It may be mentioned that the Notices of Extraordinary General Meetings to the respective shareholders have been published both by the Union Bank and the Standard Chartered Bank in different newspapers on September 29, 2006, pursuant to the decisions of the respective Boards of Directors in their meetings on September 22, 2006. The EGMs of the respective shareholders have been fixed for October 21, 2006 to consider the Scheme of Amalgamation.
According to the notes to the financial statements, Standard Chartered PLC through its subsidiary Standard Chartered Bank (Pakistan) Limited has entered into an agreement with the major shareholders of Union Bank Limited to acquire an 80.86 per cent interest in Union Bank Limited. Standard Chartered Bank (Pakistan) Limited has made a public offer (The Tender Offer) for the remaining shares of Union Bank Limited.
Union Bank Limited (Union Bank) was incorporated at Lahore on October 9, 1991 as a public limited company. Union Bank, engaged in commercial banking activities, operates through its 65 branches (2005: 65 branches) in Pakistan and two branches (2005:2 branch) outside Pakistan. The bank shares are listed on all the stock exchanges of Pakistan. Pacra has assigned long term rating at "AA-" (Double AA Minus) and short term rating at "A1+" (A One Plus). The bank's first, second and third issues of TFCs are rated at "A+".
The bank is backed by a Middle Eastern Group and Dr Abdullah Basodan, the Chairman of the Board, owned 49.06 % of its equity as on December 31, 2005. On that date, the paid up capital of the bank was Rs 2.820 billion, which was held by 10,729 shareholders, of which 10,493 individuals held 27.39% shares. Mr Shaukat Tarin, the President of the bank and Group CEO, owned 4.93% of shares.
The rest of the shares were distributed among a number of corporate entities including banks and DFIs. The paid up capital on June 30, 2006 was Rs 3.388 billion. The present overview of financial statements for the half year ended June 30, 2006 is that of Union Bank alone without consolidation with its 66.22% subsidiary, Union Leasing Limited.
Union Bank saw only 4% increase in its total assets to Rs 122 billion as on June 30, 2006 compared to Rs 117 billion on December 31, 2005. The increase in total assets has been financed largely through increase in Borrowings from the Financial Institutions. On June 30, 2006, the Investments increased by 34% to Rs 26 billion as on June 30, 2006 (21% of Total Assets) compared to Rs 19 billion (16% of TA) as on December 31, 2005. Of the total, Union Bank has 88% investments in Available for Sale Securities (2005: 83%).
Union Bank's Advances as on June 30, 2006 were at Rs 73 billion (60 % of TA) compared to Rs 69 billion (59% of TA) as on December 31, 2005, registering 5% increase. As on June 30, 2006, gross NPLs are Rs 4.239 billion (December 31, 2005: Rs 4.024 billion). In percentage terms gross NPLs on June 30, 2006 were 5.7% of gross Advances (2005: 5.7% of GA). On Net basis, NPLs are 3% of Advances as on June 30, 2006 (2005: 3% of Advances).
It may be noted that Union Bank has made full provision against NPLs according to the SBP criteria. However, as some doubtful loans have the tendency to stay under cover for sometime due to different reasons, a prudent policy for Union Bank would be that the management remains extra vigilant in the appraisal and monitoring of all loans.
Total mark up income of Union Bank for the first six months of 2006 increased by 87% to Rs 6.044 billion compared to Rs 3.237 billion for the corresponding six months of the previous year. Net mark up income (after mark up expensed and provisions) for the six months period under review increased by only 21% to Rs 2.030 billion (corresponding six months of 2005: Rs 1.672 billion). Total mark up-interest expense represented 57 % of total mark up income for six months ended June 30, 2006, compared to 36% for the corresponding six months of 2005. The payout to the Depositors has improved but still it is very low.
Non-mark up income of the bank for the six months ending June 30, 2006 was 28% higher at Rs 1.430 billion as against Rs 1.118 billion for the corresponding six months of 2005. The six months under review were closed with After-tax Profit at Rs 1.020 billion (corresponding six months of 2005: Rs 0.800 billion), registering an increase of 28%. ROE for the six months is at 18.5% (corresponding six months of 2005: 15.6%). Performance statistics are given below.
