UBL: What Remains a Hidden Gem in Banks · UBL: What Remains a Hidden Gem in Banks Commercial...
Transcript of UBL: What Remains a Hidden Gem in Banks · UBL: What Remains a Hidden Gem in Banks Commercial...
Current Price as of June 29th, 2016
July 12, 2016
UBL: What Remains a Hidden Gem in Banks
Commercial Banks
Hubco Company to Outperform Due to Analyst
United Bank Limited REP 300
UBL - BUY
Our Dec’16 Target Price of PKR 203/share offers a 15% upside potential. The stock
currently trades at 1.35x book value (CY16E), which compares well to an average of
1.42x for Big-5 peers (ex NBP). Our Dec’16 Target Price implies a CY16F P/Bx of 1.45x,
P/E of 9.4x, with a DY of 7.3%, and an EPS CAGR of 14% - CY15-20F (Total Return of
22.3%).
Key Strengths to Drive Profitability and Balance Sheet Growth
UBL has been our top pick based on a few key strategic strengths that, coupled with
macroeconomic triggers, we expect, should provide the bank with double digit growth in
its deposit base (CY15-20F CAGR 13%) along with a substantial growth expected in its
loan book (CY15-20F CAGR 10%), and an accelerated growth in profitability in the next
five years (CY15-20F CAGR of 14%). The key strengths of UBL we would like to highlight
in this report include; its (i) cornerstone retail segment (rural/urban market), (ii) rebuilding
its SME business model, (iii) increased focus on becoming a major player in Islamic
banking industry, and (iv) robust fee & commission income.
Perfect Timing for UBL to Expand its Share of Advances in the Industry
These strengths are expected to position the bank perfectly given the recently accelerated
demand for credit in the private sector (up 15% YoY on average); especially in the long
term loans with an average growth of 19% YoY which is anticipated to be followed with
an overall higher credit demand in private sector. The scenario is propped with record low
interest rates (PR 5.75%) and over a decade low inflation (FY16 2.9%) that should furnish
a protracted double digit growth in overall loans. Not to forget the cherry on top; big
ticket financing directly under the banner of CPEC, where UBL is expected to serve as one
of the few primary lenders, and the concomitant spillover throughout the economy.
Ready for Future Credit Growth with All Bases Covered
In preparation of strategically positioning itself for the anticipated upcoming credit
growth, UBL has taken stringent measures to limit its exposure to possible risks and to
improve its overall asset quality. Alongside implementing a more strict lending approach
(infection ratio stagnant at 9.0% vs. peer avg. 11.3%), UBL booked hefty provisions worth
PKR 3.8bn in CY15 (up 186% from CY14) and an additional PKR 1.8bn in 1QCY16 boosting
its coverage ratio to 91.7% (peer’ avg. 87.0%). While UBL’s CAR that improved from 14.3%
(CY14) to 14.7% (CY15) may seem relatively lower compared to some of its peers’ (avg.
19%), it is due to a relatively smaller padding in IEAs (i.e. greater proportion of loans/IEAs).
Exhibit. 1 Key Financial Highlights
Year End (PKR mn) CY13 CY14 CY15 CY16E CY17F
Net Income 19,731 24,025 27,100 27,107 29,835
Earnings growth (%) 17.1 21.8 12.8 1.1 10.1
EPS diluted (PKR) 15.8 19.3 21.4 21.6 23.9
BVPS (Tier II) 90.9 112.3 127.1 139.4 152.6
P/B (x) 1.3 1.5 1.2 1.3 1.2
P/E (x) 7.4 8.6 7.1 8.2 7.4
DPS (PKR) 10.0 11.5 13.0 13.0 13.5
Dividend Yield (%) 8.6 6.5 8.4 7.3 7.6
CAR (%) 14.2 14.3 14.7 14.6 14.7
Source: Company Financials, AHL Research
BUY
203.0
176.3
15.1
Shares (mn) 1,224
40.0
2,056
3M 6M 12M
18.5 18.6 11.8
1392.6 1169.5 1099.2
184.5 184.5 184.5
147.6 137.5 137.5
Source: Bloomberg
Analyst:
Syed Shiraz Zaidi
F:+92 21 3242 0742
D:+92 21 3246 2589
UBL PA
Free float (% )
Upside (% )
Current Price
Target Price (Dec'16)
Recommendation
Market Cap. (USD mn)
www.arifhabibltd.com
UAN: +92 21 111 245 111, Ext: 248
215,860
– Bestway Group
Price Performance
Major Shareholders
Price Performance
Avg. Volume (000)
High Price - PKR
Low Price - PKR
Return (% )
Market Cap. (PKR mn)
Best Domestic Equity House – 2016
80%
90%
100%
110%
120%
130%
Jun-
15
Jul-1
5
Aug
-15
Sep
-15
Oct
-15
Nov
-15
Dec
-15
Jan-
16
Feb-
16
Mar
-16
Apr
-16
May
-16
Jun-
16
UBL KSE100
United Bank Limited Page 2
July 12, 2016
UBL - Commercial Banks
Business & Management Overview
The Bank
A subsidiary of the renowned Bestway (Holdings) Ltd. (UK)
Third largest deposit base at PKR 1.1tr (asset base at PKR 1.5tr) – Mar’16
Third largest footprint in industry with 1,338 branches in four continents
Recently collaborated with IFC to rebuild its SME business model
Representative office in Beijing – China to support CPEC financing
United Bank Limited (UBL), headquartered in Karachi, is the third largest bank (second
largest private bank) in Pakistan with asset base in excess of PKR 1.5tr, that provides a
full range of financial solutions to individuals, corporations, institutions, and
governments through a broad spectrum of products and services, including
commercial, corporate and investment banking, consumer banking and credit,
securities brokerage, commercial, small and medium sized enterprises, agri-finance,
and Islamic and asset financing.
UBL also has the third largest footprint of 1,338 branches, and a much larger network
of ATMs both within Pakistan and internationally, including 41 Islamic branches, with a
noticeable presence in other developed and emerging markets; United Arab Emirates,
Bahrain, Qatar, United States of America, and Yemen. In addition, UBL has subsidies and
associated companies in United Kingdom (United Bank), Switzerland (UBL Switzerland),
Tanzania (UBL Bank Tanzania Ltd.), and Oman (Oman United Exchange Co.), and a
representative office in China (Beijing Rep. Office). A subsidiary of the renowned
Bestway (Holdings) Ltd. (UK), UBL maintains a deposit base in excess of PKR 1,138bn
along with PKR 480bn in advances.
Senior Management
UBL resides under the umbrella of Bestway Group; spearheaded by Sir Mohammed
Anwar Pervez, Chairman of the Board of Directors of UBL, since December 2013. Mr.
Pervez has played a pivotal role in driving Bestway Group as the seventh largest family
business in the UK.
