United Bank Limited achieved a profit after tax of Rs.15.5 billion for 2011, which is 39% higher than last year. This translates into earnings per share of Rs. 12.66 (2010: Rs. 9.12). The Board of Directors also approved a final cash dividend of 60% i.e. Rs.6.00 per share bringing the total cash dividend for the year 2011 to 75 % i.e. Rs. 7.5 per share.
Despite testing times, UBL has achieved a profit before tax of Rs 24.2 billion. This is 37% higher than last year as a result of continued improvement in operating efficiency and margins. Provisions for the year declined for a second consecutive year as a result of Bank’s prudent approach towards extending financing given the difficult credit environment whilst the NPL formation has also reduced year on year.
Net interest income before provisions increased to Rs 39.4 billion, 15% higher than last year. Despite a 200 bps reduction in the discount rate in the latter half of the year, the average yield on earning assets improved by 55 bps whilst the cost of funds growth was contained at 35bps, as a result net interest margin increased to 7.0% in 2010 to 7.2% in 2011.
Total provisions declined by 7% to Rs 7.5 billion for 2011, with nearly 75% being due to aging of existing non-performing accounts. Consequently, coverage improved from 72% to 80% by December 2011. As a result, net credit loss ratio improved from 2.3% in 2010 to 2.1% in 2011. Net interest income after provisions is therefore up 22% to Rs 32.1 billion.
Fees and commissions generated from core banking businesses increased by 10% to Rs 6.9 billion mainly attributable to increase in remittances, FI commissions and cross-sell of bancassurance. Exchange income increased by 26% to Rs 2.1 billion as a result of higher transaction volumes and better leveraging of market opportunities.
The Bank’s focus on growing its Balance Sheet resulted in a 16% growth in average deposits. The domestic CASA and low cost deposit mix also improved. Gross advances remained flat in line with the industry. The advances to deposits ratio (ADR) decreased from 67% in December 2010 to 60% in December 2011.
UBL’s strong internal capital generation resulted in a Rs 8.2 billion (16%) increase in Tier 1 Capital even after healthy dividend payments, whilst Risk Weighted Assets increased by 14%. A lower reliance on Tier II capital resulted in the total CAR of the Bank reducing slightly from 14.5% in December 2010 to 14.3% in December 2011. On a consolidated basis, the CAR showed a similar trend with Tier-1 CAR improving to 10.6% in December 2011 from December 10.4% in December 2010 while total CAR reduced slightly from 15.0% in December 2010 to 14.9% in December 2011.
UBL successfully managed to expand its branchless banking network by expanding its Dukaan network from 2,300 to over 6,400, expanding this geographical footprint to more than 625 cities and towns of Pakistan. The number and volume of transactions has grown multifold and in 2011, 19 million transactions worth more than PKR 45 billion were carried out through the Omni platform, including Government to People (G2P) disbursements.
UBL Omni maintained its lead in the G2P disbursements arena in Pakistan by working closely with the GoP and multilateral agencies. The Bank channeled over 3.5 million cash disbursement transactions and provided transparent and efficient services to 1 million flood affectees, 44,000 World Food Program beneficiaries and 150,000 recipients of the Benazir Income Support Program through successfully deploying original technological innovations. These unparalleled efforts have led UBL Omni to be recognized as a benchmark and a role model for G2P payment services not only locally but also globally.
UBL has demonstrated strong performance in testing times whilst remaining committed to investing in the future. We will continue to expand our network, both through branches and through our unique “Omni” branchless banking proposition. In 2012, the Bank aims to expand its footprint by commencing operations in Tanzania and exploring attractive markets that provide growth opportunities. While we remain cost conscious, UBL places great emphasis on investing in people and maintaining its technological and innovative edge, which will be our key differentiator in this competitive market and position the Bank well for further growth.