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Performance Statistics (Un-audited) (Rs, million)
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Balance Sheet As June 30, As December 31
2006 2005
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Total Assets: 121,849 117,101
Cash, balances with banks: 10,232 10,336
Lending to financial institutions: 7,561 13,717
Investments-Net: 25,758 19,231
Advances-Net: 72,646 68,969
Borrowing from fin. Institutions: 19,385 14,731
Deposits, other accounts: 90,337 91,187
Total Liabilities: 116,334 111,966
Net Assets: 5,515 5,135
Share Capital: 3,388 2,820
Reserves & Un-app. Profit: 2,143 2,255
Sub total-Equity: 5,531 5,075
Surplus on Revalue, Assets: -16 60
Equity incl. Revalue Surplus: 5,515 5,135
Subordinated Loan: 2,480 2,239
Equity & Sub. Loans: 7,995 7,374
Advances-Gross: 74,772 70,914
Gross NPLs: 4,239 4,024
Total Provision: 2,126 1,945
Conting. & Commitments: 27,277 33,445
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Ratios:
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Cash & bank/Total Assets: 8% 9%
Investments/Total Assets: 21% 16%
Advance-Net/Total Assets: 60% 59%
Gross NPLs/Advances-Gross: 5.7% 5.7%
Gross NPLs/Total Equity: 77% 78%
Net NPLs/Advances-Net: 3% 3%
Provision/Advances-Gross: 2.8% 2.7%
Deposits/Total Assets: 74% 78%
Total Liabilities/Total Assets: 95% 96%
Total Equity/Total Assets: 4.5% 4.4%
Equity & S.Loans/T. Assets: 6.6% 6.3%
Deposits/Equity-Times: 16.4 17.8
Advances/Deposits: 80% 76%
Investments/Deposits: 29% 21%
Contin.& Comm./Equity-Times: 4.95 6.51
Book Value Per Share: 16.28 18.21
Quoted Price (29-09-06) - Rs: 134.50 -
Price/Book Value Ratio: 8.26 -
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Income Statement (6M) 2006 2005
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Markup-interest earned: 6,044 3,237
Markup-interest expensed: 3,461 1,170
Net Markup-interest income: 2,583 2,067
Provisions and write offs: 553 395
Net mark up income (aft. Prov.): 2,030 1,672
Total non-markup income: 1,430 1,118
Income bef. Admn. Exp.: 3,460 2,790
Admin Expenses, etc: 1,936 1,508
Profit before Taxation: 1,524 1,282
Current & deferred tax: 504 482
Profit after taxation: 1,020 800
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Ratios: (6-Month Basis)
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Markup earned/Total Assets: 5.0% 2.8%
Net Markup Income/TA: 2.1% 1.8%
Net markup (aft. Prov.)/TA: 1.7% 1.4%
Non-Markup Income/TA: 1.2% 1.0%
Income before AE/TA: 2.8% 2.4%
Admin Expenses/TA: 1.6% 1.3%
Profit before Taxation/TA: 1.3% 1.1%
Profit after taxation/TA: 0.8% 0.7%
Profit after tax/Total Equity: 18.5% 15.6%
EPS- (Period-end paidup) - Rs: 3.01 2.84
Price/Earnings Ratio: 44.68 -
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Cash flow Summary (6M) 2006 2005
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Net Cash flow, Operations: 6,996 5,614
Net Cash flow, Investing: -6,762 -6,410
Net Cash flow, financing: -338 -48
Change in Net Liquidity: -104 -844
Net Liquidity at beginning: 10,336 10,694
Net Liquidity at end: 10,232 9,850
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COMPANY INFORMATION: Chairman:Dr Abdullah Mohammad Abdullah Basodan; President and Group CEO: Shaukat Tarin; Director: Mustapha Amir Chinoy; Company Secretary: Muhammad Akram; Registered Office: 6th Floor, PRC Towers, 32-A, Lalazar Drive, MT Khan Road, Karachi; Auditors: A.F. Ferguson & Co, Chartered Accountants
Legal Advisors: M/s Cornelius, Lane & Mufti, Advocates & Solicitors; Web Address: www.unionbank.com.pk