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). Position on the assigned ratings is ‘Stable’. The previous rating action was declared on June 29th, 2016.
Assigned to UBL, the largest private sector bank in Pakistan, the ratings incorporate the continued soundness in key performance areas including asset quality, capitalization and profitability. Strong domestic operations and franchise is maintained by a sizeable attendance in the overseas market. Diversification in revenue streams stems from 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 current year. Furthermore, there is a digital strategy which is to be implemented and is in process.
UBL continues to pursue a conservative asset deployment strategy with aggregate exposure to the sovereign representing around two-third of advances and 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 domestic non-performing portfolio. However, the international portfolio faces challenges emerging from the operating environment in key markets.
Capitalization indicators of the bank have witnessed obvious improvement in previous 2 years on the back of higher internal capital generation and achieved growth in risk weighted assets. In the backdrop of growing regulatory requirements, preserving strong cushion over Tier1 and overall CAR regulatory requirement stays significant. While depositor concentration has doubled over the last two years, liquidity profile of the bank is sound with high liquid assets in relation to deposits and borrowings and sizeable retail deposits. Aggressive new-to-bank gaining within CASA and growth in current accounts will endure accounts to initiate deposit strategy, going forward.
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