Performance Highlights – H1 2018 Investor Relations Conference Call August 3rd, 2018 Speakers: Mr. Aameer Karachiwalla - Chief Financial Officer Mr. Arif Saifie, FCA, CFA - Financial Controller and Head of Investor Relations Investor Relations Release
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UBL Performance Overview – H1 2018
Performance Highlights – H1 2018
Investor Relations Conference Call
August 3rd, 2018
Speakers:
Mr. Aameer Karachiwalla - Chief Financial Officer
Mr. Arif Saifie, FCA, CFA - Financial Controller and Head of Investor Relations Investor Relations Release
UBL Performance Overview – H1 2018
Table of Contents
3
8
31
PAGE
Key Highlights
Growth at a Glance
Execution and Delivery
Quarterly Trend Analysis
27
UBL Performance Overview – H1 2018 3
PBT before extraordinary items at Rs. 19.0 bln, down 17% vs. H1’17
PBT at Rs. 10.6 bln, down 54% vs. H1’17
Major downsides impacting results in H1’18:
Rs 8.4 bln recorded as pension liability (Q1’18: Rs 6.4 bln; Q2’18: Rs 2.0 bln) – Refer details in presentation
International Provisions of Rs 5.1 bln taken in H1’18 (Q1’18 Rs 2.7 bln; Q2’18: Rs 2.4) to build coverage from 58% in Dec’17 to 71% in Jun’18.
Major upsides building core earnings in H1’18:
Average domestic current deposits at Rs. 438 bln, up 17% vs. H1’17
Average CASA for the period was 86.3% (H1’17: 82.4%)
Domestic cost of deposits reduced to 2.60% (H1’17: 2.75%) – with strong current accounts growth
Average performing advances growth of 24% - Domestic up 38%, International down 12%
Domestic fees grew by 30% YoY to reach Rs 5.8 bln in H1’18
FX income increased by 76% to Rs 1.4 bln in H1’18
Overall Bank revenues up by 5%, closing at Rs. 42.3 bln in H1’18
Overall operating expenses growth well contained at 5% - H1’18 vs H1’17
CAR has improved from 15.45% in Dec’17 to 16.34% in Jun’18
Key Performance Highlights
UBL Standalone Results
UBL Performance Overview – H1 2018
277,000 NTB current accounts mobilized in H1’18 (H1’17: 240,000)
Growth led by current deposits – average growth of 17%, incremental vol. of Rs. 62 bln
Domestic CASA of 89.6% at Jun’18 end (Jun’17: 83.1%). Current to total deposits ratio at 49.5%
(Jun’17: 44.5%). Average domestic deposits grew by 5% year on year
Average performing advances growth of 24% - Domestic up 38%, International down 12%
Growth led by Corporate – average loan book expansion of 35%
Average Consumer portfolio grew 33% to Rs. 13 bln, SME lending up 32% to Rs. 28 bln
PIBs portfolio at Rs 450 bln (Dec’17: Rs 542 bln) - maturities of Rs 27 bln in H1’18
Repo book reduced from Rs. 450 bln at Dec’17 to Rs. 178 bln at Jun’18 end
4
Branch Banking builds deposit base in cost efficient manner
Avg. Total Assets of Rs 1.82 tln in H1’18, a growth of 13% over H1’17
UBL Performance Overview – H1 2018 5
Overall revenues grow by 5% YoY to Rs 42.3 bln in H1’18 - Domestic up 9% to Rs 37.0 bln
Net Interest Income of Rs. 28.1 bln in H1’18 (H1’17: Rs. 28.0 bln)
Average earning assets grew by Rs 201 bln YoY to Rs 1,552 bln in H1’18
Average 3 months KIBOR up from 6.1% in H1’17 to 6.4% in H1’18
Domestic cost of deposits reduced to 2.60% (H1’17: 2.75%) - strong current accounts growth
Advances yield at 6.4% in H1’18 (H1’17: 6.2%)
Domestic loan yield stood at 6.9% in H1’18 (H1’17: 6.9%)
International advances yield up at 5.0% (H1’17: 4.8%)
Overall investment yield stood at 8.2% in H1’17 to 7.5% in H1’18
PIB yields move from 9.0% in H1’17 to 8.6% in H1’18 in line with maturities
Significant buildup in T bills portfolio –avg. vol up from Rs 163 bln to Rs. 286 bln
UBL Performance Overview – H1 2018 6
Overall NFI closed at Rs 14.3 bln in H1’18, a 16% growth over H1’17
DOM FX revenue up by Rs 825 mln to Rs 1.39 bln in H1’18 – amidst higher FX volumes
Fee income stood at Rs 6.7 bln, up 14% from H1’171
