KARACHI
JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of United Bank Limited (UBL) at ‘AAA/A-1+’ (Triple A/A-One Plus). Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on June 29, 2016.
The ratings assigned to UBL, the second largest private-sector bank in the country, incorporate the sustained soundness in key performance areas including asset quality, capitalisation and profitability.
Strong domestic operations and franchise are supported by a sizeable presence in the overseas market. Diversification in revenue streams stems from the sizeable contribution of trade commissions, remittance, ADCs and branchless banking in overall revenues. In line with the bank’s continuous focus on innovation, UBL inaugurated its first digital branch and branch of the future in the ongoing year. Moreover, a digital strategy is also in the process of being implemented.
UBL continues to pursue a conservative asset deployment strategy with aggregate exposure to the sovereign representing around two-third of advances & investments. Diversification in lending operations is planned through growth in consumer and SME segment. Overall Asset quality indicators continued their improving trend on the back of recoveries from the domestic non-performing portfolio. However, the international portfolio faces challenges emerging from the operating environment in key markets.
Capitalisation indicators of the bank have witnessed noticeable improvement over the last two years on the back of higher internal capital generation and managed growth in risk-weighted assets.
Despite pressure on spreads, profitability growth of the bank compared favorably with peers. Profit before tax increased by 9 per cent during 2016 on account of higher capital gains and lower provisions.
