UBL to Set Up Exchange Company

The Board of Directors of United Bank Limited (PSX: UBL) has approved the establishment of an exchange company with Rs. 1 billion as paid-up capital, the commercial bank informed the Pakistan Stock Exchange on Tuesday.

According to a stock filing, the exchange company will be categorized as a wholly-owned subsidiary of UBL subject to approval by State Bank of Pakistan (SBP) and other regulatory compliances.

This comes after last week’s relentless crackdown against black market agents, and the subsequent announcement by SBP to introduce structural reforms in the Exchange Companies’ sector. As part of these reforms, leading banks actively engaged in foreign exchange business will establish wholly owned Exchange Companies to cater to the legitimate foreign exchange needs of the general public.

The minimum capital requirement for Exchange Companies has been increased from Rs. 200 million to Rs. 500 million.

These reforms are expected to strengthen governance, internal controls, and compliance culture in the sector, the central bank said in its statement.

Pertinently, the same central bank in May 2023 caught commercial banks red-handed for their role in the depreciation of the PKR. Businesses expected these financial institutions to be punished and barred from unrestrained access to the currency business but the regulator simply sent them away with a slap on the wrist and a clean chit.

Today, UBL has announced to set up an exchange company; other banks are expected to soon follow suit.


Besides the exchange company, the UBL BoD accorded its approval of an “Indicative Offer” received from Bestway Group (BG) to acquire the entire shareholding of UBL in UNBL UK. Currently, UBL owns 55 percent shares in UNBL UK.

UNBL UK contributed an Earnings Per Share (EPS) of Rs 0.57 to the Consolidated EPS of UBL for the Half Year ended June 30, 2023. For full-year 2022 the EPS contribution of UNBL UK to the Consolidated EPS of UBL stood at Rs 0.48 per share.

The Risk Weighted Assets of UNBL UK stood at Rs, 339.2 billion as of June 30th, 2023 with a downward impact of 200 basis points to the Consolidated Capital Adequacy Ratio of UBL.

The above approval of the Board of Directors of UBL is subject to the approval/clearance by SBP and all other regulatory compliances required in this regard in both Pakistan and the UK.

UNBL UK is a banking institution incorporated in the United Kingdom. UNBL UK was formed in 2001 from the merger of the UK branches of United Bank Limited and the National Bank of Pakistan.

The principal activities of UNBL UK are to provide retail banking, wholesale banking and treasury services to financial institutions and trade finance facilities to businesses of all sizes. UNBL UK operates one branch inside the United Kingdom under the trade name of United Bank UK.

According to a report by Topline Securities, As of 1H2023, UBL’s consolidated Capital Adequacy Ratio (CAR) stood at 14.81%, whereas the unconsolidated CAR stood at 16.92%. In 1H2023 CBS, management mentioned that the difference is due to the rupee devaluation and its impact on its subsidiaries outside Pakistan.

After the successful completion of this deal, it will have a positive impact of 200bps on its consolidated CAR, bringing it closer to the levels of the unconsolidated CAR, as per our channel checks, said the brokerage house.

Topline believes that the upward revision in CAR will increase the bank’s dividend-paying capacity in the future.

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