In Focus: United Bank Limited (19052008)

Target price: Rs180
On the basis of PE valuations, our estimated target price of UBL is Rs180 that has been anticipated in the light of next year per-share earnings of Rs12.98. UBL currently trading at appropriate PE levels of 10.6x and counts an attractive potential of 32 percent. In the line of UBL GDR’s prospects that will insert more liquidity in Bank and increase capital adequacy, we hold “Positive” stance towards this scrip in medium to long run.
In the light of strong market presence in both rural and urban areas, according to 1Q08 results, UBL currently holds a strong deposits base of Rs407.5billion which is expected to grow by 13 percent in the end of FY08. With strong deposit base, bank has also financed heavily in well diversified portfolio, larger branch network and low cost of financing has made the advances figure high, currently the bank’s total advances stood at Rs319.6 billion which are expected to grow by 12 percent at the end of CY08.
UBL is currently maintaining the ADR of 78 percent which is expected to contract in coming quarters; however the bank is currently maintaining the spread of 5.7 percent which is in higher range relative to sector mates.
Investments of the bank has also shown increasing trend in FY07, the interest bearing part of investments has significantly increased amid the growth of 67 percent YoY; however the total investment grew by 72 percent in same period. This growth momentum is expected to continue and will further assist the earnings of the bank.
Restructuring and reforming have resulted in overall improvement of development activities, consequently increasing bottom line growth. Reduction of excess and non-profitable branches and retrenchment of staff has improved the efficiency of bank. Further increased provisioning, write offs and implementation credit risk measures has increased the quality of lending portfolio.
International presence has given additional strength to the bank. UBL has international branches mostly in the Middle East and they also planned to further increase the network.