UBLStandaloneFinancialStatementsJune302015.pdf

United Bank LimitedUNCONSOLIDATED CONDENSED

INTERIM FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2015(UNAUDITED)

U N I T E D B A N K L I M I T E D

Directors’ Report H1 2015 P a g e | 1

Directors’ Report to the Members

On behalf of the Board of Directors, I am pleased to present to you the financial statements of

United Bank Limited for the half year ended June 30, 2015.

Performance Highlights

Unconsolidated profit before tax for the half year ended June 30, 2015 has grown by 40%

over the corresponding period ended June 30, 2014 and reached Rs.22.13 billion

Build up in earning streams across both interest based and non-funded income have

resulted in a 27% growth in revenues

Administrative expenses remain well controlled with an increase of 7%, resulting in a

significant improvement in the cost to income ratio from 44.6% in June ’14 to 37.6% in

June’15

Financial Highlights

Overall Performance

UBL has achieved profit after tax of

Rs. 12.72 billion for the first half of

2015 which is 21% higher than the

corresponding period and translates

into earnings per share of Rs. 10.39

(June 2014: Rs. 8.60). On a

consolidated basis, UBL posted a profit

after tax of Rs. 13.42 billion, an

increase of 18% over the

corresponding period of 2014.

Net Interest Income

Net interest income has grown by

Rs. 6.13 billion to Rs. 27.29 billion, an

increase of 29%. The expansion in the

balance sheet funded by growth in

core deposits remains the major driver

behind enhanced earnings. Domestic

Deposit growth stood at 13% during

the current half year with the cost of



deposits down to 3.8% in H1 ’15 as compared to 4.5% in H1’14. The built up in the high yielding

long term portfolio of government securities continues to support revenues. Despite the lower

rate environment overall margins have improved from 5.5% in H1 2014 to 5.9% in H1 2015.

Non-Interest Income

Non-interest income has grown by 23% to reach Rs. 12.39 billion in the current half year with

an overall contribution of 31% to the revenue base.

Fees and commissions grew by 11% to Rs. 6.17 billion compared to Rs. 5.55 billion in the

corresponding period. Branchless banking continues to gain momentum in line with expansion

in its outreach. Volumes and earnings growth in home remittances maintained market

leadership. Dividend income stood at Rs. 2 billion with stable yields on the equity portfolio and

high returns on mutual funds. The current half year remained an active trading period with

sizeable capital gains of Rs. 2.5 billion arising mainly on the bond portfolio with a consistent

performance from the equities desk.

Provisions and loan losses

Provisions for the half year 2015 were reported at Rs. 2.09 billion against Rs. 1.11 billion in the

corresponding period of 2014. The increase was mainly due to the prudent build up in general

provisions within domestic and international. The asset quality level stood at 11.2% as at

June’15 (Dec’14: 11.2%) with a 1% reduction in the overall level of NPLs during the current half

year. The coverage ratio at the end of June 2015 remains strong at 81% (Dec’14: 81%).

Cost management

Administrative expenses have increased by 7% over the corresponding period of 2014 and

amounted to Rs. 14.94 billion. The rise is a result of variable costs which move in line with

related transaction revenues and personnel costs. Initiatives for effective cost management

aimed to attain economies of scale continue across the network. The overall cost to income

ratio has improved to 37.6% in 2015 compared to 44.6% last year.

Taxation

The Federal Government vide Finance Act 2015 has imposed a one time super tax at the rate of

4% on income of banks for the year ended December 31, 2014. This tax has been levied for

financing the rehabilitation of internally displaced persons affected by the ongoing war on

terror. Further, the subsidized taxation rates on dividend income and capital gains of banks

have also been withdrawn retroactively w.e.f. the year ended December 31, 2014 and a

uniform tax rate of 35% is made applicable. Accordingly, provisions of Rs. 1.25 billion and Rs.

0.37 billion for Super tax and Dividend income/Capital gains respectively have been made for

the prior year in the results for the half year ended June 30, 2015.



Balance Sheet Management

The balance sheet size reached a size of Rs. 1.3 trillion, a growth of 16% over December 2014.

The growth in domestic deposits was 13%, well ahead of the market base which expanded by

9.6%. Average domestic current accounts have increased by 15% in comparison to the

corresponding period last year. The Bank’s overall deposit base stood at Rs. 992 billion, with a

growth of 11% over December 2014. The loans and advances portfolio has declined marginally

to Rs. 430 billion at the end of half year 2015 from Rs. 434 billion in Dec ’14. The investment

portfolio reached Rs. 647 billion at the end of June 2015, a growth of 30% which was mainly

within government securities.

Capital Ratios

UBL’s capital ratios improved with the overall capital adequacy at 14.5% as at Jun’15 as

compared to 13.9% in Dec’14. Tier-1 CAR was maintained at 10.1% as at Jun’15 (Dec’14: 10.0%).

The Board of Directors of UBL declared an interim dividend of 30% (Rs. 3.0 per share) at their

meeting in Islamabad on July 23rd 2015, along with the results for the half year ended June 30,

2015.

Key developments

Economy Review

The most significant event which may transform the landscape for Pakistan is the recent signing

of the China Pakistan Economic Corridor (CPEC) – a multi-billion dollar project which aims at

connecting Pakistan’s Gwadar with Western China’s Kashgar through heavy investments in

transport infrastructure and energy related projects. CPEC would serve as the largest stimulant

for domestic and foreign investment in the future.

Inflation has maintained its downward trajectory with the significantly lower 1H 2015 CPI

average of 3.0%. Large scale manufacturing (LSM) has started showing some signs of recovery

with the LSM index posting a growth of 2.93% during 10M FY15. The fiscal position remains a

concern as revenue generation remains challenging whilst expenditures continue to escalate.

The country’s overall FX reserves position has improved considerably by US$ 4.0bn during FY15

and crossed the US$ 18 billion level. This was as a result of a surplus in the balance of payments

position and scheduled disbursements under the Extended Fund Facility (EFF) from the IMF.

Although, the trade deficit for 11M FY15 has widened by 11.6% YoY with imports up by 2.0%

and exports down by 5.3%, benefits of lower oil prices have started providing respite during the

latter part of FY15. Despite a relatively weaker trade performance the current account balance

improved by a significant 34% YoY to reach a deficit of US$ 2.0 billion as against US$ 3.0 billion

during the same period last year. This was a result of larger flows under the Coalition Support

895 828



Fund and a 16% increase in home remittances during the 11M of FY15 to US$ 16.6 billion.

Reserves were also supported by privatization proceeds through the successful completion of a

large capital market transaction in the banking sector this year. In view of the stable and

growing reserves position the PKR-USD exchange rate has remained comfortable with a modest

1.3% depreciation during Jan-Jun 2015.

The growth in the local stock market remained modest during 1H 2015 with the KSE-100 index

appreciating by 7.1% amid a bearish trend triggered by foreign selling. However improving

macros resulted in strong gains in 2Q 2015 with enhanced foreign participation. Overall during

1H 2015 foreigners remained net sellers with US$ 75 million net outflow.

Given the significantly lower inflation trajectory along with an improving external account

outlook, the State Bank of Pakistan maintained its monetary easing stance and cut its discount

rate cumulatively by 250bps during 1H 2015 to 7.0%. Moreover, the SBP also introduced the

new ‘target rate’ at 50bps below the discount rate (ceiling rate) i.e. at 6.5% which would be the

policy rate for the SBP going forward. The central bank also reduced the width of Interest rate

corridor by 50bps to 200bps, which has kept floor rate (repo rate) of the corridor at 5.0%. The

savings floor rate remains at 50bps below the repo rate, thus maintaining the overall pressure

on banking sector margins.

Deposits for the banking sector grew by 9.6% during the first half of 2015, while lending has

remained slow after posting a strong performance during 4Q 2014. Non-performing loans for

the industry increased by 1.9% during Q1’2015 to PKR 620 billion as at Mar’15. The industry

infection ratio reached 12.8% in Mar’15 as against 12.3% in Dec’14.