Domestic fees grew by 30% YoY to reach Rs 5.8 bln in H1’18:–
Home remittances revenues grew by 29% - market share up to 30% (H1’17: 25%)
Trade commissions growth of 15% to reach Rs 489 mln
Debit card commissions grew by 35% - 340,000 new cards issued (H1’17: 329,000)
Banca revenues maintained momentum to reach Rs 616 mln (H1’17: Rs 467 mln)
Cash management commissions grew by 26% over H1’17 to reach Rs 266 mln
Dividend income of Rs. 1.2 bln (H1’17: 1.3 bln) – yield of 9.2% (H1’17: 9.4%)2
Capital gains of Rs. 4.5 bln realized (H1’17: Rs 3.8 bln) – mainly on the PIBs portfolio 3
FX income increased by 76% to Rs 1.4 bln in H1’184
UBL Performance Overview – H1 2018
DOM net provision reversal of Rs 544 mln in H1’18 (H1’17: Rs 1.17 bln reversal)
DOM asset quality stood at 5.2% at the end of Jun’18 (Dec’17: 6.2%)
International provisions of USD 44.5 mln taken in H1’18 (H1’17: USD 6.7 mln)
Overall NPLs closed at Rs. 56.0 bln at Jun’18 (Dec’17: Rs. 51.1 bln)
International NPLs up from USD 207 mln in Dec’17 to USD 233 mln at Jun’18
Overall asset quality maintained at 7.7% (Dec’17: 7.9%)
Specific coverage at 80% (Dec’17: 76%) – DOM coverage at 89% (Dec’17: 91%)
7
Net provision charge of Rs. 4.5 bln in H1’18 vs. net reversal of Rs. 0.5 bln in H1’17
Administrative expenses stood at Rs. 18.5 bln, up 7% YoY
Personnel costs for H1’18 at Rs. 8.3 bln, up 4% vs H1’17
Premises cost up 3% in H1’18 to reach Rs 3.4 bln
Variable / Other costs increased by 13% - primarily due to higher sales related commissions,
cash transportation charges, consultancy charges etc.
Strong recoveries in Domestic, coverage buildup in International
UBL Performance Overview – H1 2018 8
Execution and Delivery
UBL Performance Overview – H1 2018
50%75% 85%
100%115%
130% 130% 130%
60%
54.8%59.2% 58.2%
65.8% 64.2% 61.9% 57.4% 62.6% 63.2%
0%
10%
20%
30%
40%
50%
60%
70%
80%
0%
20%
40%
60%
80%
100%
120%
140%
2010 2011 2012 2013 2014 2015 2016 2017 H1'18
Cash Dividend Dividend Payout Ratio
9
Consistent earnings performance throughout the years
International deposits - Rs in bln 252 256 248 228 2.2% 2.2%
Total Bank - Rs in bln 1,315 1,289 1,242 1,173 2.5% 2.6%
International - USD in mln 2,077 2,322 2,174 2,176 2.2% 2.2%
Domestic CASA 89.6% 84.7% 86.3% 82.4%
Domesctic Current to Total Deposits 49.5% 44.3% 44.1% 39.8%
Period End Cost of DepositsAverage
UBL Performance Overview – H1 2018 16
Advances portfolio up 12% over Dec’17
Net Advances
Jun'18 Dec'17 Var %
Corporate Bank 351 303 16%
Commodity 78 47 66%
Commercial 35 35 0%
Consumer 14 12 18%
Others 34 34 0%
Total Domestic 512 431 19%
International 163 173 -6%
Bank 675 605 12%
International USD mln 1,342 1,569 -14%
Rs in bln
351
303
78
47
35
35
14
12
163
173
34
34
Jun'18
Dec'17
Corporate Bank Commodity Commercial Bank Consumer Bank International Others
UBL Performance Overview – H1 2018
Dubai, 64%
Abu Dhabi,
30%Sharjah, 6%
International Advances - Corporate advances remains the largest component
17
By Business - UAEBy Geography
Corporate,
61%
Consumer,
4%
Others, 35%
Baitna, 98%
Personal loan, 1%
Others, 1%
UAE, 75%
Bahrain, 14%
Qatar, 11%Yemen, 0%
NewYork, 0%
EPZ, 0%
UBL Performance Overview – H1 2018
Concentration of Advances as at June 30, 2018 - Standalone
18
2%
10%
10%
1%2%
3%
6%
2%
30%
7%
27%
Chemical & Pharma Agribusiness Textile
Cement Sugar Autos & Transport
Financial Electronics Power & Energy
Individuals Others
UBL Performance Overview – H1 2018
Diversified investment portfolio with strong market risk management
Investments’ yields
Non Funded revenue streams continue to grow
Portfolio declines in line with reduced leveraging
19
10.4%
11.1%
10.4%
8.9%
7.8% 7.5%
2013 2014 2015 2016 2017 H1'18
1,292 1,159
822 1,447
3,836
4,542
H1'17 H1'18
Capital gains
FX income
Dividend
Rs in mln
218
414
450
542 18
