ratio of 5.4x, a PBV ratio of 1.3x, and a dividend yield of 15 percent.