Leading from the front, UBL’s current CEO and President, Mr. Wajahat Husain brings
with him banking expertise spanning over three decades, both domestic and
international. He chairs other key positions with the bank such as the Chairman – UBL
Switzerland and UBL Tanzania, and Director of United Bank UK. Under his stewardship,
and in line with its core values, UBL has witnessed strategic expansion of its international
business in Middle East, China, and Africa.
Along with Mr. Pervez, and Mr. Husain, UBL is maneuvered with the help of highly
experienced board of seven directors that have served as executive chairs within UBL
and other elite financial organizations of Pakistan. We view the exceptional mix of UBL
senior management and their decades of experiences within financial industry to drive
the bank to accomplish its goals and objectives by using available resources both
effectively and efficiently going forward.
Exhibit. 2 Company Snapshot - Dec'15
Head Quarters Karachi
Sponsors Bestway (Holdings) UK
Branches 1,338
Deposit Market Share 12.0% (3rd largest)
Asset Base (PKR bn) 1,506
Loan Book (PKR bn) 480
Equity (PKR bn) 160
Source: Company Financials, AHL Research
Exhibit. 3 Asset Mix by Region - 2015
Domestic Ops 75%
International Ops 25%
Middle East 19%
United States of America 1%
Europe 6%
Africa 0%
EPZ 0%
Source: Company Presentations
United Bank Limited Page 3
July 12, 2016
UBL - Commercial Banks
Shareholders’ Pattern (UBL)
Exhibit. 4 Aggregate Shares Held Figure. 1 Aggregate Shares Held
No of Shares % of Shares
Bestway Group (BG 752,406,007 61.5%
General Public 391,410,020 32.0%
Banks, DFIs, & NBFIs 33,616,240 2.7%
Modarabas & MFs 22,352,467 1.8%
Insurance Companies 18,613,586 1.5%
International GDRs 5,021,054 0.4%
NIT 758,599 0.1%
Privatization Commission 1,714 0.0%
1,224,179,687 100.0%
Source: Company Financials, AHL Research Source: Company Financials, AHL Research
Exhibit. 5 Aggregate Shares Held (as of Dec'15) Figure. 2 Aggregate Shares Held
No of Shares % of Shares
Associated Companies, Undertakings & Re
Bestway Holdings 631,728,895 51.6%
Bestway Cement 93,649,744 7.6%
NIT
CDC NIT 758,599 0.1%
Modarabas & MFs 22,352,467 1.8%
Public Sector 4,106,907 0.3%
Banks, DFIs, NBFIs 52,229,826 4.3%
Directors & CEO 17,536,633 1.4%
Executives 2,407,557 0.2%
Source: Company Financials, AHL Research Source: Company Financials, AHL Research
61%
32%
3%4%
Bestway Group (BG) General PublicBanks, DFIs, & NBFIs Others
0.1%
0.2%
0.3%
1.4%
1.8%
4.3%
7.6%
51.6%
0.0% 20.0% 40.0% 60.0%
CDC NIT
Executives
Public Sector
Directors & CEO
Modarabas & MFs
Banks, DFIs, NBFIs
Bestway Cement
Bestway Holdings
United Bank Limited Page 4
July 12, 2016
UBL - Commercial Banks
Key Strengths to Drive Profitability and Balance Sheet growth
UBL’s core values and progressive approach to embrace innovation and technology in
the banking and financial sector has enabled the bank to more than double its assets
and profitability in the last five years (CY10-15). Based on our analysis, we project the
bank to continue to excel in key segments of the market with a competitive edge over
its peers and provide impetus for double digit growth in balance sheet along with a
parallel shift in loan growth and profitability (CY15-20F).
Robust
Retail Business
Rebuilding SME Business Model
Increased Focus on Islamic Banking
Strong hold on Remittances to feed Fee & Commission
Income
Double Digit growth
in Balance Sheet,
Loan Book & Profitability
United Bank Limited Page 5
July 12, 2016
UBL - Commercial Banks
1. Strong Retail Business – UBL’s cornerstone - its Retail business grew by a
staggering 14% in CY15 with its asset base inching up to the trillion mark (PKR 985bn
Mar’16), followed by Trading and Sales (PKR 836bn), and Commercial banking (PKR
452), respectively. The management has been taking a stride in improving its services
by continuously renovating and relocating its vast network to areas with more business
potential and by offering competitive products in order to capture bigger share of the
retail market, both urban and rural.
With approximately 20% share in the overall economy, agriculture sector continues to
remain the largest employer and pivotal towards economic growth of the country and
a major segment for local banks to offer various banking products and services.
Historically, UBL has maintained its presence in the stated segment offering various
tailored development and crop-production financing solutions making up about
11.00% of its gross advances in CY14 (9.32% CY15), however, it may not have been the
leader due to the lack of a stronger outreach as one of the factors.
Figure. 3 Agriculture Growth Expected to Accelerate With GDP
Source: Company Financials, AHL Research
Considering that the growth in GDP is expected to accelerate from FY17 onwards
(upwards of 5.5%), especially from an expected bottomed out demand in FY16 due to
bad harvesting season, we estimate the bank could benefit from an accelerated credit
demand in the agribusiness. In addition, the low banking penetration within these areas
provides a fruitful opportunity to tap into the untapped market via improved network.
Besides its rural products and services, UBL facilitates various popular products and
services such as Omni-Branchless Banking, Merchant Payment, Employee Banking
Salary Account (payroll), UBL Pay Partner (payroll SME), Free Insurance Coverage, and
Signature Lounges, geared towards corporates, high net-worth individuals and other
urban clientele that are expected to continue augmenting its advances growth.
3.8% 3.7%4.0% 4.2%
4.7%
5.7%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
FY
12A
FY
13A
FY
14A
FY
15A
FY
16F
FY
17F
GDP Agriculture
According to the SBP, Agribusiness witnessed a
growth of 20% in CY15 alone with a modest
10.3% infection ratio.
Moreover, under the proposed FY17 Budget, GoP
will provide unprecedented relief measures to the
farmers’ community along with up to 50%
guarantees on small farmer loans.
Such initiatives by GoP should furnish ample
encouragement for the local banks to lend more
freely to agribusinesses.
United Bank Limited Page 6
July 12, 2016
UBL - Commercial Banks
2. Rebuilding SME Business Model – A key component of UBL’s Commercial
Banking segment remains the SME market. Recently, UBL teamed up with
International Finance Corporation (IFC), a member of the World Bank Group, which
will serve as an advisor to the Bank on rebuilding its business model and supply chain
finance program targeting the ever growing SME market.
The objective of the yearlong project is to expand UBL’s outreach to SMEs, with IFC
assisting the bank in developing a strategy and business model for SMEs á la Bank
Alfalah Limited (ex any capital injection). During the project, IFC will review UBL’s
existing credit and risk policies and provide recommendations to help improve
efficiencies and reduce turn-around time.
