United Bank Limited (UBL) reported its CY25 earnings, posting a record profit of Rs. 130 billion (EPS: Rs. 51.9), up 73 percent YoY. Quarterly profit was Rs. 29.9 billion (EPS: Rs. 11.95), rising 17 percent YoY but down 15 percent QoQ. The bank announced its highest annual dividend at Rs. 29.5 per share, versus Rs. 22 in CY24.

The profit growth was driven by a surge in net interest income (NII) and provisioning reversals. NII reached Rs. 362 billion, up 108 percent YoY, supported by higher interest income of Rs. 1.2 trillion (+9 percent YoY) and lower interest expense of Rs. 823 billion (-10 percent YoY).

Non-funded income fell 25 percent YoY to Rs. 62.7 billion, mainly due to a 78 percent YoY drop in gains from securities sales (Rs. 9.9 billion). Fee income rose 48 percent YoY to Rs. 32 billion, FX income increased 43 percent YoY to Rs. 18 billion, and dividend income grew 34 percent YoY to Rs. 2.3 billion.

The bank booked a provisioning reversal of Rs. 4.7 billion, compared with a provisioning expense of Rs. 12.7 billion in CY24.

Operating expenses increased 38 percent to Rs. 139 billion, but strong income growth reduced the cost-to-income ratio to 32.7 percent from 39 percent. The effective tax rate rose to 55 percent from 48 percent.

On the balance sheet, deposits exceeded Rs. 5 trillion, up 96 percent YoY, while investments hit Rs. 9.9 trillion (+69 percent YoY) and advances fell 5 percent YoY to Rs. 1.4 trillion.

UBL shares trade at a P/B of 3x and a dividend yield of 6.6 percent for CY26E based on the last closing price.