18
42
39
51
47
0
1
20
31
Jun'18 Dec'17
T Bills PIBs
Listed shares GoP Sukuks / Eurobonds
Foreign bonds Mutual funds
Others
Rs in blnTotal 1,092
Total 800
UBL Performance Overview – H1 2018
Our international outreach - serving in 4 continents under the single “UBL” brand
20
OVERSEAS BRANCHES20
PAKISTAN BRANCHES1,361
SUBSIDIARIES4
ASSOCIATED COMPANIES3
Globally around 20% of our asset base is located overseas
Asset mix by region 2017 2016Domestic Operations 79.9% 76.4%
International Operations 20.1% 23.6%Middle East 14.8% 17.5%USA 0.2% 0.7%Europe 4.7% 5.0%Africa 0.2% 0.3%EPZ 0.1% 0.1%
UBL Performance Overview – H1 2018
UBL Innovation and Awards
UBL “Firsts” – Initiatives to stay ahead of the market Market recognition and awards
First Commercial Bank in Pakistan to launch Branchless Banking (UBL OMNI)
First Bank in the world to issue VISA Debit Cards for G2P assistance to affectees
First Bank to provide Instantaneous ATM/Debit cards to branchless banking customers at the time of account opening (UBL Omni)
First Pakistani Bank to be granted status of Authorized Derivative Dealer (ADD) in Pakistan and First institution from Pakistan and third in South Asia to be accredited with Primary Membership of International Swaps and Derivatives Association
First Bank in Pakistan to offer Prepaid VISA Debit Card
First Bank in Pakistan to offer Verified by Visa Service
First Bank in Pakistan where customer’s inward remittances are deposited automatically on an ATM and VISA enabled debit card (UBL Tezraftaar PardesCard)
“Best Bank” in the first ever Pakistan Banking Awards 2016
“Best Bank for Corporate Finance and Capital Market Development” in the Pakistan Banking Awards 2017
JCR-VIS reaffirmed UBL’s entity ratings at AAA/A-1+ (Triple A / A-One Plus)
“Innovation Award” at the Mastercard Innovation Forum for ‘Launch of UBL MasterPass QR’
“National Medal of Innovation Award” 2016 for Pioneering G2P Payments – Pakistan Innovation Foundation
Top 25 Companies Award by the Karachi Stock Exchange for 2010-2012, 2015 and 2016
“Best Bank for SMEs” by the Asia Money Pakistan Banking Awards in 2017
2012 & 2013 Bank of the Year in Pakistan Award by The Banker Magazine, an affiliate of the Financial Times, UK
ASIAMONEY Best Domestic Bank Award for 2011 and 2012
Recognized globally in 2013 as one of the 14 “Sprinters” by the GSMA’s Mobile Money for the Unbanked (MMU) program, being the only bank in the category
GSMA Global Mobile Award 2012 for “Best Use of Mobile in Emergency or Humanitarian Situations” and Financial Insights Innovation Award for “Innovation in Cash Disbursements (G2P)”
Recognized by CFA Pakistan Society for the “Best Investor Relations” function in 2013 and 2014
21
UBL Performance Overview – H1 2018
Update on Pension Estimated Cost
22
March 2018 June 2018
Headcount Estimated
Cost
Headcount Estimated
Cost
Minimum For Commuted - Pension not restored Rs 4,000 Rs 8,000
Minimum For Commuted - Pension restored Rs 8,000 Rs 8,000
Pensioners - Status verified 1,896 1,906 2,801 3,128
Pensioners - Status not verified 3,704 2,359 2,858 754
Pensioners - Total 5,600 4,265 5,659 3,883
Retrenched Employees - Status verified - - 2,453 3,653
Retrenched Employees - Status not verified 3,854 2,689 1,376 1,095
Retrenched - Total 3,854 2,689 3,829 4,749
Active Employees' Estimated Cost 1,159 1,024 1,120 1,250
Total Pension Fund Estimated Cost 10,613 7,978 10,608 9,882 Pension Fund Movement
Opening Balance 1,572 7,978 Add: Estimated Charge for the quarter * 6,406 2,000 Less: Payments - (96)
Total Pension Fund Closing Balance 10,613 7,978 10,608 9,882
Discount Rate 7.75% 9.75%
Rupees in Million
* This estimated charge for pension has been taken into accounts on "Without Prejudice basis" and subject to the Honorable Supreme Courts' final decision.
