October 28, 2010 United Bank Limited (UBL) earned profit before tax (PBT) of Rs.12.9 billion at the close of the third quarter 2010, which is 30% higher than for the corresponding period last year. This was despite a difficult economic environment and higher inflationary pressures in the domestic market. Profit after tax (PAT) at Rs.8.1 billion is also 27% higher. This strong performance has been achieved through significant improvements in operating efficiency and margins. The quantum of provisions required has also declined during this period.

Net interest income before provisions improved to Rs.25.1 billion. Growth in low cost deposits resulted in a 110 bps reduction in the cost of deposits. However, yield on earning assets declined by 60 bps as average 6M KIBOR was 73 bps lower than in the same period last year. Meanwhile, net credit loss ratio improved to 2.4% in September 2010 from 3.2% in September 2009. Net interest income after provisions closed at Rs.18.8 billion which is 30% higher than in a similar period last year.

Non-interest income earned was slightly lower at Rs.7.3 billion compared to Rs.8.3 billion last year. However fees and commissions increased by 9% to Rs.4.7 billion because of overall growth in trade commissions, income on remittances and higher corporate service charges.

Overall administrative expenses grew by only 4.7% over the corresponding period last year despite higher inflation (CPI – Sept YOY: 15.7%). The Bank achieved considerable higher cost efficiencies that helped partly offset the increase in premises and utilities costs and paid for higher investments in IT

Gross advances were lower by 3.8% mainly on account of portfolio rationalization and more prudent lending. Total deposits were maintained at 2009 levels but at reduced cost because of a higher proportion of low-cost deposits in the mix. Return on average assets (ROAA) improved from 1.5% last September to 1.7%.

Capital adequacy ratio (CAR) improved to 14.4% in September 2010 versus 12.8% at the end of September 2009. Tier-1 CAR also improved to 10% from 8.8% last year.

UBL international business continued to perform well during Q3, 2010, with retail asset provisions having leveled off this year. Top priority is being given to liquidity management, resulting in ADR at a healthy 80% in most markets, compared with 100% for the overall banking sector in UAE. The Oman-United Exchange Company, a UBL joint-venture company, became the first exchange house in Oman to receive ISO-9001 certification. Another noteworthy achievement was the successful closing of a large syndication for a 75MW power plant in Yemen. The scope of the bank’s FI business has also grown in scale and scope that will improve profitability and reduce risk. The International Division is fully geared to undertake selected asset acquisitions as the Gulf economies improve, in the months ahead.

From a corporate social responsibility perspective, the bank has been very active this year, particularly in raising funds for flood victims in Pakistan. A substantial amount was raised through individual donations from the general public, with the help of a focused media campaign, based on a promise from the bank to match the amount deposited in the Fund account. UBL employees also contributed a portion of their salary for September. The bank matched the amount thus collected and put in additional funds as well, to be used for purchasing and distributing portable water purifiers produced by a Swiss company specializing in ‘complex emergency response and disease control products’. UBL field staff is actively involved in the distribution of the water purifiers in the worst affected areas.

UBL has pioneered in developing a Government to People (G2P) aid distribution channel through its groundbreaking work on the IDP aid distribution projects. The Government therefore assigned the bank a major project for producing, personalizing and distributing ‘Watan Cards’ among 2 million flood affected families for dispensing a sum of Rs.40 billion, an emergency aid, within very tight timelines. By end-September, the bank has distributed 500,000 cards and Rs.10 billion has been dispensed through the bank’s ATM network and remote POS terminals.

Going forward, the Bank will continue to focus on strengthening its balance sheet through the acquisition of low cost deposits and improvement in asset quality, as well as grow its international business in a secure and selective manner.