In addition, IFC will also help UBL with setting up a number of Value Chain Finance
Products that should be a value added service for its existing and prospective clients.
IFC holds the view that UBL can leverage its extensive branch network and existing
digital banking platform to rapidly increase its outreach to SMEs, so much so it has
estimated to invest USD 550,000 on this project.
It is not that SME banking is unknown to UBL. Based on our estimates and
categorization of SME by Small and Medium Enterprises Development Authority
(SMEDA) – an institution by GoP under Ministry of Industries and Production, UBL
lending to the SME segment accounted for 4%-8% (~PKR 20bn to 40bn) of its total
advances, during CY15.
Going forward, IFC advisory and the resultant innovative products and services
tailored for the various factions of SME segment could take the segment’s share on
UBL loan book to 8% - 10% in the near term, we believe. On the other hand, in the
medium to longer term (CY20F) where the spillover from CPEC is expected to push
the credit demand in the SME segment to new highs, its share in UBL’s book could
add up to 12% - 15% of its total advances, we believe.
Nonetheless, this project should translate into an improved topline (net interest
income) due to relatively higher yields on SME loans, in turn compensating for the
subdued interest rate environment, and accelerated growth in advances while still
managing a comfortable infection rate within set parameters.
Figure. 4 Infection Ratios on Corporate, SME, and Agri Loans
Source: Company Financials, AHL Research
-
10
20
30
40
50
Mar
-12
Jun-
12
Sep
-12
Dec
-12
Mar
-13
Jun-
13
Sep
-13
Dec
-13
Mar
-14
Jun-
14
Sep
-14
Dec
-14
Mar
-15
Jun-
15
Sep
-15
Mar
-16
Corporate SME Agri(x)
According to SBP, infection ratio for sectors such as
Textile, Leather, Others, and Sugar average out at
14.5%, whereas for Textile, which remains a major
component of SME, has the highest infection ratio of
26.3%. As it is apparent from this, most of the
conservative local financial institutions keep their
distance from the segment all together.
In order to find a resolution to this problem, SBP has
stressed over and over again on the need for local
banks/ DFIs to strategically position themselves by
appropriately aligning their business strategies with
the specific needs of SME sector, which UBL’s
collaborative effort with IFC should furnish.
In addition, recently passed ‘Credit Bureau Bill’ and
‘Corporate Restructuring Bill’ should assist banks in
the long term with making well informed lending
decisions and limiting exposure to credit costs.
SME sector witnessed modest credit growth in CY15
of 4%, same as CY14, whereas in CY16TD it has shed
a hefty 8%, offering a potential for upswing. SME’s
share in the total borrowing by private sector has
averaged 9% in the last 18 months.
Value Chain Finance
It refers to financial products and services that
flow to or through any point in a value chain that
enables investments to increase that units returns
and the growth and competitiveness of the whole
chain.
United Bank Limited Page 7
July 12, 2016
UBL - Commercial Banks
Figure. 5 Slight YoY Decline in SME Lending, Even with Substantial Cut in its Infection Ratio
Source: SBP, AHL Research
3. Increased Focus on Islamic Banking - Given the sheer size of the still mostly
untapped market, we believe UBL has been positioning itself aggressively to target the
Sharia led market with a focus on penetrating across segments in the society where
there is clear preference for Islamic products.
In terms of competition, amongst Big 5 banks, peers like MCB have already setup
dedicated Islamic subsidiaries, whereas from mid-tier banks Meezan Bank (largest
Islamic commercial bank) and Bank Alfalah Ltd have a strong presence in the domestic
market. As of Dec’15, UBL managed an extensive network of 141 Islamic window
operations (via conventional branches), whereas, its Islamic Banking branches reached
a total of 41. Its Sharia led Islamic banking segment comprises of PKR 32.8bn which is
a meager ~2% of its total assets, and thus opens up a window of opportunity for UBL
to capture the rising demand for Islamic credit facility via expansion.
UBL is already in process of converting its conventional branches into fully functional
Islamic branches in targeted key areas with 13 such branches converted in CY15 alone.
In addition, the bank has been diligently training its staff (from both conventional and
Islamic businesses) on basic concepts of Islamic banking, Islamic banking products and
services, and Islamic Branch operations throughout the year.
Besides opening up credit opportunities through CPEC projects, given part of the rural
(lower strata) and SME markets’ inclination towards Islamic banking, an improved
dedicated Islamic banking network should position UBL for the anticipated post-CPEC
boom in SME market. Furthermore, it should support the cornerstone of UBL; its retail
banking segment with the increasing auto ijarah (auto financing) products.
25
27
29
31
33
35
37
39
41
-
50
100
150
200
250
300
350
Mar
-12
Jun-
12
Sep
-12
Dec
-12
Mar
-13
Jun-
13
Sep
-13
Dec
-13
Mar
-14
Jun-
14
Sep
-14
Dec
-14
Mar
-15
Jun-
15
Sep
-15
Mar
-16
Advances NPLs Infection (RHS)(PKR bn) (%)
According to data published by SBP (Mar’16),
Islamic Banking segment consists of a low PKR
1.0 tr in assets compared to a whopping PKR
14.3 tr under conventional banking. However,
the segment witnessed a substantial 27% YoY
growth in net financing (advances) in Mar’16.
One setback for the Islamic banks has remained
the lack of asset-side products such as GoP
Sukuks. While conventional banks enjoy the
easy access to SBP PIBs at a favorable yield
spread, GoP Sukuks, paying KIBOR or lower,
have not been able to meet the sector’s
liquidity (apparent from the increasing bid-
cover observed at well over 2.0x in recent Ijarah
Sukuk auctions). The new target set by GoP for
FY17 is PKR 87bn compared to PKR 250bn in
FY16.
However, this will propel banks to lend more
aggressively (substantiated with an increasing
Financing to Deposits) where banks like UBL
with larger network, better turn-around-time,
and more thorough credit risk policies should
benefit most.
United Bank Limited Page 8
July 12, 2016
UBL - Commercial Banks
Figure. 6 Substantial Pickup in Islamic Financing While NPFs* Decline – A Win Win Scenario For Islamic Banks
Source: SBP, AHL Research (*) Non Performing Finances
4. Strong Hold on Remittances to Feed Fee & Commission Income – UBL has
enjoyed a healthy growth in Fee & Commission income with a CAGR of 15% from CY10-
15, with major components driven by core banking such as commission on trade,
remittances, general banking charges, and corporate services.
UBL is a market leader in remittances with over 25% share, where, in conjunction with
the initiative to capture regional remittances, Fee income should witness a higher single
digit growth in the medium to longer term. Whereas, in the shorter term we anticipate
the bank to maintain its current lower double digit growth nonetheless.
