The bank, engaged in commercial banking activities, operates under the supervision of the SBP, through its 55 branches (2004: 53 branches) in Pakistan and two branches (2004:1 branch) outside Pakistan. It has carved itself a prominent position in the financial market. Its top management comprises of seasoned professionals and its vision is to provide clients with complete banking solutions.
The present review of the nine months financial statements is that of Union Bank alone without consolidation with its 66% owned subsidiary, Union Leasing Limited. Pacra rating Union Bank is long term at AA- (Double AA Minus) and short term rating at A1+ (A One Plus).
Total assets of Union Bank increased by 29% to Rs 100.5 billion on September 30, 2005 compared to Rs 78 billion on December 31, 2004. Investments more than doubled to Rs 14.5 billion (14% of Total Assets) from Rs 6.7 billion (9% of TA) on December 31, 2004. Bulk of the investments is in Federal Government securities. The composition of the securities has changed considerably during the period under review. As on September 30, 2005, 78% securities are in available for sale category (2004: 30%) and held to maturity securities at 21% (2004: 67%). Advances increased by 25% to Rs 63 billion (63% of TA) compared to previous Rs 51 billion (66% of TA). Bulk of the Advances is in loans and advances in Pakistan.
The increases in assets were made possible partly through adjustments in cash balances and partly due to increase in total liabilities (to Rs 96 billion from previous Rs 74 billion) particularly the deposits which rose to Rs 76.5 billion (76% of TA) as on September 30, 2005 compared to Rs 63 billion (81% of TA) as on December 31, 2004. In the meantime, equity also increased to Rs 4.6 billion (5% of TA) from previous Rs 3.3 billion (4% of TA). Including subordinated loans, equity is only 6% of total assets as on September 30, 2005.The stakeholders might consider taking measures to raise level of equity.
Union Bank has more than doubled its profit after tax for the nine months ended September, 2005 to Rs 1,250 million as compared to Rs 597 million for the corresponding nine months of last year.
This has been made possible by increases in net mark up income as well as non-mark up income comprising fees, commissions, etc. ROE at 27% for the nine months period is highly attractive compared to 18 % for the corresponding period last year. The management claims that over 95% of the bank income is derived from the core banking operations.
Union Bank had NPLs at Rs 4,128 million (6% of Advances) on September 30, 2005 compared to Rs 3,559 million (7% of Advances) on previous balance sheet date of December 31, 2004. The level of NPLs is high when compared to total equity of the bank.
The provisions against doubtful loans work out to 2 % of Advances for 2005 (2004: 2 %). The provision made by the bank, however, is said to be fully in line with the prescribed requirement under Prudential Regulations. As some doubtful loans have the tendency to stay under cover for sometime due to different reasons, a prudent policy would be that the management makes higher general provision against doubtful loans coupled with periodic critical review of risk management procedures instituted in the bank to keep NPLs within acceptable level. Performance statistics of the bank are given below.
Union Bank has joined 'the Rs 100 billion banks club' as its total assets on September 30, 2005 amounted to Rs 100.5 billion. It has been a significant player in the financial market in the past but now it appears to be poised to play a much bigger role. However, the management team has to maintain focus, as in the past, on superior service to all its customers, depositors and stakeholders.
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Performance Statistics (Rs 000) (Audited)
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Balance Sheet (Unaudited) On Dec 31
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As on September 30 2005 2004
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Total Assets: 100,520,392 77,710,677
Cash, balances with banks: 9,978,168 10,693,430
Lending to financial institutions: 7,865,128 4,933,890
Investments-Net: 14,503,715 6,739,370
Advances-Net: 63,382,999 50,907,846
Borrowing from fin. Institutions: 14,488,914 7,659,281
Deposits, other accounts: 76,516,241 62,954,966
Total Liabilities: 95,878,991 74,364,916
Net Assets: 4,641,401 3,345,761
Share Capital: 2,452,021 1,967,110
Reserves, Retained Earnings: 2,123,450 1,368,443
Surplus on Revalu. of Securities: 65,930 10,208
Total Equity: 4,641,401 3,345,761
Subordinated Loan: 1,488,666 1,486,556
Equity and Sub. Loans: 6,130,067 4,832,317
NPLs at end of period: 4,128,000 3,559,000
Contingencies and Commitments: 28,341,288 29,975,619
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Ratios:
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Cash and bank/Total Assets: 10% 14%
Investments/Total Assets: 14% 9%
Advance/Total Assets: 63% 66%
NPLs/Advances-Gross: 6.3% 6.8%
NPLs/Total Equity: 89% 106%
NPLs/Total Equity and S Loans: 67% 74%
Prov. required/Advances Gross: 2.1% 2.2%
NPLs Prov. Req./Provision Held: 126% 110%
Deposits/Total Assets: 76% 81%
Total Liabilities/Total Assets: 95% 96%
Total Equity/Total Assets: 5% 4%
Equity and S. Loans/Total Assets: 6% 6%
Deposits/(Equity+SL)-X: 12.5 13.0
Advances/Deposits: 83% 81%
Investments/Deposits: 19% 11%
Contin.& Comm./(Equity+SL)-X: 4.62 6.20
Book Value Per Share: 18.93 17.01
Quoted Price (24-10-05) - Rs: 53.05 -
Price/Book Value Ratio: 2.80 -
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Income State. (9M end Sep 30) 2005 2004
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Markup & interest earned: 5,585,056 3,078,458
Markup & interest expensed: 2,294,510 1,080,694
Net Markup & interest income: 3,290,546 1,997,764
Net markup income aft. Provisions: 2,597,550 1,756,145
Total non-markup income: 1,790,079 1,157,502
Total net income: 4,387,629 2,913,647
Admin exp. (non markup exp.): 2,380,858 1,905,526
Profit before Taxation: 2,006,771 1,008,121
Profit after taxation: 1,250,145 597,279
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Ratios: (9 Months Basis)
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Net Markup Income/Total Assets: 3.3% 2.6%
Non-Markup Income/Total Assets: 1.8% 1.5%
Total net income/Total Assets: 4.4% 3.7%
Admin expenses/Total Assets: 2.4% 2.5%
Profit bef. Taxation/Total Assets: 2.0% 1.3%
Profit after taxation/Total Assets: 1.2% 0.8%
Profit after tax/Total Equity: 26.9% 17.9%
EPS- (9 M end paid up) - Rs: 5.10 3.04
Price/Earnings Ratio: 10.41 -
Bonus Shares: 15% 15%
Cash Dividend: 10% 10%
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Cash flow Summary (9 Months) 2005 2004
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Net Cash flow, Operations: 7,543,773 3,296,031
Net Cash flow, Investing: -8,192,206 -1,008,106
Net Cash flow, Financing: -66,829 -79,557
Net Cash flow Position for Period: -715,262 2,208,368
Cash and bank at beginning: 10,693,430 6,680,525
Cash and bank at end of period: 9,978,168 8,888,893
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COMPANY INFORMATION: Chairman: Dr Abdullah Mohammad Abdullah Basodan; President and Group CEO: Shaukat Tarin; Director: Mustapha Amir Chinoy; Chief Operating Officer: International Operations: Muneer Kamal; Company Secretary: Syed Liaquat Ali; Registered Office: 6th Floor, PRC Towers, 32-A, Lalazar Drive, MT Khan Road, Karachi; Auditors: Taseer Hadi Khalid & Co, Chartered Accountants;
Legal Advisors: M/s Cornelius, Lane & Mufti, Advocates & Solicitors; Web Address: www.unionbank.com.pk