UBL International

The macroeconomic indicators in the GCC countries continued to be led by UAE and Qatar

where our diversification in non-oil sectors provides support from the impact of reduced oil

prices. The construction, trade, tourism and services sectors continue to play an important role.

Wholesale banking remained in focus with a buildup in the asset book in UAE and Qatar during

H1’2015. Liability management and building a sustainable retail deposit base continues to be a

top priority within our international branches.

As a part of the Bank’s strategy to provide its customers value added services, the Bank

launched NRP Banking services in UAE during the year. We plan to expand the NRP services by

launching the offering in Bahrain and Qatar later this year to provide access to the Pakistani

diaspora living in these countries with one stop banking services in Pakistan.

We continue to monitor the situation in Yemen while managing a gradual reduction in our

overall exposure in the country.



Credit Rating

The credit rating company JCR-VIS has reaffirmed UBL’s long term and short term credit ratings

at “AA+” and “A-1+” respectively. Both the ratings for UBL have been assigned a “Stable”

outlook.

Corporate Social Responsibility (CSR)

During the half year of 2015, UBL donated over Rs. 71 million in support of its CSR activities;

which were mainly in the education sector. Donees included the Institute of Business

Administration, Karachi (IBA), Namal College and The Citizens Foundation. In the health sector

UBL donated to Pakistan Foundation for Fighting Blindness and the Pakistan Parkinsons Society.

Donations in the second quarter included contributions to the Indus Earth Trust for the

rehabilitation project for the people displaced by the Awaran, Balochistan earthquake.

Future Outlook

The Bank remains geared to reposition itself as the improving macro outlook manifests itself

with a pickup in business activity across major segments. Retail bank aims to build on its

existing momentum with deposit growth targeted above market with higher branch driven

performance. Reinvestment within corporate to capture the financing requirements arising on

new infrastructure projects and active participation by investment banking remains a key focus.

More penetration within the mid-market segment to capture transaction and trade flows is a

business opportunity where we seek to build on our potential. Active recovery and

restructuring across the NPL portfolio shall continue in order to improve asset quality and

realize the upside on provision reversals.

Acknowledgements

In last I would like to thank and appreciate UBL shareholders and customers for their trust and

support. I would take this opportunity to praise our staff for their dedicated efforts and

appreciate the Government, the State Bank of Pakistan, the Securities & Exchange Commission

and other regulatory bodies for their guidance and support.

For and on behalf of the Board,

Sir Mohammed Anwar Pervez, OBE, HPk

Chairman

Islamabad

July 23rd, 2015

UNCONSOLIDATED CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION

AS AT JUNE 30, 2015

Note (Un-audited) (Audited)

June 30,

2015

December 31,

2014

ASSETSCash and balances with treasury banks 101,600,792 74,687,959 Balances with other banks 23,086,398 12,885,121 Lendings to financial institutions 6 21,079,581 21,872,138 Investments 7 647,186,063 497,334,002

Advances 8 429,699,896 434,264,050

Operating fixed assets 9 31,037,433 30,303,370

Deferred tax asset - net - -

Other assets 38,901,355 40,067,467

1,292,591,518 1,111,414,107

LIABILITIES

Bills payable 14,688,663 9,553,585

Borrowings 10 121,899,725 53,065,156

Deposits and other accounts 11 992,362,309 895,083,053

Subordinated loans - -

Liabilities against assets subject to finance lease - -

Deferred tax liability - net 4,255,528 1,899,345

Other liabilities 24,281,084 26,296,516

1,157,487,309 985,897,655

NET ASSETS 135,104,209 125,516,452

REPRESENTED BY:

Share capital 12,241,798 12,241,798

Reserves 35,904,452 34,130,131

Unappropriated profit 51,123,197 48,217,351

99,269,447 94,589,280

Surplus on revaluation of assets - net of deferred tax 12 35,834,762 30,927,172

135,104,209 125,516,452

CONTINGENCIES AND COMMITMENTS 13

Wajahat Husain Amin Uddin Zameer Mohammed Choudrey Sir Mohammed Anwar Pervez, OBE, HPk President & Director Director Chairman Chief Executive Officer

--------------(Rupees in '000)-------------

The annexed notes from 1 to 22 form an integral part of these unconsolidated condensed interim financial statements.

7

UNCONSOLIDATED CONDENSED INTERIM PROFIT AND LOSS ACCOUNT (UN-AUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, 2015

NoteApril - June

2015

April - June

2014

January - June

2015

January - June

2014

Mark-up / return / interest earned 14 23,505,775 20,900,627 46,417,427 40,294,658

Mark-up / return / interest expensed 15 (9,329,449) (9,552,857) (19,130,810) (19,133,057)

Net mark-up / return / interest income 14,176,326 11,347,770 27,286,617 21,161,601

Provision against loans and advances - net (1,223,203) (522,322) (1,929,717) (669,269)

Provision against lendings to financial institutions - net - (10,043) - (9,705)

(Provision) / reversal of provision for diminution in value

of investments - net 21,329 (246,855) (6,220) (241,277)

Bad debts written off directly (32,010) (32,670) (68,062) (76,400)

(1,233,884) (811,890) (2,003,999) (996,651)

Net mark-up / return / interest income after provisions 12,942,442 10,535,880 25,282,618 20,164,950

Non mark-up / interest income

Fee, commission and brokerage income 3,348,342 2,844,386 6,167,169 5,547,557

Dividend income 1,529,238 364,631 2,023,367 1,039,223

Income from dealing in foreign currencies 527,983 771,277 1,232,683 1,425,712

Gain on sale of securities - net 566,111 628,298 2,498,858 1,411,300

Unrealized loss on revaluation of investments classified as

held for trading (183,796) (9,892) (265,256) (56,620)

Other income 374,683 367,967 732,191 673,282

Total non mark-up / interest income 6,162,561 4,966,667 12,389,012 10,040,454

19,105,003 15,502,547 37,671,630 30,205,404

Non mark-up / interest expenses

Administrative expenses 16 (7,610,712) (7,185,050) (14,935,384) (13,905,343)

Other provisions - net (53,405) (101,255) (85,022) (114,777)

Workers' Welfare Fund (224,718) (172,569) (453,270) (329,445)

Other charges 131 (7,676) (63,566) (7,827)

Total non mark-up / interest expenses (7,888,704) (7,466,550) (15,537,242) (14,357,392)

Profit before taxation 11,216,299 8,035,997 22,134,388 15,848,012

Taxation - Current (4,157,550) (2,978,178) (8,069,575) (5,648,238)

Taxation - Prior 17.2 (1,622,583) (315) (1,622,583) (315)

Taxation - Deferred 159,178 265,331 279,903 332,851

(5,620,955) (2,713,162) (9,412,255) (5,315,702)

Profit after taxation 5,595,344 5,322,835 12,722,133 10,532,310

Earnings per share - basic and diluted 4.57 4.35 10.39 8.60

Wajahat Husain Amin Uddin Zameer Mohammed Choudrey Sir Mohammed Anwar Pervez, OBE, HPk

President & Director Director Chairman

Chief Executive Officer


---------------------------------------- (Rupees in '000) ----------------------------------------

-------------------------------------------- (Rupees) --------------------------------------------

UNCONSOLIDATED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME (UN-AUDITED)


April - June

2015

April - June

2014

January - June

2015

January - June

2014

Profit after taxation 5,595,344 5,322,835 12,722,133 10,532,310

Other comprehensive income:

Items that are not to be reclassified to profit or loss in subsequent periods - - - -

Items that may be reclassified to profit or loss in subsequent periods

Exchange differences on translation of

net investment in foreign branches (67,243) 115,133 502,108 (2,351,375)

Amortization of cash flow hedges - - - 4,962

Related deferred tax charge - - - (1,737)

- - - 3,225

(67,243) 115,133 502,108 (2,348,150)

Other comprehensive income transferred to equity 5,528,101 5,437,968 13,224,241 8,184,160

Items that may be reclassified to profit or loss in subsequent periods

Surplus arising on revaluation of available for sale securities (55,212) (1,880,668) 7,588,779 70,776

Related deferred tax charge 19,325 658,234 (2,656,072) (24,772)

(35,887) (1,222,434) 4,932,707 46,004

Total comprehensive income during the period - net of tax 5,492,214 4,215,534 18,156,948 8,230,164





------------------------------------ (Rupees in '000) ------------------------------------

UNCONSOLIDATED CONDENSED INTERIM CASH FLOW STATEMENT (UN-AUDITED)


January - June

2015

January - June

2014

CASH FLOW FROM OPERATING ACTIVITIES

Profit before taxation 22,134,388 15,848,012

Less: Dividend income (2,023,367) (1,039,223)

20,111,021 14,808,789

Adjustments:

Depreciation 862,748 800,636

Amortization 194,971 211,515

Workers' Welfare Fund 453,270 329,445

Provision for retirement benefits 416,536 502,909

Provision against loans and advances - net 1,929,717 669,269

Provision against lendings to financial institutions - net - 9,705

Provision for diminution in value of investments - net 6,220 241,277

Gain on sale of operating fixed assets (17,642) (31,620)

Amortization of cash flow hedges - 4,962

Unrealized loss on revaluation of investments classified as held for trading 265,256 56,620

Bad debts written-off directly 68,062 76,400

Provision against other assets 85,022 114,777

4,264,160 2,985,895

24,375,181 17,794,684

(Increase) / decrease in operating assets

Lendings to financial institutions 792,557 11,227,153

Held for trading securities (29,708,578) (827,365)

Advances 2,566,375 (18,419,358)

Other assets - (excluding advance taxation) (2,652,326) (7,570,731)

(29,001,972) (15,590,301)

Increase / (decrease) in operating liabilities

Bills payable 5,135,078 (4,085,356)

Borrowings 68,834,569 (6,327,404)

Deposits and other accounts 97,279,256 29,657,100

Other liabilities (excluding current taxation) (2,043,466) 397,321

169,205,437 19,641,661

164,578,646 21,846,044

Payments on account of staff retirement benefits (489,769) (838,061)

Income taxes paid (5,743,813) (5,430,803)

Net cash inflow from operating activities 158,345,064 15,577,180

CASH FLOW FROM INVESTING ACTIVITIES

Net investment in securities (112,826,180) (6,186,654)

Dividend income received 1,850,232 1,008,281

Investment in operating fixed assets (1,821,396) (959,600)

Sale proceeds from disposal of operating fixed assets 55,846 352,875

Net cash outflow from investing activities (112,741,498) (5,785,098)

CASH FLOW FROM FINANCING ACTIVITIES

Repayments of subordinated loans - (332,668)

Dividends paid (8,991,564) (7,928,942)

Net cash outflow from financing activities (8,991,564) (8,261,610)

36,612,002 1,530,472

Exchange differences on translation of net investment in foreign branches 502,108 (2,351,375)

Increase / (decrease) in cash and cash equivalents during the period 37,114,110 (820,903)

Cash and cash equivalents at beginning of the period 87,573,080 114,388,222

Cash and cash equivalents at end of the period 124,687,190 113,567,319




-----------(Rupees in '000)-----------


UNCONSOLIDATED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2015

Exchange

translation

reserve

Cash flow

hedge

reserve

Balance as at January 01, 2014 (Audited) 12,241,798 19,658,933 14,025,502 (3,225) 42,634,545 88,557,553

Transactions with owners for the six months June 30, 2014

Final cash dividend - December 31, 2013 declaredsubsequent to the year end at Rs. 4.0 per share - - - - (4,896,719) (4,896,719)

Interim cash dividend - March 31, 2014 declared

at Rs. 2.5 per share - - - - (3,060,450) (3,060,450) - - - - (7,957,169) (7,957,169)

Total comprehensive income for the six months ended June 30, 2014

Profit after taxation for the six months ended June 30, 2014 - - - - 10,532,310 10,532,310 Other comprehensive income - net of tax - - (2,351,375) 3,225 - (2,348,150) Total comprehensive income for the six months ended June 30, 2014 - - (2,351,375) 3,225 10,532,310 8,184,160

Transfer from surplus on revaluation of fixed assets to unappropriated profit - net of tax - - - - 33,358 33,358

Transfer to statutory reserve - 1,053,231 - - (1,053,231) - Balance as at June 30, 2014 (Un-audited) 12,241,798 20,712,164 11,674,127 - 44,189,813 88,817,902

Transactions with owners for the six months ended

December 31, 2014

Interim cash dividend - June 30, 2014 declared

at Rs. 2.5 per share - - - - (3,060,450) (3,060,450)

Interim cash dividend - September 30, 2014 declared

at Rs. 2.5 per share - - - - (3,060,450) (3,060,450)

- - - - (6,120,900) (6,120,900)

Total comprehensive income for the six months ended

December 31, 2014

Profit after taxation for the six months ended December 31, 2014 - - - - 11,397,251 11,397,251

Other comprehensive income - net of tax - - 604,115 - (142,698) 461,417

Total comprehensive income for the six months ended December 31, 2014 - - 604,115 - 11,254,553 11,858,668

Transfer from surplus on revaluation of fixed assets

to unappropriated profit - net of tax - - - - 33,610 33,610

Transfer to statutory reserve - 1,139,725 - - (1,139,725) -

Balance as at December 31, 2014 (Audited) 12,241,798 21,851,889 12,278,242 - 48,217,351 94,589,280

Transactions with owners for the six months ended June 30, 2015

Final cash dividend - December 31, 2014 declared

subsequent to the year end at Rs. 4.0 per share - - - - (4,896,719) (4,896,719)

Interim cash dividend - March 31, 2015 declared

at Rs.3.0 per share - - - - (3,672,539) (3,672,539)

- - - - (8,569,258) (8,569,258)

Total comprehensive income for the six months ended June 30, 2015

Profit after taxation for the six months ended June 30, 2015 - - - - 12,722,133 12,722,133 Other comprehensive income - net of tax - - 502,108 - - 502,108 Total comprehensive income for the six months ended June 30, 2015 - - 502,108 - 12,722,133 13,224,241

Transfer from surplus on revaluation of fixed assets

to unappropriated profit - net of tax - - - 25,184 25,184

Transfer to statutory reserve - 1,272,213 - - (1,272,213) -

Balance as at June 30, 2015 (Un-audited) 12,241,798 23,124,102 12,780,350 - 51,123,197 99,269,447





--------------------------------------------------(Rupees in '000)---------------------------------------------------

Share

capital

Unapprop-

riated profit

TotalStatutory

reserve

Capital reserves

NOTES TO THE UNCONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS (UN-AUDITED)


1. STATUS AND NATURE OF BUSINESS

2. BASIS OF PRESENTATION

3. STATEMENT OF COMPLIANCE

3.1

3.2

3.3

3.4

United Bank Limited (the Bank) is a banking company incorporated in Pakistan and is engaged in commercial banking and related

services. The Bank's registered office and principal office are situated at UBL Building, Jinnah Avenue, Blue Area, Islamabad and

at State Life Building No. 1, I. I. Chundrigar Road, Karachi respectively. The Bank operates 1,295 (December 31, 2014: 1,295)

branches inside Pakistan including 24 (December 31, 2014: 24) Islamic Banking branches and 1 (December 31, 2014: 1) branch in

Karachi Export Processing Zone. The Bank also operates 18 (December 31, 2014:18) branches outside Pakistan as at June 30,

2015. The Bank is a subsidiary of Bestway (Holdings) Limited which is incorporated in the United Kingdom.

The Bank's ordinary shares are listed on all three stock exchanges in Pakistan. Its Global Depository Receipts (GDRs) are on the

list of the UK Listing Authority and the London Stock Exchange Professional Securities Market. These GDRs are also eligible for

trading on the International Order Book System of the London Stock Exchange. Further, the GDRs constitute an offering in the

United States only to qualified institutional buyers in reliance on Rule 144A under the US Securities Act of 1933 and an offering

outside the United States in reliance on Regulation S.