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
Financing To Deposit Net NPF / Capital (RHS)(x) (x)
Figure. 7 Fee & Commission Income Breakup (Mar’16)
Source: Company Financials, AHL Research
19%
5%
26%
29%
4%5%
13%
Trade
Consumer Loan
Remittances
Service Charge
Cash mgmt
Bancassurance
Others
United Bank Limited Page 9
July 12, 2016
UBL - Commercial Banks
Figure. 8 UBL Enjoys an Increasing Fee Income Supported By Over 25% Share of Home Remittances*
Source: SBP, Company Financials, AHL Research (*) Remittances Industry share based on UBL Analyst Briefing
Leading Big 5 in Deposit Growth
UBL has managed to lead the Big5 with a staggering growth in its deposit base (read:
balance sheet expansion) over the period of last four years (CY11-15) with a CAGR of
15% compared to an average of its peers of 12%. In CY15 alone, UBL posted an 18%
growth compared to its big 5 peers’ average of only 9% (industry grew deposits at an
average of 12%), while UBL’s 5Y CAGR (CY10-15) also stands high at 15% against peer
average of 13%.
Speaking of aggressive strategies, UBL has been paving its own path in booking fixed
deposits (thanks to its new product lines such as UBL Mahana Aamdani Term Deposits)
instead of herding with its peers in solely focusing on CASA accounts. While in the short
term, fixed deposits’ pile up (FDRs up by 17% in CY15, 5Y CAGR of 13%) might have
hurt bank’s topline and net interest margins (NIMs), down 70bps in 1QCY16 to 4.12%
(annualized), relative to other banks (peer avg. 4.05%), we believe, it may very well be
the best strategy in building up its resource base and meeting its year round fixed
deposits target at current cheaper rates.
Figure. 9 Cost & Breakdown of Deposits Figure. 10 NIMs Expected to Improve in the Long Run
Source: Company Financials, AHL Research Source: Company Financials, AHL Research
2,000
2,500
3,000
3,500
4,000
1,000
2,000
3,000
4,000
5,000
6,000
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
Remittances Fee Income (RHS)(USD mn) (PKR mn)
28% 29% 30% 30% 28%
35% 35% 34% 34% 34%
35% 35% 36% 36% 38%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
0%
20%
40%
60%
80%
100%
120%
CY14 CY15 CY16E CY17F CY18F
Fixed Saving Current CoD (RHS)
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
-
100
200
300
400
500
600
CY
10
CY
11
CY
12
CY
13
CY
14
CY
15
CY
16E
CY
17F
CY
18F
CY
19F
CY
20F
Fixed Deposits NIMs (RHS)(PKR bn)
United Bank Limited Page 10
July 12, 2016
UBL - Commercial Banks
With that said, bank’s management has continuously voiced its preference for
CASA accounts over the last few quarters and which, based on the results, it
seems to be on track of (CAs – non remunerative – up by 17% in CY15, 5Y CAGR
of 16%).
Going forward, we estimate an annual average growth in deposits of 13%, with
a probable upward shift in CY17-18 incorporated. While the cost of funds for
the bank is still relatively cheaper at 3.13% (1QCY16 annualized) in comparison
to its peer’s 3.56%, we believe, in the shorter term, it may notice a slight uptick
of 10-15 bps from a possible further pile up of FDRs but should be manageable
at current levels for CY16 (lower than 3.4% from CY15).
Management is also very confident it will be able to successfully manage NIMs
around current levels (at 4.12% on an annualized 1QCY16), through various
high yield projects and upcoming aforementioned strategic initiatives.
Perfect Timing to Expand its Share of Advances in the Industry
We also see UBL’s aforementioned strategic strengths perfectly fitting in the
overall macroeconomic picture. The recent pickup in demand for credit in the
private sector (up ~10% YoY on average), especially in long term loans with
average growth of ~18% YoY (since May’15), is anticipated to be followed by
an overall higher credit demand in private sector via short-term & working
capital financing.
Figure. 12 LT Credit Offtake to Indicate Upcoming Credit Demand Growth
Source: SBP, AHL Research
The scenario is propped with record low interest rates (Policy Rate at 5.75%), over a
decade low headline inflation (FY16 recorded at 2.85% | FY17E at 4.0%), as well as
several relief measures provided under FY17 Budget, that could provide for a protracted
high single digit to low double digit growth in overall loans. Not to forget the cherry
on top; big ticket financing directly under the banner of CPEC, of which UBL is expected
to serve as one of a few primary lenders, and the concomitant spillover throughout the
economy, and in the years to follow.
Similar to the deposit growth, UBL has led the big 5 group in loan book expansion over
the past five years with a CAGR of over 7% (CY10-15) compared to peer average of 5%,
7.0%
9.0%
11.0%
13.0%
15.0%
17.0%
19.0%
21.0%
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Apr
-15
May
-15
Jun-
15
Jul-1
5
Aug
-15
Sep
-15
Oct
-15
Nov
-15
Dec
-15
Jan-
16
Feb
-16
Mar
-16
Apr
-16
SMEs LT WCF YoY LT growth (RHS)(PKR bn)
Figure. 11 UBL Deposits’ Categorization
Source: Company Financials, AHL Research
Fixed29%
Savings 33%
Current38%
Fixed Savings Current
United Bank Limited Page 11
July 12, 2016
UBL - Commercial Banks
even in CY15 where advances growth remained lackluster for the bank at a little over
4% compared to peer average of under 2%.
Exhibit. 6 Major Sectors of Loan Book with Respective Coverage and Infection Ratios (Dec'15)
PKR bn Advances % of Advances % Δ YoY Coverage Infection Ratio
Energy 113,321,701 21% 16% 59% 6%
Individuals 64,599,561 12% -11% 62% 11%
Agribusiness 49,398,812 9% -12% 79% 1%
Textile 56,538,633 11% -12% 96% 24%
Financial 30,808,904 6% 14% 99% 6%
Wholesale Trade 28,067,454 5% 18% 79% 6%
Food 21,400,575 4% 77% 85% 4%
Construction 20,894,566 4% -16% 93% 17%
Others 144,884,403 27% 6% 75% 8%
Source: Company Financials, AHL Research
For CY16 onwards, management is eyeing a loan book expansion of over 10% triggered
by i) secure SME lending with assistance from IFC, ii) aggressive lending to financial
institutions (both government and corporate entities), iii) excellent retail business, and
iv) an increased focus on Islamic banking.
While into the medium-long term (CY17-20), bank is expected to capture a consistent
loan growth of higher single to double digits supported by CPEC (both directly and
indirectly).
