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Mega write offs, provisions of Rs 12.92b UBL profit after tax drops by 39.52pc

Top officers skim bank, provisions weaken share value due to poor enforcement: Experts  

By M Jahangir Hayat

LAHORE: United Bank Limited (UBL) profit after tax has dropped significantly by 39.52 percent to Rs15.22billion in calendar Year 2018 from Rs 25.17 billion in 2017, as mega provision for Non-Performing Loans (NPLs) and writes off eat up major part of the profit, indicating week enforcement structure, the UBL annual report 2018 indicated.

The earnings per share of the bank have also reduced to Rs 12. 44 in 2018 from Rs 20.57 in 2018 depriving the shareholders of their major part of the profit share as the profit.

 As per the annual statement the bank earned a hefty before provisions and write offs Rs 44.53 billion against the profit of Rs 42.36 billion for bad debts which showed that the bank as usual made progress.

 However, the extraordinary high provisions of Rs 12.92 billion have reduced the profit for the shareholders weakening the value of it share.

The increment in salaries of the president and CEO and directors, like the last year 2017, also seems unwarranted for on the administrative expenses as last year about 50 percent increments were approved for the top officials.

Banking sector experts commented that the bank had never charged such the huge provisions before and they smelt the rat with affairs of the bank.

 They were of the view that the devil is always in the detail and the thing will be cleared when the bank will issued all its annual accounts.

 They said that it seemed that the bank has a poor enforcement and recovery system and worst is that the bank has no intelligence for lending and investing into the viable projects.

“Now the shareholders would have to pay for the blunders of the bank management,” they said adding that the bank must have to take measures in order to improve enforcement and recovery and reduce the Non Performing Loans.

They said that the top officials are skimming the bank by receiving unusual increments in their remuneration while the lower staff is being ‘exploited’ as they are given so-called increment and promotion.

On the other hand, UBL Head of Corporate Affairs & Marketing Abbas Kazmi emailed that the bank have posted a ‘standalone’ Profit Before Tax (PBT) of Rs. 25 billion for Full Year 2018. Excluding a one-off extraordinary pension charge for prior years, PBT reached Rs. 31.6 billion, one of the highest in the industry.

The Bank maintained its strong payout, declaring dividends of Rs. 13.5 billion (Rs. 11 per share) in total to shareholders during the year. The Bank remains well capitalized as the Capital Adequacy Ratio (CAR) improved from 15.4% in Dec’17 to 17.7% in Dec’18.
The bank administration said building on the strong momentum of its domestic branch banking franchise; UBL added 586,000 new current accounts during the year. Current deposits closed at Rs. 508 billion at Dec’18 with 15% growth over last year. Resultantly, current to total deposits ratio improved from 43% in 2017 to 46% in 2018. Domestic deposits reached Rs. 1.1 trillion at Dec’18, a 9% growth over last year.
The Corporate Banking segment remained a very active participant in public and private sector expansion projects. As a result, gross advances for the Bank have grown by 16% this year. The asset buildup also remained strong within Consumer lending, led by autos where the portfolio increased by 48%.

The administration highlighted that the bank remained committed to providing easy access to financing for SMEs. In line with this commitment, average SME lending grew by 25%.The agri-portfolio also grew by 59%, on an average basis, over the previous year.
In order to enhance the capital base and support the growth trajectory of the Bank, UBL has also successfully completed the process of issuing Additional Tier 1 (ADT-1) Term Finance Certificates (TFCs) amounting to Rs. 10 billion, the ban administration stated.

However, UBL president Sima Kamil was repeatedly contacted but she was not available for her comments.

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