JCR-VIS Reaffirms Ratings of United Bank Limited

Karachi, June 28, 2011: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of United Bank Limited (UBL) at 'AA+/A-1+' (Double A Plus/A-One Plus). Ratings of the four outstanding subordinated debt instruments, TFC-1, TFC-2, TFC-3 and TFC-4, issued by UBL have also been reaffirmed at 'AA' (Double A). Outlook on the assigned ratings is 'Stable'.

UBL is ranked as the third largest commercial bank in the country in terms of deposits. Over the last few years, increasing competition in the banking sector and a strategic re-profiling of the bank's deposit base is manifested in a decline in market share in deposits, though it is still sizeable at 8.6% at year-end 2010. As a result of the re-profiling, UBL achieved meaningful improvement in cost of deposits during 2010. While UBL's domestic deposit mix features a high proportion of retail deposits, overseas deposits are characterized by higher concentration. Apart from conventional delivery channels, deposit growth is also being targeted through the bank's branchless banking operations, which are focused at the unbanked population of the country. Further expansion of the agent network is being pursued to achieve higher transaction volumes.

While growth in lending has been stagnant on account of prevailing economic conditions, the growing asset base is characterized by an increasing proportion of government securities. Consequently, liquidity indicators of the bank have strengthened. Increasing amount of non-performing assets continue to burden the bank's earnings. In addition to accretion of fresh NPLs in the corporate loan book, SME and consumer portfolios have suffered considerable delinquency, necessitating a change in underwriting guidelines.

Going forward, the bank is exploring expansion options overseas following two years of restricted growth. Gross infection reported in the overseas portfolio is so far lower than domestic operations. In the backdrop of local currency devaluation, asset impairment may also translate into market risk on books.

Capitalization levels are supported through sub-ordinated debt instruments. Furthermore, tier-1 capital adequacy has also strengthened over time, providing added protection to depositors.

The bank has made significant progress in implementation of core banking software. In addition, applications designed to facilitate loan processing and monitoring are also being simultaneously rolled out. The bank is likely to benefit from enhanced monitoring and reporting capabilities once full-scale implementation is achieved, which is targeted for end-2013.

FFor further information on this rating announcement, please contact Mr. Javed Callea (Ext: 501) or Ms. Sobia Maqbool, CFA (Ext: 506) at 35311861-70 or fax to 35311872-3.

Syed Ziauddin Ahmed
Advisor