UBL - Ready for the Future Credit Growth with All Bases Covered
On the provisional front, UBL continues with its conservative approach with cautious
lending and maintaining a healthy buffer for possible infections. UBL wrote-off a
significant PKR 7.9bn during CY15 subsequently declining a substantial PKR 9.0bn in
NPLs, with a net infection ratio of 9%.
Figure. 13 Substantial Coverage To Lend Aggressively Figure. 14 Improved Infection Coupled With Prudent Provisions
Source: Company Financials, AHL Research
Source: Company Financials, AHL Research SP – Specific Provisioning GP – General Provisioning
65%
70%
75%
80%
85%
-
10
20
30
40
50
60
70
CY
10
CY
11
CY
12
CY
13
CY
14
CY
15
CY
16E
CY
17F
CY
18F
CY
19F
CY
20F
NPLs Coverage (RHS)(PKR bn)
6.0%
8.0%
10.0%
12.0%
14.0%
30
35
40
45
50
CY
10
CY
11
CY
12
CY
13
CY
14
CY
15
CY
16E
CY
17F
SP GP Infection (RHS)(PKR bn)
United Bank Limited Page 12
July 12, 2016
UBL - Commercial Banks
Furthermore, during 1QCY16 management booked another hefty PKR 2.0bn of general
provision out of prudence towards possible uptick in non-performing loans (both from
domestic and international book). Based on discussion with management, as UBL
stands at a premium coverage level of 91% (1QCY16), it expects only nominal
provisioning throughout the rest of the CY16.
While leverage for the Big 5 banks has stayed around 10x since last five years, increasing
investments in the sovereign bonds have provided for rather too good to be true CARs.
In the meanwhile, UBL has been pacing itself to achieve a comfortable CAR (14.6%
CY16E) to successfully position itself for the anticipated private sector credit offtake.
Here it is pertinent to note that while most of its peers (ex NBP) held much higher CARs
than UBL, they also maintained IDRs in the 70% range. Whereas, UBL’s CAR on average
stood at 14.6% against a much lower IDR average of 56% (CY12-15), exhibiting a much
smaller padding in its IEAs (i.e. greater proportion of loans/IEAs). As a result, the
upcoming PIB maturity and future lending should pose but only a relatively smaller
impact on its CAR.
Strong Investment Portfolio Continues to Feed into the Topline
During the 1QCY16, an industry wide accumulation of PIBs was witnessed. Similarly, UBL
Treasury accumulated on PIBs making it the largest PIB portfolio in the sector crossing
PKR 524bn mark. Consequently, UBL enjoys the largest bond-driven investment surplus
of PKR 21.5bn, even after realizing the largest capital gain on sale of securities for PKR
3.9bn during 1QCY16 alone (total capital gain realized in CY15 was PKR 3.2bn).
One key risk to banking sector earnings in CY16 is the PKR 1.4tr PIB maturity during
3QCY16 (Jul’16). While some of its Big 5 peers (e.g. MCB and ABL) may take noticeable
hit on their NIMs during the 3QCY16, we expect UBL to considerably mitigate the
reinvestment risk via i) continuous re-profiling of its PIB portfolio, ii) expanding its
balance sheet, and ii) substituting with other high yielding avenues (primarily loans),
resulting in a drop of ~40bps to 4.2% expected by end of CY16 compared to 4.6% in
CY15.
Going forward, with PIB maturity due in 3QCY16, under the current lower yield
environment and expectation of interest rate hikes, we expect UBL Treasury to split
reinvestment in both PIBs and MTBs with yields ranging from 6.2% up to 7.5%. Just to
give a perspective, UBL’s end of 1QCY16 PIB portfolio yields stood around 10% (based
on management guidance), however, the decline in yields should be cushioned with
concurrent increase in investments driven by balance sheet expansion.
Figure. 16 Capital Gains and PIBs In Tandem Figure. 17 Banks Expected to Reinvest in PIB MTB mix
Source: Company Financials, AHL Research Source: Company Financials, AHL Research
0
1
2
3
4
5
6
7
-
200
400
600
800
1,000
CY
10
CY
11
CY
12
CY
13
CY
14
CY
15
CY
16E
CY
17F
CY
18F
CY
19F
CY
20F
PIB CG (RHS)(PKR bn)
50
100
150
200
250
-
200
400
600
800
1,000
1,200
1,400
CY
10
CY
11
CY
12
CY
13
CY
14
CY
15
CY
16E
CY
17F
CY
18F
CY
19F
CY
20F
PIB MTB NII (RHS)(PKR bn) (PKR bn)
Figure. 15 Interest Earning Assets (CY10-20F)
Source: Company Financials, AHL Research
Cash with Banks Lendings to Fis INV ADV
CY10 CY20F
United Bank Limited Page 13
July 12, 2016
UBL - Commercial Banks
Figure. 18 Relatively Lower Yield Due to Re profiling Figure. 19 Second Largest Total Surplus*
Source: Company Financials, AHL Research Source: Company Financials, AHL Research (*) UBL holds the largest bond surplus
Other Significant Items
Capital Gains on Sale of Investments & Risks to Our Estimates
Historically, UBL had the least reliance on capital gains in providing for its bottom line.
In the past three years (CY13-15), where its peers’ booked gains on an average of 5%-
10% of their total revenue, UBL’s realized capital gains stood on an average of 4% of its
total revenue.
However, in the wake of current low interest rate and small yield spread environment,
there is a higher possibility for the entire banking sector to capture hefty capital gains.
Recently, UBL has enjoyed a very effective treasury function in providing lofty earnings
support. As of Mar’16, it booked the largest capital gain of PKR 3.95bn and yet it held
the largest PIB surplus of PKR 21.5bn that could be used to support the missing bottom
line, if needed (to compensate for scenarios such as the continuation of Super Tax).
In our earnings’ forecasts, we have maintained a moderate-to-conservative approach
towards possible capital gains to smoothen our estimates. We have assumed capital
gains at PKR 5.25bn for CY16 (PKR 3.95bn already booked in 1QCY16), followed by an
average of PKR 4.6bn for the next two years (CY17-18). It is, however, pertinent to note
that the capital gains pose the highest risk (both upside and downside) to our bottom
line estimates.
7.0%
7.2%
7.4%
7.6%
7.8%
8.0%
500
700
900
1,100
1,300
UB
L
HB
L
NB
P
MC
B
AB
L
Investments Yields (RHS)(PKR bn)
-
100
200
300
400
500
600
10
20
30
40
UB
L
HB
L
NB
P
MC
B
AB
L
Total Surplus Equities PIBs (RHS)(PKR bn) (PKR bn)
United Bank Limited Page 14
July 12, 2016
UBL - Commercial Banks
International Loan Book – Stable Outlook
One of the primary concerns surrounding UBL has been its international loan book.
