Press Release

VIS Reaffirms Instrument & Entity Ratings of United Bank Limited

Karachi, June 30, 2021: 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). Rating of UBL’s Basel III compliant additional Tier-1 (ADT-1) TFC has also been reaffirmed at ‘AA+’ (Double A Plus). Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on June 29, 2020.

Ratings draw comfort from the dominant market position of UBL – the second largest private sector Bank in Pakistan with a strong and well diversified domestic franchise. The bank has a limited presence in the overseas market and as part of its global re-alignment strategy continues to exit non-core markets. Most recently, the bank also decided to wind up its Switzerland subsidiary after completing the asset sale in Tanzania last year. During 2020, the bank continued its de-risking strategy whereby the asset base within the overseas portfolio recorded a further sizable reduction given the continued economic stress in GCC countries.

Deposit growth of the bank during 2020 was channeled towards the investment portfolio which primarily remains concentrated in liquid sovereign securities. Deposit mix has also improved well in line with peers as a result of strong buildup of current accounts. Overall, liquidity profile of the bank remains sound. Asset quality, however, remained under pressure with Non-Performing loan (NPLs) accretion largely in the overseas portfolio. Consequently, provisioning charge increased with buildup of coverage levels, impacting overall profitability. Reduction in non- markup income was evident as a result of COVID related slowdown.

Due to the asset portfolio de-risking, risk weighted assets of the bank reduced, leading to significant improvement in capitalization indicators. Notable improvement was noted in Capital Adequacy Ratio (CAR), being one of the highest among the peers.

Going forward, in order to further strengthen its market position, the Bank’s focus will remain on low cost deposit mobilization supported by investments in its digital capabilities. Credit risk however remains elevated with potential for further impairment in the overseas portfolio.

The assigned ratings continue to be underpinned by UBL’s strong market positioning and are supported by the Bank’s sound liquidity metrics and robust capital reserves. The assigned ratings remain dependent on maintenance of liquidity, capitalization, and asset quality indicators, within designated threshold.

For further information on this rating announcement, please contact the undersigned (Ext: 201) at 021-35311861-70 or fax to 021-35311872-3.





Javed Callea
Advisor

Applicable Rating Criteria: Commercial Banks Methodology – June 2020
https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/Meth-CommercialBanks202006.pdf

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2021 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .