Press Release

VIS Reaffirms Instrument & Entity Ratings of United Bank Limited

Karachi, June 27, 2023: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of United Bank Limited (‘UBL’ or ‘the Bank’) at ‘AAA/A-1+’ (Triple A/A-One Plus). The medium to long-term rating of ‘AAA’ denotes highest credit quality, with negligible risk factors, being only slightly more than for risk-free debt of the Government of Pakistan (GoP). The short-term rating of ‘A-1+’ denotes highest certainty of timely payment, liquidity factors are outstanding and safety is just below risk-free short-term obligations of GoP. The rating of UBL’s Basel III compliant additional Tier-1 (ADT-1) TFC has also been reaffirmed at ‘AA+’ (Double A Plus). The medium to long-term rating of ‘AA+’ denotes high credit quality, with strong protection factors. Moreover, risk factors are modest but may vary slightly with possible changes in the economy. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on June 30, 2022.

The ratings take into account the systemic importance and franchise value of UBL in the domestic financial sector. Market share of the bank in domestic deposits is sizeable at 7.5% at end-1Q23; though some decrease has been witnessed in the same in recent years. The bank also has limited international presence through its branches, subsidiary and representative offices.

Asset base recorded relatively muted growth in 2022. However, domestic advances increased considerably mainly due to higher disbursements towards financial sector. Despite increase in classified portfolio due to currency devaluation on international non-performing exposure, overall asset quality indicators remained range bound during the review period. Improvement in asset quality indicators is considered important from the ratings perspective. Investments continues to form a major part of the asset mix. Investments mainly comprises federal government securities – local and foreign. Given deterioration in sovereign ratings and high interest rate environment, investment portfolio is exposed to heightened credit and market risks.

Healthy fund based income with improvement in spreads have been witnessed. Considerable support continues to emanate from non-markup income. Further improvement in efficiency ratio was witnessed that is in line with the rating benchmark. However, significant provision charge primarily on investments and higher incidence of taxation, restricted the bottom line. Meanwhile, liquidity profile is considered strong and comfortably aligned with peers. Deposit concentration has been improving on a timeline basis.

Given increase in Risk Weighted Assets, CAR decreased in the review period; however the same is comfortably above the rating benchmark and regulatory requirement. The capitalization buffers have provided adequate cushion to absorb credit impairment charges. Going forward, in an event of any further increase in interest rates, the bank may experience impairment which may adversely impact capitalization buffers. Given the economic challenges maintaining capitalization buffers and asset quality would continue to be important from the rating perspective, going forward.

For further information on this rating announcement, please contact the undersigned (Ext: 201) at (021) 35311861-64 or email at

Javed Callea

VIS Financial Institutions Rating (June 2023)
VIS Rating Scales and Definitions

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