In accordance with the directives of the Federal Government regarding the shifting of the banking system to Islamic modes, the

State Bank of Pakistan (SBP) has issued various circulars from time to time. Permissible forms of trade-related modes of financing

include purchase of goods by banks from their customers and immediate resale to them at appropriate mark-up in price on deferred

payment basis. The purchases and sales arising under these arrangements are not reflected in these unconsolidated condensed

interim financial statements as such, but are restricted to the amount of facility actually utilized and the appropriate portion of mark-

up thereon. The Islamic Banking branches of the Bank have complied with the requirements set out under the Islamic Financial

Accounting Standards issued by the Institute of Chartered Accountants of Pakistan and notified under the provisions of the

Companies Ordinance, 1984.

IFRS - 10 Consolidated Financial Statements was made applicable from period beginning on or after 1 January 2015 vide SECP

circular 633 (I) / 2014. SECP has granted exemption to the Bank from application of the requirements of this standard with respect

to the investment in mutual funds managed by UBL Fund Managers Limited. Accordingly, the requirements of this standard have

not been applied in the preparation of these unconsolidated condensed interim financial statements to the extent of their

applicability to these mutual funds.

The financial results of the Islamic Banking branches of the Bank have been included in these unconsolidated condensed interim

financial statements for reporting purposes, after eliminating material inter-branch transactions / balances. Key financial figures of

the Islamic Banking branches are disclosed in note 20 to these unconsolidated condensed interim financial statements.

The SBP vide BSD Circular letter No. 10, dated August 26, 2002 has deferred the applicability of International Accounting Standard

39, Financial Instruments: Recognition and Measurement and International Accounting Standard 40, Investment Property for

banking companies till further instructions. Further, according to the notification of the SECP issued vide SRO 411(I)/2008 dated

April 28, 2008, International Financial Reporting Standard (IFRS) 7, Financial Instruments: Disclosures has not been made

applicable for banks. Accordingly, the requirements of these standards have not been considered in the preparation of these

unconsolidated condensed interim financial statements. However, investments have been classified and valued in accordance with

the requirements of various circulars issued by the SBP.

These unconsolidated condensed interim financial statements of the Bank have been prepared in accordance with the

requirements of International Accounting Standard (IAS) 34, Interim Financial Reporting, Islamic Financial Accounting Standards

(IFAS) issued by the Institute of Chartered Accountants of Pakistan, the requirements of the Companies Ordinance, 1984, the

Banking Companies Ordinance,1962 and directives issued by the Securities and Exchange Commission of Pakistan (SECP) and

the SBP. In case requirements differ, the requirements of the Companies Ordinance, 1984, the Banking Companies Ordinance,

1962 and the said directives have been followed.

The disclosures made in these unconsolidated condensed interim financial statements have been limited based on a format

prescribed by the SBP vide BSD Circular Letter No. 2 dated May 12, 2004 and IAS 34, Interim Financial Reporting. They do not

include all the disclosures required for annual financial statements, and these unconsolidated condensed interim financial

statements should be read in conjunction with the unconsolidated financial statements of the Bank for the year ended December

31, 2014.

1



3.5

4. SIGNIFICANT ACCOUNTING POLICIES AND FINANCIAL RISK MANAGEMENT

4.1

4.2

5. BASIS OF MEASUREMENT

5.1

5.2

(Un-audited) (Audited)June 30,

2015

December 31,

2014

6. LENDINGS TO FINANCIAL INSTITUTIONS

Call money lendings 2,675,000 1,105,000

Repurchase agreement lendings 879,610 3,226,563

Other lendings to financial institutions 18,328,247 18,335,817

21,882,857 22,667,380

Provision against lendings to financial institutions (803,276) (795,242)

21,079,581 21,872,138

These unconsolidated condensed interim financial statements represent the separate condensed interim

financial statements of the Bank. The consolidated condensed interim financial statements of the Bank

and its subsidiary companies are presented separately.

------------(Rupees in '000)------------

The accounting policies adopted in the preparation of these unconsolidated condensed interim financial

statements are consistent with those applied in the preparation of the unconsolidated financial

statements of the Bank for the year ended December 31, 2014.

The financial risk management objectives and policies are consistent with those disclosed in the financial

statements of the Bank for the year ended December 31, 2014.

These unconsolidated condensed interim financial statements have been prepared under the historical

cost convention except that certain operating fixed assets have been stated at revalued amounts and

certain investments and derivative financial instruments have been stated at fair value.

The preparation of these unconsolidated condensed interim financial statements in conformity with

approved accounting standards requires management to make judgments, estimates and assumptions

that affect the reported amounts of assets and liabilities and income and expenses. It also requires

management to exercise judgment in the application of its accounting policies. The estimates and

assumptions are based on historical experience and various other factors that are believed to be

reasonable under the circumstances. These estimates and assumptions are reviewed on an ongoing

basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if

the revision affects only that period, or in the period of revision and future periods if the revision affects

both current and future periods.

The significant judgments made by management in applying its accounting policies and the key sources

of estimation uncertainty were the same as those applied to the unconsolidated financial statements of

the Bank for the year ended December 31, 2014.

2



7. INVESTMENTS

7.1 Investments by type

Held by Bank Given as

collateral

Total Held by Bank Given as

collateral

Total

Held for trading securities

Market Treasury Bills 20,591,042 - 20,591,042 6,941,106 - 6,941,106

Pakistan Investment Bonds 16,925,046 - 16,925,046 822,818 - 822,818

Ordinary shares of listed companies 346,109 - 346,109 430,943 - 430,943

37,862,197 - 37,862,197 8,194,867 - 8,194,867

Available for sale securities

Market Treasury Bills 22,293,875 15,053,195 37,347,070 40,823,380 - 40,823,380

Pakistan Investment Bonds 184,148,802 71,577,945 255,726,747 168,005,906 20,563,460 188,569,366

Government of Pakistan Sukuk 9,258,354 - 9,258,354 9,280,698 - 9,280,698

Government of Pakistan Eurobonds 12,504,861 - 12,504,861 11,815,701 - 11,815,701

Ordinary shares of listed companies 17,758,530 - 17,758,530 16,686,985 - 16,686,985