While UBL enjoys the largest international operations amongst top tier local banks,
~20% of its total deposits with an infection ratio of 10% (compared to HBL/NBP at
12%/19%), its diversifying international portfolio, ironically, is heavily anchored in the
Middle East markets (specifically in the United Arab Emirates).
Of the total (unconsolidated) international net advances portfolio of PKR 148bn (USD
1.42bn), 72% or PKR 107bn is booked in UAE, whereas; another 4% (PKR 6bn) of the
total international loan book belongs to the stressed operations in war torn Yemen.
Pertaining to its UAE loan book, management is confident with an overall financially
sound clientele that consists of ex-oil corporations (predominantly trade related) and
that have maintained healthy relationships with the bank over the years. UBL
management holds a stable outlook for its Gulf operations yet remains prudent with
enhanced due diligence processes on fresh underwritings and more strengthened risk
surveillance on existing credit portfolio.
With regards to its Yemeni operations, based on our discussion with the management,
it has a clear short term strategy of reducing the risk exposures and maintaining
sovereign risk investments. We note that the clean exposure to its Yemen loan book
has been on a continuous declining trend, noted at USD 7mn as of Mar’16.
Given the recent ample provisioning aforementioned (Coverage ratio of 91%), we view
the risk exposure to UBL’s international loan book mostly accounted for. While building
our estimates of future provisioning (CY16-20F annual average of PKR 3.2bn), we also
acknowledged the conservative approach taken by the management with no
substantial fresh loans to be added to its international credit portfolio of PKR 148bn
during CY16 or not without stringent due diligence.
‘Brexit’ and Possible Impact on the Subsidiary; UBL UK
In light of recent global development where Britain decided to exit European Union
(popularly known as ‘Brexit’) based on a surprising result of the referendum conducted
in Jun’16, we performed preliminary analysis of possible impact on UBL via its 55%
owned subsidiary; UBL UK.
While, due to the high degree of ambiguity surrounding ‘Brexit’ and its implications on
the financial institutions functioning in the UK it is too early to calculate anything
concrete, we note that UBL UK makes up for an insignificant portion of the parent
company’s topline.
Furthermore, the subsidiary substantiates only a small portion of total business with an
asset base of GBP 463mn, and GBP 11.75mn in PAT (around 3% of parent company’s
PAT), it should not pose a material risk to the parent company in near term.
More can be asserted on this topic as the details of post-Brexit policies surface. Possible
risks to subsidiary may come via (i) interest rate cuts, (ii) restricting trade terms with the
EU, and (iii) under-performing capital markets.
Figure. 20 Net International Advances Breakdown
Source: Company Financials, AHL Research
12%
10%
4%2%
72%
Bahrain Qatar Yemen New York UAE
United Bank Limited Page 15
July 12, 2016
UBL - Commercial Banks
Expenses
Historically, UBL has managed its C/I average at industry levels of 45%-50%, especially
post expansionary phase witnessed from CY11-13 where the bank added over 150
branches. However, since CY13 UBL has successfully trimmed down its operating
expenses considerably bringing down C/I from 50% (CY13) to 41% (1QCY16) compared
to peers’ average of 47%.
In CY16, where we expect the recent slow paced network expansion to continue, there
may be a slight push in C/I upwards to 43%-44%. Whereas, the recent conversion of
conventional to Islamic branches as oppose to setting up new ones (that in the normal
course take up to 18 months to break even) should assist in keeping the operating
expenses lower bound.
In the longer term, where cost benefits from limited branch expansion and further
automation should curb operating expenses, factors such as (i) anticipated pickup in
inflation, and (ii) cyclical rise in salaries and premises lease renewals may put upward
pressure on the same. We anticipate UBL’s C/I to sustain at 40%-43% for the period
CY17-20F.
Figure. 21 C/I Expected to Improve Further… in LT Figure. 22 Well Managed OpEx – Both Salary & Branch Costs
Source: Company Financials, AHL Research Source: Company Financials, AHL Research
Taxes – Continuation of Super Tax in CY16
In an effort to provide for the military offensive in progress against extremists, GoP has
decided to continue the imposition of a 4% Super Tax (to be based on CY15 PBT).
Similar to CY15, we expect UBL to book the entire charge in the 2QCY16 estimated at
PKR 1.7bn (PKR 1.42/share). In comparison to its peers that booked hefty capital gains
in CY15, UBL’s exposure to a Super Tax continuation is expected to be around 6% of
CY16E earnings.
For the entire CY16, we expect the effective taxation to settle around 39% compared to
38% booked in CY15.
36%
38%
40%
42%
44%
46%
48%
50%
1,000
1,100
1,200
1,300
1,400
1,500
CY
10
CY
11
CY
12
CY
13
CY
14
CY
15
CY
16E
CY
17F
CY
18F
CY
19F
CY
20F
Branch C/I (RHS)
(#)
20%
30%
40%
50%
60%
70%
-
10.0
20.0
30.0
40.0
50.0
60.0
CY
10
CY
11
CY
12
CY
13
CY
14
CY
15
CY
16E
CY
17F
CY
18F
CY
19F
CY
20F
Admin expenses Branch Cost (% of OpEx) RHS
Salary (% of OpEx) RHS
(PKR bn)
United Bank Limited Page 16
July 12, 2016
UBL - Commercial Banks
Profitability
Profitability to show a +14% CAGR over CY16-20F
We estimate United Bank Limited to achieve an earning CAGR of 14% over CY16-20F
based on a) focusing on its key strengths that can not only provide high yielding
avenues but also boost balance sheet expansion to enable a larger investment base, b)
a strong investments portfolio, and c) well managed operating expenses. It is also
pertinent to note that UBL’s largest bond surplus of PKR 21.5bn (total surplus of PKR
26.4bn) poses a substantial upward risk to our earnings estimate.
Based on an estimated annual pay-out of 60%, we estimate UBL to maintain its ROE
(Tier II) at an average of 18.8% from CY16-20F, with a slight decline to 16.6% in CY16;
mostly due to continuation of Super Tax (additional 4% of CY15 PBT ~ PKR 1.7bn). With
that said, UBL offers an attractive 7.3% dividend yield, providing a robust 22.3% Total
Return.
Recommendation & Valuation
We value United Bank Limited using a Justified Price to Book ratio with our estimated
average ROE of 18.8% (Tier II) for the five year period CY15-20 (risk-free rate 8.0%,
equity risk premium 6.0%, and beta factor 1.2x). We estimate a sustainable growth in
earnings through a retention rate kept at 42.3% (pay-out ratio of 53.7%) and ROE-g
and COE-g kept at 10.8% and 7.4%, respectively.
In addition, we use our CY16 estimated book value per share of PKR 139.4 (Tier II). With
the stated, our justified P/B multiple comes out to be 1.45x with a healthy dividend yield
of 7.3% (providing a potential Total Return of 22.3%). This compares favorably in the
context of trailing P/E high of 10.9x. Hence we rate the stock as Buy!