The extraordinary charge of Rs. 8.4 Billion represents the estimated amount of the cost of pensionpayable as per Honorable Supreme Court’s Order increasing the minimum pension to Rs. 8,000 permonth subject to 5% annual increase from January 1, 2019. Estimate is based on on-going lifeverification of both pensioners and retrenched employees. The estimate is also based on the paymentof pension without taking effect of commutation. The Bank has sought clarification from the HonorableSupreme Court on the effect of commutation in calculation of minimum pension and the treatment ofex-employees who were separated under the Golden Handshake Scheme described as RetrenchmentScheme of 1997. The amount will be adjusted based on the guidance received from the HonorableSupreme Court.
Disclosure Note 17 of Condensed Financial Statements for the period ended June 30, 2018
UBL Performance Overview – H1 2018 23
Review of Non Interest Income & Administrative Expenses
UBL Performance Overview – H1 2018 24
Non Fund Income Standalone Results
H1'18 H1'17 Var %
Fee, commission and brokerage income 5,753 4,433 30%
Dividend income 1,152 1,285 -10%
Income from dealing in foreign currencies 1,389 563 147%
Gain / (loss) on sale of securities 4,350 3,611 20%
Other income 360 419 -14%
Domestic Total 13,003 10,311 26%
International Total 1,283 2,035 -37%
Bank Total 14,286 12,346 16%
International Total - USD in '000 11,255 19,407 -42%
Rs in mln
UBL Performance Overview – H1 2018 25
Fees and Commissions performance Standalone Results
H1'18 H1'17 Var %
OMNI fee & commissions 994 910 9%
Commission on trade 489 427 15%
Corporate service charges/ Facility fee 109 113 -3%
Corporate finance fee 413 47 783%
FIG commission 127 50 157%
Commission on ATM/ Debit cards 764 564 35%
Commission on home remittances (net) 516 400 29%
Commission on remittances/ uniremote services 487 428 14%
Commission on consumer loan 348 309 13%
Commission income - Bancassurance 616 467 32%
Commission on cash management 266 212 26%
Commission others 624 507 23%
Domestic Total 5,753 4,433 30%
International Total 975 1,475 -34%
Bank Total 6,728 5,908 14%
International Total - USD in '000 8,548 14,068 -39%
Rs in mln
UBL Performance Overview – H1 2018 26
Administrative Expenses Standalone Results
H1'18 H1'17 Var %
Salaries, allowances & Staff fund
charges5,702 5,311 -7%
Rent taxes insurance etc. 1,908 1,904 0%
Outsourced service charges
including sales commission2,137 2,011 -6%
Advertisement and publicity 325 429 24%
Communications 580 453 -28%
Depreciation / Amortization 1,318 1,147 -15%
Legal and professional charges 111 161 31%
Banking service charges 707 476 -48%
Stationery and printing 332 294 -13%
Travelling 94 107 12%
Cash transportation charges 504 340 -48%
Repairs and maintenance 726 688 -5%
Vehicle expenses 91 85 -7%
Office running expenses 206 394 48%
Insurance expense 46 45 -1%
Others 269 289 7%
Domestic Total 15,056 14,136 -7%
International Total 3,461 3,181 -9%
Bank Total 18,517 17,317 -7%
International Total - USD in '000 30,369 30,343 0%
Rs in mln
UBL Performance Overview – H1 2018 27
Growth at a Glance
UBL Performance Overview – H1 2018 28
Balance Sheet
Rs. in mlns 2017 2016 2015 2014 2013 2012
Assets
Cash and balances with treasury and other banks 177,099 146,428 128,870 87,573 114,388 109,396
Lending to financial institutions 33,664 34,168 24,095 21,872 28,835 21,953
The information contained herein reflects our latest business statement as atJune 30, 2018.
Except the historical information contained herein, statements in this Releasewhich contain words or phrases such as ‘will’, ‘would’, ‘indicating’ expected to’ etc.,and similar expressions or variations of such expressions may constitute ‘forward-looking statements’. These forward-looking statements involve a number of risks,uncertainties and other factors that could cause actual results to differ materiallyfrom those suggested by the forward-looking statements. These risks anduncertainties include, but are not limited to our ability to successfully implementour strategy, future levels of non-performing loans, our growth and expansion inbusiness, the impact of any acquisitions, the adequacy of our allowance for creditlosses, technological, implementation and changes, the actual growth in demandfor banking products and services, investment income, cash flow projections, ourexposure to market risks as well as other risks detailed in the reports filed by uswith various regulatory authorities as per applicable laws and regulations. UBLundertakes no obligations to update forward-looking statements to reflect event orcircumstances after the date thereof.