Preference shares 425,261 - 425,261 421,087 - 421,087

Ordinary shares of unlisted companies 243,024 - 243,024 242,997 - 242,997

Term Finance Certificates 1,371,263 - 1,371,263 1,483,030 - 1,483,030

Investment in REIT 458,590 - 458,590 - - -

Foreign bonds - sovereign 16,557,671 - 16,557,671 14,667,408 - 14,667,408

Foreign bonds - others 10,578,663 - 10,578,663 10,903,768 - 10,903,768

275,598,894 86,631,140 362,230,034 274,330,960 20,563,460 294,894,420

Held to maturity securities

Market Treasury Bills 58,127,754 - 58,127,754 30,281,900 - 30,281,900

Pakistan Investment Bonds 137,983,310 - 137,983,310 122,713,145 - 122,713,145

Government of Pakistan Eurobonds 5,187,450 - 5,187,450 5,082,949 - 5,082,949

Term Finance Certificates 5,468,037 - 5,468,037 5,570,990 - 5,570,990

Sukuks 4,306,317 - 4,306,317 1,880,379 - 1,880,379

Participation Term Certificates 2,795 - 2,795 2,795 - 2,795

Debentures 2,266 - 2,266 2,266 - 2,266

Foreign bonds - others 220,764 - 220,764 217,942 - 217,942

Recovery note 313,712 - 313,712 309,708 - 309,708

CDC SAARC Fund 221 - 221 218 - 218

211,612,626 - 211,612,626 166,062,292 - 166,062,292

Associates

United Growth and Income Fund 3,030,136 - 3,030,136 3,030,136 - 3,030,136

UBL Liquidity Plus Fund 10,078 - 10,078 100,000 - 100,000

UBL Money Market Fund 9,850 - 9,850 100,000 - 100,000

UBL Retirement Savings Fund 120,000 - 120,000 120,000 - 120,000

UBL Principal Protected Fund - II 100,000 - 100,000 100,000 - 100,000

UBL Principal Protected Fund - III 200,000 - 200,000 200,000 - 200,000

UBL Government Securities Fund 1,503,779 - 1,503,779 1,600,000 - 1,600,000

UBL Gold Fund 100,000 - 100,000 100,000 - 100,000

Al Ameen Islamic Cash Fund 760,470 - 760,470 100,000 - 100,000

Al Ameen Islamic Aggressive Income Fund 25,944 - 25,944 200,000 - 200,000

Al Ameen Islamic Sovereign Fund 50,000 - 50,000 350,000 - 350,000

Al Ameen Islamic Retirement Savings Fund 90,000 - 90,000 90,000 - 90,000

Al Ameen Islamic Principal Preservation Fund – I - - - 100,000 - 100,000

Al Ameen Islamic Principal Preservation Fund – II 100,000 - 100,000 100,000 - 100,000

Al Ameen Islamic Principal Preservation Fund – III 100,000 - 100,000 100,000 - 100,000

Al Ameen Islamic Principal Preservation Fund – IV 100,000 - 100,000 100,000 - 100,000

Al Ameen Islamic Principal Preservation Fund – V 100,000 - 100,000 100,000 - 100,000

Al Ameen Islamic Asset Allocation Fund 100,000 - 100,000 100,000 - 100,000

Al Ameen Islamic Financial Planning Fund 100,000 - 100,000 - - -

UBL Insurers Limited 240,000 - 240,000 240,000 - 240,000

Khushhali Bank Limited 832,485 - 832,485 832,485 - 832,485

Oman United Exchange Company, Muscat 6,981 - 6,981 6,981 - 6,981

DHA Cogen Limited 7.2 - - - - - -

7,679,723 - 7,679,723 7,769,602 - 7,769,602

Subsidiaries

United National Bank Limited (UBL UK) 2,855,223 - 2,855,223 2,855,223 - 2,855,223

UBL (Switzerland) AG 589,837 - 589,837 589,837 - 589,837

UBL Fund Managers Limited 100,000 - 100,000 100,000 - 100,000

UBL Bank (Tanzania) Limited 1,322,014 - 1,322,014 1,322,014 - 1,322,014

United Executors and Trustees Company Ltd. 30,100 - 30,100 30,100 - 30,100

4,897,174 - 4,897,174 4,897,174 - 4,897,174

537,650,614 86,631,140 624,281,754 461,254,895 20,563,460 481,818,355

Provision for diminution in value of

investments (1,701,778) - (1,701,778) (1,725,669) - (1,725,669)

Investments (net of provisions) 535,948,836 86,631,140 622,579,976 459,529,226 20,563,460 480,092,686

Surplus on revaluation of available for sale

securities 19,013,958 5,857,385 24,871,343 16,517,995 764,569 17,282,564

Deficit on revaluation of held for trading

securities (265,256) - (265,256) (41,248) - (41,248)

Total investments 554,697,538 92,488,525 647,186,063 476,005,973 21,328,029 497,334,002

7.2

(Audited)(Un-audited)June 30, 2015 December 31, 2014

----------------------------------------------------------------- (Rupees in '000) -----------------------------------------------------------------

As a result of exercise of a pledge in 2013, the Bank holds 20.99% of the issued and paid up capital of DHA Cogen Limited without any consideration having been paid.

Consequently, DHA Cogen Limited is classified as an associated company.

3




June 30,

2015

December 31,

2014

8. ADVANCES

Loans, cash credits, running finances, etc.

In Pakistan 324,005,166 313,662,887

Outside Pakistan 114,624,305 115,124,415

438,629,471 428,787,302

Bills discounted and purchased

Payable in Pakistan 15,425,454 24,589,010

Payable outside Pakistan 22,975,694 26,622,008

38,401,148 51,211,018

Advances - gross 477,030,619 479,998,320

Provision against advances

Specific 8.1 (43,295,089) (43,714,188)

General 8.2 (4,035,634) (2,020,082)

Advances - net of provision 429,699,896 434,264,050

8.1

Category of Classification

Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total

Other assets especially

mentioned* 83,609 - 83,609 1,923 - 1,923 1,923 - 1,923

Substandard 4,741,789 770,235 5,512,024 420,216 64,275 484,491 420,216 64,275 484,491

Doubtful 863,318 2,084,330 2,947,648 428,065 794,798 1,222,863 428,065 794,798 1,222,863

Loss 37,955,256 6,831,325 44,786,581 36,284,001 5,301,811 41,585,812 36,284,001 5,301,811 41,585,812

43,643,972 9,685,890 53,329,862 37,134,205 6,160,884 43,295,089 37,134,205 6,160,884 43,295,089

Category of Classification

Domestic Overseas Total Domestic Overseas Total Domestic Overseas Total

Other assets especially

mentioned* 114,459 - 114,459 650 - 650 650 - 650

Substandard 4,419,940 623,812 5,043,752 284,598 34,891 319,489 284,598 34,891 319,489

Doubtful 1,018,729 1,956,548 2,975,277 499,788 851,273 1,351,061 499,788 851,273 1,351,061

Loss 39,031,546 6,687,729 45,719,275 36,961,605 5,081,383 42,042,988 36,961,605 5,081,383 42,042,988

44,584,674 9,268,089 53,852,763 37,746,641 5,967,547 43,714,188 37,746,641 5,967,547 43,714,188

* The other assets especially mentioned category pertains to agricultural finance and advances to small enterprises.

8.2

8.3


June 30,

2015

December 31,

2014

9. OPERATING FIXED ASSETS

Capital work-in-progress 4,005,777 2,974,574

Property and equipment 25,949,919 26,093,356

Intangible assets 1,081,737 1,235,440

9.1 31,037,433 30,303,370

9.1

December 31, 2014 (Audited)

Classified advances Provision required Provision held

The Bank has availed the benefit of Forced Sale Value (FSV) of mortgaged properties held as collateral against non-performing advances as allowed under BSD

Circular 1 of 2011. Had the benefit under the said circular not been taken by the Bank, the specific provision against non-performing advances would have been higher

by Rs. 613.272 million (December 31, 2014: Rs. 922.746 million) and consequently the profit after tax would have been lower by Rs. 398.627 million (December 31,

2014: Rs. 599.785 million). The FSV benefit availed is not available for the distribution of cash or stock dividend to shareholders.

----------------------------------------------------------------------------------------- (Rupees in '000) -----------------------------------------------------------------------------------------

General provision represents provision amounting to Rs. 249.299 million (December 31, 2014: Rs. 252.740 million) against consumer finance portfolio and Rs. 37.942

million (December 31, 2014: Rs. 32.942 million) against advances to small enterprises as required by the Prudential Regulations issued by the SBP and Rs. 2,470.643

million (December 31, 2014: Rs.1,686.400 million) pertaining to overseas advances to meet the requirements of the regulatory authorities. General provisions also

include an amount of Rs. 1,277.750 million (December 31, 2014: Rs. 48.000 million) which the Bank carries as a matter of prudence given the current economic

environment, and is based on management estimates.

-------------(Rupees in '000)------------

Additions and disposals during the period amounted to Rs. 1,821.396 million (June 30, 2014: Rs. 959.600 million) and Rs. 164.721 million (June 30, 2014: Rs. 672.056

million), respectively.