Figure. 23 UBL - Price to Book Band Figure. 24 UBL – Price to Earning Band
Source: Company Financials, AHL Research Source: Company Financials, AHL Research
-
50
100
150
200
250
300
Jan-
10
Aug
-10
Mar
-11
Oct
-11
May
-12
Dec
-12
Jul-1
3
Feb
-14
Sep
-14
Apr
-15
Nov
-15
Jun-
16
Price P/B 0.7x P/B 1.0xP/B 1.3x P/B 1.6x P/B 1.9x
-
50
100
150
200
250
300
Jan-
10
Aug
-10
Mar
-11
Oct
-11
May
-12
Dec
-12
Jul-1
3
Feb
-14
Sep
-14
Apr
-15
Nov
-15
Jun-
16
Price P/E 4.0x P/E 5.7x
P/E 7.4x P/E 9.1x P/E 10.8x
United Bank Limited Page 17
July 12, 2016
UBL - Commercial Banks
Rating
Based on its latest rating issued, JCR-VIS Credit Rating Company Ltd. has upgraded the
entity rating for UBL to ‘AAA/A-1+’ (Triple A/A-One Plus) from an earlier ‘AA+/A-1+’
(Double A Plus/ A-One Plus), with a ‘Stable’ outlook on the scrip.
The upgrade was announced on the back of sustained improvement across key
performance areas including asset quality, liquidity, capitalization, and profitability.
Another key rating driver was UBL’s diversified revenue streams and operations. JCR-
VIS also reiterated our stance on UBL’s overseas operations with a stable outlook and
less susceptibility to oil related exposure.
Exhibit. 7 Entity Rating
Long Term AAA Stable
Source: Company Financials
United Bank Limited Page 18
July 12, 2016
UBL - Commercial Banks
Risk Factors
Based on empirical evidence, United Bank Limited is exposed to two major risks while
performing its intermediary function in the economy; a) Credit Risk, and b) Interest Rate
Risk. While Credit Risk arguably remains the most obvious risk to banking sector in
general, United Bank Limited has adequately estimated the price and created more than
sufficient provisioning for possible credit losses, as was discussed earlier in this report.
Based on our discussions with the management, the possible threat from the Middle
East operations is relatively low due to stringent lending framework and stable financial
condition of all its major clients.
Secondly, in our view, interest rates going forward should stay relatively stable at
current record low levels for the shorter term with a reversal anticipated as soon as
1QCY17 and latest during 2HCY17. Considering which, we believe, meagre Interest Rate
changes should not have a drastic impact on the bank’s business model or on its
earnings. With that being said, our performed analysis yielded the following results:
Exhibit 8 below, illustrates the changes in NIMs, EPS, and our CY16 Target Price with
+/- 50bps change in Policy Rate. For our base case, annual average Policy Rates for
CY16-19, come out at 5.9%, 6.1%, 6.9%, and 7.6%.
Exhibit. 8 Changes in Policy Rate* (CY16E)
Scenarios -50bps 5.90% +50bps
NIMs (%) 4.2 4.2 4.2
EPS (PKR) 21.5 21.6 21.6
EPS %Δ 0% 0% 0%
TP (PKR) 202 203 204
TP %Δ 0% 0% 0%
ROE (%) 16.6 16.6 16.7
ROE %Δ 0% 0%
Source: AHL Research, * With changes only in CY16.
In addition to Interest Rate Risk, we believe, a further slowdown in advances growth
could also potentially hurt UBL’s earnings. Exhibit 9 illustrates the changes in NIMs, EPS,
and our CY16 Target Price with +/- 100bps change in Policy Rate for CY16. Our original
estimate for growth in Advances for UBL during CY16 stands at 6.9%.
Exhibit. 9 Changes in Loan Growth* (CY16E)
Scenarios -100bps 6.90% +100bps
NIMs (%) 4.2 4.2 4.3
EPS (PKR) 21.4 21.6 21.8
EPS %Δ -1% 0% 1%
TP (PKR) 202 203 204
TP %Δ 0% 0% 0%
ROE (%) 16.5 16.6 16.7
ROE %Δ -1% 1%
Source: AHL Research, * With changes only in CY16.
United Bank Limited Page 19
July 12, 2016
UBL - Commercial Banks
Financial Highlights
Profit & Loss (PKR mn) 2014A 2015A 2016E 2017F 2018F CAGR & Avg
Net interest income 46,914 57,859 60,019 64,752 78,673 13.8%
Non-Interest Income 21,356 23,687 27,458 27,535 29,329 8.3%
Fee and Commission 13,045 14,239 15,976 16,331 17,835 8.1%
Capital Gains 2,063 3,195 5,250 4,510 4,630 22.4%
Income from FX Contracts 3,092 2,043 1,622 1,745 1,942 -11.0%
Other Income 1,366 1,299 1,197 1,203 1,274 -1.7%
Operating expenses 32,712 35,137 39,846 43,849 48,178 10.2%
Pre-provisioning earnings 36,953 47,271 48,280 49,283 60,703 13.2%
Provisions 1,336 3,823 3,560 3,235 2,735 19.6%
Pre-tax income 35,616 43,447 44,720 46,048 57,968 12.9%
Taxes 11,592 16,348 17,614 16,209 20,869 15.8%
Net income 24,025 27,100 27,107 29,839 37,100 11.5%
EPS (PKR) 19.3 21.4 21.6 23.9 29.7 23.2
DPS (PKR) 11.5 13.0 13.0 13.5 17.0 13.6
Dividends 14,078 15,326 15,937 16,522 20,869 10.3%
Key Balance Sheet Items (PKR bn) & Capital Ratios CAGR & Avg
Total assets 1,182 1,486 1,652 1,831 2,109 15.6%
Interest Earning Assets 1,046 1,330 1,499 1,671 1,934 16.6%
Interest Bearing Liabilities 1,015 1,298 1,448 1,609 1,865 16.4%
Non-performing loans 57 48 51 54 57 -0.2%
Allowance for loan losses 45 38 42 44 46 0.7%
Loans 467 487 520 570 637 8.0%
Deposits 952 1,120 1,256 1,445 1,678 15.2%
NIMs * (%) 4.6 4.9 4.2 4.1 4.4 4.4
Tier-1 Ratio (CAR) * (%) 14.3 14.7 14.6 14.7 14.9 14.6
Shareholders' equity 138 156 171 187 207 10.8%
* Averages
Valuation Ratios & Profitability Measures Average
P/E x 9.1 7.3 8.2 7.4 6.0 7.6
P/B x 1.6 1.2 1.3 1.2 1.0 1.3
Dividend yield % 6.5 8.4 7.3 7.6 9.6 7.9
Dividend Cover x 1.7 1.6 1.7 1.8 1.7 1.7
ROE % 19.3 18.5 16.6 16.7 18.8 18.0
ROA % 2.1 2.0 1.7 1.7 1.9 1.9
Payout Ratio % 59.5 60.8 60.2 56.5 57.2 58.9
Shares Outstanding PKRmn 1,224 1,224 1,224 1,224 1,224 1,224
Deposits/Branch PKRmn 725 842 927 1,051 1,194 948
United Bank Limited Page 20
July 12, 2016
UBL - Commercial Banks
Credit quality ratio 2014A 2015A 2016E 2017F 2018F Average
Infection ratio % 11.1 9.1 9.1 8.8 8.2 9.3
Coverage ratio % 78.5 80.0 81.0 81.4 81.4 80.5
Loss/Gross NPL % 81.9 79.8 79.8 79.8 79.8 80.2
Reserves /NPLs % 65.3 86.6 89.8 95.1 103.4 88.0
Growth Rates and Key Ratios Average
Net Interest Income % 18.7 23.3 3.7 7.9 21.5 15.0
Fee & Commission % 14.0 9.2 12.2 2.2 9.2 9.4
Non-Interest Income % 10.0 10.9 15.9 0.3 6.5 8.7
Total Revenues % 15.7 18.3 6.9 5.7 16.9 12.7
Operational Expenses % 10.3 7.4 13.4 10.0 9.9 10.2
