KARACHI, July 30: The Board of Directors of United Bank Limited (UBL) announced an interim cash dividend of 10% i.e. Re.1/= per share for the year 2010, at a meeting held today in London, on the basis of the bank’s performance in the first half year of 2010.

UBL earned profit before tax (PBT) of Rs.8.6 billion at the close of first half-year, which is 27% higher than the PBT for a similar period last year. This strong performance has been achieved despite continuing economic uncertainty and a challenging external environment as a result of the bank’s sustained emphasis on improving operating efficiency, while continuing to grow its balance sheet. Provisions too declined substantially because of a prudent approach adopted towards risk taking, as well as strong focus on recoveries.

Profit after tax at Rs.5.2 billion, 21% higher than in the corresponding period last year, translates into Earnings per Share (EPS) of Rs.4.25 (HY 2009: Rs.3.50).

Net interest income before provisions grew 5% to Rs.16.5 billion. Our low cost deposits efforts resulted in a 140 bps decline in the cost of funds. However, yield on earning assets declined by 80 bps as average 6M KIBOR was 130 bps lower than during the first six months of last year. As a result, net interest margin increased from 6.6% to 7.1%.

Credit provisions were lower at Rs.3.9 billion, for the first half-year of 2010 compared to Rs.6.3 billion last year, whereas coverage improved to 76% and net credit loss ratio dropped to 2.1% from 3.1%. Net interest income after provisions stands at Rs.12.5 billion.

Non-interest income decreased to Rs.4.7 billion as against Rs.6.2 billion for the first six months of 2009, mainly due to exceptional derivatives gains recorded last year. Fees and commissions increased by 8% to Rs.3.1 billion due to an overall growth in trade commissions, income generated on remittances and higher corporate service charges. The launch of ‘Bancassurance’ in 2009 contributed nearly 20% to the overall increase in fees and commissions.

Administrative expenses increased by only 4% over the corresponding period last year despite inflationary pressures (CPI - June YOY: 13%) because of higher cost efficiencies. Increase in the above expenses was mainly due to higher premises and utilities costs, higher advertising spend and Rupee devaluation impact on international operations cost.

Total assets grew by 4% over December 2009 to Rs.645 billion. Advances dropped slightly (3%) mainly on account of rationalization across portfolios and more prudent lending. A planned reduction of Rs.21 billion was achieved in higher cost deposits, which was more than offset by a 10% growth in low cost deposits. Total deposits thus grew by Rs.8 billion during the year to reach Rs.500 billion. CASA improved to 68% as of June 30, 2010 while the domestic low cost deposit mix improved from 66% in December 2009 to 72% at the close of HY 2010. Return on average assets (ROAA) improved from 1.5% at the close of 2009 to 1.6%.

The second quarter of 2010 saw a flurry of new product activities. Business Partner Plus a specialized current checking account was launched in this period. It is aimed at individuals, traders, businessmen and commercial customers and offers a single platform for transacting a comprehensive range of banking services nationwide.

UBL First Minor PLS Savings Account, though not entirely new as a concept, has been positioned differently in comparison with competition. Whilst it is positioned as a product that is meant to enable parents to save in a planned manner to meet the future financial needs of their children, the savings habit comes across as a fun activity for minor account holders as well.

Another significant development was the launch of UBL Omni branchless banking. Omni offers basic banking services through “UBL Omni Dukaans (retail outlets) that include account opening, cash withdrawals and deposits, remittances, bill payments and purchase of mobile airtime. So far more than 1,300 UBL Omni Dukaans have been signed up across more than 150 cities and towns in Pakistan.

Implementation of UBL’s new core banking system is on track, with the first branch to go live by Q3 2010. The ‘2010 Model Bank Award’ received by UBL from industry analyst firm Celent recently, recognizes the banks leadership in implementing banking technology initiatives in Pakistan and the region.

The bank also maintained its leadership in Home Remittances, with volumes growing at 40% compared to the first half of 2009. Innovative remittance products launched during Q2 2010 include TezRaftaar Cash, “Cash-Over-the-Counter” product, to complement the existing product based on cheques and account-to-account transfer. Plans to further increase market share are in the pipeline as negotiations for foreign counter-party tie-ups are being conducted with support from PRI (Pakistan Remittance Initiative).

Performance in international operations continues to be affected by the softness in GCC economies, but with firming up of commodity prices and proactive Government support, its impact has been reduced. Corporate portfolio has performed significantly better than peers in the region. Also, our focused effort on maintaining liquidity has resulted in satisfactory ADRs while reducing the concentration of deposits and significantly lowering the cost of deposits.

Looking ahead, the bank’s focus will remain on strengthening its balance sheet through the acquisition of low cost deposits and improvement in asset quality. We will also continue to leverage our strong technology base to implement cost effective innovative banking solutions for our customers.