-------------(Rupees in '000)------------

Provision heldProvision required

----------------------------------------------------------------------------------------- (Rupees in '000) -----------------------------------------------------------------------------------------

Advances include Rs. 53,330 million (December 31, 2014: Rs. 53,853 million) which have been placed under non-performing status as detailed below:

June 30, 2015 (Un-audited)

Classified advances

4



(Un-audited) (Audited)

NoteJune 30,

2015

December 31,

2014

10. BORROWINGS

Secured

Borrowings from the State Bank of Pakistan under:

Export refinance scheme 12,654,068 14,267,463

Refinance facility for modernization of SME 25,788 33,591

Long term financing facility 6,357,484 6,461,411

Long term financing under export oriented projects 94,720 173,925

19,132,060 20,936,390

Repurchase agreement borrowings 91,827,087 21,269,642

110,959,147 42,206,032

Unsecured

Call borrowings 5,044,530 4,217,499

Overdrawn nostro accounts 25,270 297,173

Trading liabilities - 102,539

Other borrowings 5,870,778 6,241,913

10,940,578 10,859,124

121,899,725 53,065,156

11. DEPOSITS AND OTHER ACCOUNTS

Customers

Fixed deposits 245,815,314 224,072,873

Savings deposits 328,881,644 312,006,110

Sundry deposits 15,981,075 7,323,725

Margin deposits 4,801,701 6,683,291

Current accounts - remunerative 7,403,637 11,268,765

Current accounts - non-remunerative 364,954,660 316,074,790

967,838,031 877,429,554

Financial Institutions

Remunerative deposits 18,994,221 13,920,093

Non-remunerative deposits 5,530,057 3,733,406

24,524,278 17,653,499

992,362,309 895,083,053

12. SURPLUS ON REVALUATION OF ASSETS - NET OF DEFERRED TAX

Surplus arising on revaluation of assets - net of tax:

Fixed assets 12.1 19,668,389 19,693,506

Securities 12.2 16,166,373 11,233,666

35,834,762 30,927,172

12.1 Surplus on revaluation of fixed assets

Surplus on revaluation of fixed assets as at January 1 20,271,107 15,227,721

Revaluation of fixed assets during the period / year - 5,146,820

Exchange adjustments 103 (406)

Transferred to unappropriated profit in respect of incremental depreciation

charged during the period / year - net of deferred tax (25,184) (66,968)

Related deferred tax liability on incremental depreciation charged during the

period / year (13,560) (36,060)

(38,641) 5,043,386

20,232,466 20,271,107

Less: Related deferred tax liability on:

Less: Revaluation as at January 1 577,601 5,034,686

Less: Revaluation of fixed assets during the period / year - 36,432

Less: Reversal of deferred tax on revaluation of land - (4,457,315)

Less: Exchange adjustments 36 (142)

Less: Incremental depreciation charged during the period / year (13,560) (36,060)

564,077 577,601

19,668,389 19,693,506

-------------(Rupees in '000)-------------

5




June 30,

2015

December 31,

2014

12.2 Surplus / (deficit) on revaluation of available for sale securities

Market Treasury Bills 166,273 22,796

Pakistan Investment Bonds 15,632,118 10,550,575

Listed shares 7,176,165 5,160,199

Investment in REIT 417 -

Term Finance Certificates, Sukuks, other bonds, etc. (30,280) (74,792)

Foreign bonds 1,926,650 1,623,786

24,871,343 17,282,564

Related deferred tax liability (8,704,970) (6,048,898)

16,166,373 11,233,666

13. CONTINGENCIES AND COMMITMENTS

13.1 Direct credit substitutes

Contingent liabilities in respect of guarantees given favouring:

Government 6,359,494 4,113,804

Banking companies and other financial institutions 3,523,682 2,479,948

Others 4,060,168 3,605,207

13,943,344 10,198,959

13.2 Transaction-related contingent liabilities

Contingent liabilities in respect of performance bonds,

bid bonds, warranties, etc. given favouring:

Government 84,979,031 83,496,420

Banking companies and other financial institutions 4,397,119 4,306,447

Others 24,407,755 40,579,368

113,783,905 128,382,235

13.3 Trade-related contingent liabilities

Contingent liabilities in respect of letters of credit opened favouring:

Government 46,461,028 50,620,631

Others 96,139,391 88,189,565

142,600,419 138,810,196

13.4 Other contingencies

Claims against the Bank not acknowledged as debts 12,087,990 10,927,017

-------------(Rupees in '000)-------------

These mainly represent counter claims filed by the borrowers for restricting the Bank from disposal of assets (such as

mortgaged / pledged assets kept as security).

Based on legal advice and / or internal assessments, management is confident that the matters will be decided in the

Bank's favour and the possibility of any outcome against the Bank is remote and accordingly no provision has been

made in these financial statements.

6

13.5 Commitments to extent credit


June 30,

2015

December 31,

2014

13.6 Commitments in respect of forward foreign exchange contracts

Purchase 202,081,579 176,779,148

Sale 167,833,185 140,729,954

13.7 Commitments in respect of derivatives

Interest rate swaps 10,975,163 4,511,816

Cross currency swaps 506,233 5,934,000

FX Options - purchased - 190,043

FX Options - sold - 190,043

Forward purchase of Government securities - 1,329,394

Forward sale of Government securities - 906,201

13.8 Commitments in respect of capital expenditure 3,025,939 1,874,447

13.9 For contingencies relating to taxation refer note 17.1

--------------- (Un-audited) ---------------

January - June

2015

January - June

2014

14. MARK-UP / RETURN / INTEREST EARNED

On loans and advances to customers 17,846,855 17,201,698

On lendings to financial institutions

Call money lendings 54,577 9,378

Repurchase agreement lendings 212,824 591,676

Other lendings to financial institutions 391,986 207,006

659,387 808,060

On investments in

Held for trading securities 430,055 1,171,857

Available for sale securities 16,818,241 13,909,866

Held to maturity securities 10,610,249 7,134,662

27,858,545 22,216,385

On deposits with financial institutions 52,640 68,515

46,417,427 40,294,658

15. MARK-UP / RETURN / INTEREST EXPENSED

On deposits 15,445,807 16,384,147

On securities sold under repurchase agreements 2,151,503 1,387,258

On other short term borrowings 1,287,418 1,071,402

On long term borrowings 246,082 290,250

19,130,810 19,133,057

The Bank makes commitments to extend credit in the normal course of its business but these being revocable

commitments do not attract any significant penalty or expense if the facility is unilaterally withdrawn.

-------------(Rupees in '000)-------------

-------------(Rupees in '000)-------------

7



January - June

2015

January - June

2014

16. ADMINISTRATIVE EXPENSES

Salaries, allowances etc. 5,251,261 4,884,051

Charge for compensated absences 130,427 231,783

Medical expenses 260,696 255,704

Contribution to defined contribution plan 103,738 95,758

Charge in respect of defined benefit obligations 182,371 175,368

Rent, taxes, insurance, electricity etc. 1,947,900 1,856,786

Depreciation 862,748 800,636

Amortization 194,971 211,515

Outsourced service charges including sales commission 2,129,618 1,785,423

Communications 590,779 548,243

Banking service charges 496,158 466,997

Cash transportation charges 280,808 251,765

Stationery and printing 303,859 280,009

Legal and professional charges 144,294 79,442

Advertisement and publicity 243,377 385,064

Repairs and maintenance 773,006 618,684

Travelling 136,914 121,239

Office running expenses 294,780 263,876

Vehicle expenses 89,557 103,509

Entertainment 103,145 92,506

Cartage, freight and conveyance 45,804 42,029

Insurance expense 20,681 40,907

Auditors' remuneration 40,129 43,263

Training and seminars 45,134 43,579

Brokerage expenses 15,561 22,668

Subscriptions 36,508 32,027

Donations 71,773 24,130

Non-executive Directors' fees 27,907 16,617

Zakat paid by overseas branch 42,860 49,348

Miscellaneous expenses 68,620 82,416

14,935,384 13,905,342

17. TAXATION

17.1

-------------(Rupees in '000)-------------

The Income Tax returns of the Bank have been filed up to the tax year 2014 (accounting year ended

December 31, 2013) and were deemed to be assessed under section 120 of the Income Tax Ordinance,

2001 (Ordinance) unless amended by the Commissioner of Inland Revenue.