Provisions % 0.7 (14.2) 8.3 6.2 4.4 1.1
Advances % 12.5 4.3 6.8 9.5 11.7 9.0
Investments % 13.2 43.9 15.1 15.8 19.4 21.5
Other Assets % 40.0 1.8 2.0 2.0 2.0 9.6
Deposits % 7.0 17.7 12.2 15.1 16.1 13.6
Borrowings % 29.6 208.4 7.1 (17.8) 16.1 48.7
Other Liabilities % 21.7 1.4 3.0 3.0 3.0 6.4
Non-financial information
Employee No. 13,382 14,623 14,228 14,438 14,753
Branches No. 1,313 1,330 1,355 1,375 1,405
United Bank Limited Page 21
July 12, 2016
UBL - Commercial Banks
Analyst Certification: The research analyst(s), is (are) principally responsible for preparation of this report. The views expressed in this research
report accurately reflect the personal views of the analyst(s) about the subject security (ies) or sector (or economy), and no part of the
compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by
research analyst(s) in this report. In addition, we currently do not have any interest (financial or otherwise) in the subject security (ies).
Furthermore, compensation of the Analyst(s) is not determined nor based on any other service(s) that AHL is offering. Analyst(s) are not subject
to the supervision or control of any employee of AHL’s non-research departments, and no personal engaged in providing non-research services
have any influence or control over the compensatory evaluation of the Analyst(s).
Equity Research Ratings
Arif Habib Limited (AHL) uses three rating categories, depending upon return form current market price, with Target period as December 2015
for Target Price. In addition, return excludes all type of taxes. For more details kindly refer the following table;
Rating Description
BUY Total return of subject security(ies) is more than +10% from last closing of market price(s)
HOLD Total return of subject security(ies) is between -10% and +10% from last closing of market price(s)
SELL Total return of subject security(ies) is less than -10% from last closing of market price(s)
Equity Valuation Methodology
Following valuation technique is used to arrive at the target price of subject security (ies);
Justified Price to Book Value (JPBV)
Risks
The following risks may potentially impact our valuations of subject security (ies);
Market risk
Interest Rate Risk
Exchange Rate (Currency) Risk
Disclaimer: This document has been prepared by Research analysts at Arif Habib Limited (AHL). This document does not constitute an offer or solicitation for
the purchase or sale of any security. This publication is intended only for distribution to the clients of the Company who are assumed to be reasonably sophisticated
investors that understand the risks involved in investing in equity securities. The information contained herein is based upon publicly available data and sources
believed to be reliable. While every care was taken to ensure accuracy and objectivity, AHL does not represent that it is accurate or complete and it should not be
relied on as such. In particular, the report takes no account of the investment objectives, financial situation and particular needs of investors. The information given
in this document is as of the date of this report and there can be no assurance that future results or events will be consistent with this information. This information
is subject to change without any prior notice. AHL reserves the right to make modifications and alterations to this statement as may be required from time to time.
However, AHL is under no obligation to update or keep the information current. AHL is committed to providing independent and transparent recommendation to
its client and would be happy to provide any information in response to specific client queries. Past performance is not necessarily a guide to future performance.
This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for any investment decision. The user assumes
the entire risk of any use made of this information. Each recipient of this document should make such investigation as it deems necessary to arrive at an independent
evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult his or her own
advisors to determine the merits and risks of such investment. AHL or any of its affiliates shall not be in any way responsible for any loss or damage that may be
arise to any person from any inadvertent error in the information contained in this report.
© 2016 Arif Habib Limited: Corporate Member of the Karachi, Lahore and Islamabad Stock Exchanges. No part of this publication may be copied, reproduced,
stored or disseminated in any form or by any means without the prior written consent of Arif Habib Limited.
United Bank Limited Page 22
July 12, 2016
UBL - Commercial Banks
Contact Information
Shahid Ali Habib Chief Executive Officer [email protected] +92 -21-3240-1930
Shahbaz Ashraf, CFA Head of Research [email protected] +92-21-3246-2589
Tahir Abbas AVP- Senior Investment Analyst [email protected] +92-21-3246-2589
Syed Fawad Basir AVP- Investment Analyst [email protected] +92-21-3246-2589
Rao Aamir Ali Investment Analyst [email protected] +92-21-3246-2589
Syed Shiraz Zaidi Investment Analyst [email protected] +92-21-3246-1106
Muhammad Waleed Rahmani Investment Analyst [email protected] +92-21-3246-1106
Misha Zahid Investment Analyst [email protected] +92-21-3246-1106
Arsalan M. Hanif Management Trainee [email protected] +92-21-3246-1106
Muhammad Hasnain Madni Officer- Database [email protected] +92-21-3246-1106
Azhar Javaid VP- International Sales [email protected] +92-21-3246-8312
Usman Taufiq Ahmed AVP- International Sales [email protected] +92-21-3246-8285
M. Yousuf Ahmed SVP- Equity Sales [email protected] +92-21-3242-7050
Syed Farhan Karim VP- Equity Sales [email protected] +92-21-3244-6255
Farhan Mansoori VP- Equity Sales [email protected] +92-21-3242-9644
Afshan Aamir VP- Equity Sales [email protected] +92-21-3244-6256
Atif Raza VP- Equity Sales [email protected] +92-21-3246-2596
Furqan Aslam AVP- Equity Sales [email protected] +92-21-3240-1932
Research Team
Equities Sales Team