The income tax authorities have issued amended assessment orders for the tax years 2003 to 2014, and

created additional tax demands of Rs.11,559 million (including disallowances of provisions made prior to

Seventh Schedule), which have been fully paid as required under the law. The Bank has filed appeals

before the various appellate forums against these amendments. Where the appellate authorities have

allowed relief on certain issues, the assessing authorities have filed appeals before higher appellate

forums. Where the appellate authorities have not allowed relief the Bank has filed appeals before higher

appellate forums. The management of the Bank is confident that the appeals will be decided in favor of

the Bank.

8



17.2

18. SEGMENT DETAILS WITH RESPECT TO BUSINESS ACTIVITIES

Total income 348,652 12,765,476 18,363,402 6,485,754 1,712,345 -

Total expenses (51,298) (647,900) (12,121,984) (2,707,283) (2,012,776) -

Profit before tax 297,354 12,117,576 6,241,418 3,778,471 (300,431) -

Segment return on assets (ROA) 246.4% 2.3% 1.0% 1.1% - -

Segment cost of funds 0.0% 6.0% 3.4% 5.4% - -

Total income 193,433 7,831,235 17,012,649 4,654,916 1,509,822 -

Total expenses (45,076) (429,948) (10,733,522) (3,293,340) (852,157) -

Profit before tax 148,357 7,401,287 6,279,127 1,361,576 657,665 -

Segment return on assets (ROA) 121.0% 1.8% 1.2% 0.4% - -

Segment cost of funds 4.1% 6.5% 4.1% 6.2% - -

Segment assets (gross of NPL provisions) 842,657 720,474,675 937,688,184 429,529,656 108,628,034 (861,276,599)

Segment non performing loans (NPLs) 656,485 1,972,240 19,475,118 30,999,296 226,723 -

Segment provision held against NPLs 493,714 1,835,299 16,875,386 24,021,187 69,503 -

Segment liabilities 155,652 694,166,934 917,052,263 403,047,945 4,341,114 (861,276,599)

Segment assets (gross of NPL provisions) 775,136 553,839,601 843,640,420 434,496,803 97,622,294 (775,245,959)

Segment non performing loans (NPLs) 648,147 1,988,086 21,059,066 29,930,610 226,854 -

Segment provision held against NPLs 487,423 1,643,702 18,169,702 23,337,495 75,866 -

Segment liabilities 152,477 530,733,012 817,313,036 407,975,315 4,969,774 (775,245,959)

Segment assets and liabilities include inter segment balances.

Transactions between reportable segments are based on an appropriate transfer pricing mechanism using agreed rates.

Trading and

sales

Under the Seventh Schedule to the Ordinance, banks are allowed to claim provisions against advances up to 5% of total advances for consumer and

small and medium enterprises and up to 1% of total advances for remaining advances. Amounts above these limits are allowed to be claimed in future

years. The Bank has booked a deferred tax asset of Rs.1,350 million (December 31, 2014: Rs.1,350 million) in respect of provisions in excess of the

above mentioned limits.

The tax returns for Azad Kashmir (AK) Branches have been filed upto the tax year 2014 (financial year 2013) under the provisions of section 120(1) read

with section 114 of the Ordinance and in compliance with the terms of the agreement between banks and the Azad Kashmir Council in May 2005. The

returns filed are considered as deemed assessment orders under the law.

The tax authorities have also carried out monitoring for Federal Exercise Duty, Sales tax and withholding taxes covering period from year ended 2007 to

2014. Consequently various addbacks and demands were raised creating a total demand of Rs. 1,245 million. The Bank has filed appeals against all

such demands and is confident that these would be decided in the favor of the Bank.

The tax returns for UAE, Yemen and Qatar branches have been filed upto the year ended December 31, 2014 and for USA branch upto the year ended

December 31, 2013 under the provisions of the laws prevailing in the respective countries, and are deemed as assessed unless opened for

reassessment.

For the six months ended June 30, 2015 (Un-audited)

Others

The Finance Act 2015 has introduced certain amendments relating to taxation of banking companies . As per these amendments ,bank's income from

dividend and capital gains are now taxed at the normal tax rates instead of previously applicable reduced rates . In addition , one-time super tax at the

rate of 4 percent of the taxable income has also been levied . These amendments apply retrospectively for the tax year 2015, i.e year ended December

31, 2014. The effects of above amendments have been incorporated in this condensed interim financial statements and an amount of Rs. 1,626 million

(June 30, 2014 : Nil) has been recognised as prior year tax charge.

------------------------------------------------------------- (Rupees in '000) -----------------------------------------------------------------

------------------------------------------------------------- (Rupees in '000) -----------------------------------------------------------------

------------------------------------------------------------- (Rupees in '000) -----------------------------------------------------------------

Inter segment

elimination

Commercial

banking

Retail banking Others

As at June 30, 2015 ( Un-audited)

Corporate

finance

Corporate

finance

For the six months ended June 30, 2014 (Un-audited)

Inter segment

elimination

Commercial

banking

Trading and

sales Others

Corporate

finance Retail banking

Corporate

finance

Commercial

banking

------------------------------------------------------------- (Rupees in '000) -----------------------------------------------------------------

Retail banking

Trading and

sales

OthersTrading and

sales

Commercial

banking

Retail banking

As at December 31, 2014 (Audited)

Inter segment

elimination

Inter segment

elimination

9



19. RELATED PARTY TRANSACTIONS

The Bank has related party transactions with its associates, subsidiary companies, employee benefit plans and its directors and executive officers (including their associates).

Details of transactions with related parties during the period, other than those which have been disclosed elsewhere in these unconsolidated condensed interim financial statements, are as follows:

Directors

Key manage-

ment

personnel

Subsidiaries AssociatesOther related

partiesDirectors

Key manage-

ment

personnel


parties

Balances with banks

In current accounts - - 1,146,823 - - - - 990,076 - -

In deposit accounts - - 1,454,228 - - - - 1,284,622 - -

- - 2,601,051 - - - - 2,274,698 - -

Lendings to financial institutions

Repurchase agreement lendings - - - - 879,610 - - - - -

Other lendings to financial institution - - 940,853 519,234 - - - 314,065 500,000 -

Investments

Opening balance - - 4,897,174 7,769,602 3,895,328 - - 3,523,962 6,674,980 4,075,691

Investment made during the period / year - - - 850,000 - - - 1,373,212 3,305,579 -

Investment redeemed / disposed off during the period / year - - - (939,878) - - - - (2,210,957) (180,363)

Transfer in / (out) - net - - - - - - - - - -

Closing balance - - 4,897,174 7,679,724 3,895,328 - - 4,897,174 7,769,602 3,895,328

Provision for diminution in value of investments - - - - 118,356 - - - - 118,356

Advances

Opening balance 368 106,148 - 2,155,149 9,394,005 - 105,328 - 2,155,149 412,954

Addition during the period / year 1,923 35,391 - - 4,496,932 3,668 82,263 - - 14,328,295

Repaid during the period / year (1,065) (28,928) - - (7,282,379) (3,300) (90,422) - - (5,347,244)

Transfer in / (out) - net - (28,702) - - - - 8,979 - - -

Closing balance 1,226 83,909 - 2,155,149 6,608,558 368 106,148 - 2,155,149 9,394,005

Provision held against advances - - - 2,155,149 - - - - 2,155,149 -

Other Assets

Interest mark-up accrued - 69 11,632 11,947 115,567 - 155 7,816 14,893 282,516

Receivable from staff retirement funds - - - - 84,779 - - - - 88,862

Prepaid insurance - - - 125,340 - - - - - -

Dividend Receivable - - 165,570 - - - - - - -

Other receivable - - 4,796 - 30,164 - - 7,458 - 30,164

Provision against other assets - - - - 30,164 - - - - 30,164

Borrowings

Opening balance - - 1,230,900 - - - - 1,008,108 - -

Borrowings during the period / year - - 2,671,674 - - - - 2,945,057 - -

Settled during the period / year - - (2,435,263) - - - - (2,722,265) - -

Closing balance - - 1,467,311 - - - - 1,230,900 - -

Deposits and other accounts

Opening balance 7,920,019 126,853 272,133 2,498,946 204,907 7,506,473 124,455 277,343 665,956 81,859

Received during the period / year 10,479,606 469,687 16,573,619 69,149,157 69,203,024 26,067,173 1,431,994 126,102,516 112,527,304 127,557,270

Withdrawn during the period / year (10,554,737) (473,409) (16,551,624) (65,477,241) (69,233,675) (26,710,567) (1,409,059) (126,107,726) (110,694,314) (127,526,534)

Transfer in / (out) - net - (76,891) - - - 1,056,940 (20,537) - - 92,312

Closing balance 7,844,888 46,240 294,128 6,170,862 174,256 7,920,019 126,853 272,133 2,498,946 204,907

Other Liabilities

Interest / return / mark-up payable on deposits 45,716 10 97 5,621 104 47,181 1,206 21 9,793 266

Interest / return / mark-up payable on borrowings - - 4,417 - - - - 2,408 - -

Payable to staff retirement fund - - - - 4,972 - - - - 78,172

Unearned income - - 746 - - - - 187 - -

Contingencies and Commitments

Letter of guarantee - - - 42,137 - - - - 41,600 -

Forward foreign exchange contracts purchase - - 14,760,970 - 55,424 - - 2,914,010 - 149,615

Forward foreign exchange contracts sale - - 15,111,642 - 376,069 - - 2,837,357 - 31,313

Cross Currency Swaps - - - 506,233 - - - - - -

Directors

Key manage-

ment

personnel


partiesDirectors

Key manage-

ment

personnel


parties

Mark-up / return / interest earned - 1,860 22,134 23,963 406,816 - 2,359 9,175 - 206,214

Commission / charges recovered 34 85 286 2,370 137 8 11 315 806 42

Dividend income - - 292,891 448,340 373,217 - - 129,691 44,156 258,247

Net gain on sale of securities - - - 164,726 - - - - 75,259 50,424

Other income - 5,488 560 3,874 - - 455 560 175 -

Mark-up / return / interest paid 106,626 917 19,931 92,659 9,033 89,967 1,403 14,036 25,959 6,113

Remuneration paid - 324,118 - - - - 503,360 - - -

Post employment benefits - 9,251 - - - - 8,891 - - -

Non-executive directors' fee 27,907 - - - - 16,617 - - - -

Net charge for defined contribution plans - - - - 103,738 - - - - 95,758

Net charge for defined benefit plans - - - - 60,005 - - - - 53,622

Other expenses - - - 13,751 61,921 - - - 27,696 52,121

Insurance premium paid - - - 241,164 - - - - 269,177 -

Insurance claims settled - - - 81,930 - - - - 57,031 -

---------------------------------------------------------------------------------(Rupees in '000)---------------------------------------------------------------------------------

The Bank enters into transactions with related parties in the normal course of business. Contributions to and accruals in respect of staff retirement benefits and other benefit plans are made in accordance with the actuarial valuations /

terms of the contribution plan. Remuneration to the executives / officers is determined in accordance with the terms of their appointment.

As at June 30, 2015 (Un-audited) As at December 31, 2014 (Audited)

---------------------------------------------------------------------------------(Rupees in '000)---------------------------------------------------------------------------------

For the Six months ended June 30, 2015 (Un-audited) For the Six months ended June 30, 2014 (Un-audited)

10



20. ISLAMIC BANKING BUSINESS

20.1 The statement of financial position of the Bank's Islamic Banking branches is as follows:


ASSETS

Cash and balances with treasury banks 1,297,859 1,105,791

Balances with other banks 2,634,821 388,594

Due from financial institutions 1,500,000 -

Investments 10,987,571 8,078,202

Islamic financing and related assets 20.3 6,229,884 6,656,812

Operating fixed assets 100,367 99,954

Due from Head Office 2,748,526 2,503,182

Other assets 163,350 154,874

Total Assets 25,662,378 18,987,409

LIABILITIES

Bills payable 249,192 112,626

Deposits and other accounts

Current accounts - non remunerative 2,361,883 2,345,427

Current accounts - remunerative 1,667,590 1,001,301

Saving accounts 1,989,156 1,330,333

Term deposits 1,220,645 1,061,485

Deposits from financial institutions - remunerative 17,192,150 12,120,720

Deposits from financial institutions - non remunerative 20,009 32

24,451,433 17,859,298

Due to Head Office - -

Other liabilities 126,914 179,808

24,827,539 18,151,732

NET ASSETS 834,839 835,677

REPRESENTED BY

Islamic Banking Fund 1,181,000 1,181,000

Accumulated losses (328,726) (276,733)

852,274 904,267

Deficit on revaluation of assets (17,435) (68,590)

834,839 835,677

------------ (Rupees in '000) ------------

June 30,

2015

December 31,

2014

11



20.2

Return earned 842,833 541,361

Return expensed (620,995) (448,365)

221,838 92,996

Provision against loans and advances - net - (4,663)

Reversal for diminution in value of investments - net - 719

Reversal / (provision) against assets given on Ijarah 1,161 (10,120)

1,161 (14,064)

Net return after provisions 222,999 78,932

Other Income

Fee, commission and brokerage income 11,141 16,855

Dividend income - 9,062

Income / (loss) from dealing in foreign currencies 182 (6,730)

Loss on sale of securities - net 5,204 -

Other income 1,597 29,783

Total other income 18,124 48,970

241,123 127,902

Other Expenses

Administrative expenses (293,116) (260,629)

Other reversals - net - 373

Total other expenses (293,116) (260,256)

Net loss for the period (51,993) (132,354)

Accumulated losses brought forward (276,733) (156,679)

Accumulated losses carried forward (328,726) (289,033)

Remuneration to Shariah Advisor 848 616


20.3 Islamic financing and related assets

Financings

Murabaha 357,960 230,260

Ijarah 741,533 706,341

Diminishing Musharaka 5,068,415 4,801,540

Provision against financings (36,052) (36,052)

6,131,856 5,702,089

Advances

Advances and receivables against Ijarah 74,341 124,731

Advances for Diminishing Musharaka - 4,500

Advances for Murabaha 33,998 834,246

Provision against advances for Murabaha (17,498) (17,498)

90,841 945,979

Profit receivable against financing 7,187 8,744

6,229,884 6,656,812

-------(Un-audited)------January - June

2015

------------ (Rupees in '000) ------------

January-June

2014

June 30,

2015

December 31,

2014

------------ (Rupees in '000) ------------

The profit and loss account of the Bank's Islamic Banking branches for the six months ended June 30 is as follows:

12



21 NON-ADJUSTING EVENT AFTER THE BALANCE SHEET DATE

22. DATE OF AUTHORIZATION




The Board of Directors in its meeting held on July 23, 2015 has declared a cash dividend in respect of the six months

ended June 30, 2015 of Rs. 3.0 per share (June 30, 2014: Rs. 2.5 per share). The unconsolidated condensed interim

financial statements for the six months ended June 30, 2015 do not include the effect of these appropriations which will

be accounted for subsequent to the period end.

These unconsolidated condensed interim financial statements were authorised for issue on July 23, 2015 by the Board of

Directors of the Bank.

13

UBLStandaloneFinancialStatementsJune302015.pdf

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