Page 32 - DIY Investor Magazine | Issue 31
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      In recent years, KCB, along with the rest of the Kenyan banking sector, has seen its share price get cheaper in relation to its earnings – initially due to concerns over a new law to cap interest rates (which ultimately had little impact on KCB’s profitability), and latterly due to the impact of Covid on the Kenyan economy. In our view, this created a compelling long-term investment opportunity considering its consistent track record of strong profitability and the potential to deliver strong growth.     ‘UBL IS ABLE TO DELIVER A POSITIVE USER EXPERIENCE AND ENJOYS A HIGH DEGREE OF TRUST WITH CUSTOMERS’ UBL (PAKISTAN) Banking in Pakistan is unique because, unlike the corporate/ consumer lending model of most banks worldwide, Pakistani banks have largely favoured government lending. There is very limited consumer or corporate debt: by way of comparison, in the UK, private sector debt stood at 190.3 per cent of GDP at the end of 20194; by contrast, private sector debt-to-GDP for Pakistan stood at just 18.1 per cent at the end of 2019.5 However, consumer lending is now rising from a low base, which in our view is a tailwind that will likely support a positive loan growth outlook for many years to come. More striking to us is the opportunity in retail deposits. As the informal economy reduces, and savers become more educated about wealth management, this should be an area of substantial growth. In markets like Indonesia, those banks that have been able to couple robust loan and deposit growth with a high level of profitability have delivered extremely strong returns for shareholders as the sector has developed. We believe the market has not yet recognised the potential for leading banks in Pakistan to do likewise. What is more, UBL has a clear digital strategy, centred on offering innovative solutions to existing customers through its UBL Digital app, and on promoting financial inclusion through the provision of basic banking facilities to the mass population. In mid-2020, UBL appointed a new CEO, Mr Shazad Dada, who has stressed the importance of expanding the bank’s digital offerings. In the first nine months of 2020, the bank added 200 thousand new users to its digital banking platform, taking the total to 1.2 million. There is a long runway for further growth, too, considering that the bank has over 10 million customers and a large part of the population remains unbanked. UBL is able to deliver a positive user experience and enjoys a high degree of trust with customers, as evidenced by its strong position in remittances, where it has approximately 24 per cent market share.6 Equally important is the resilience that UBL has exhibited over the past year, as Covid has weighed on the Pakistan economy. The bank has remained profitable and well-capitalised throughout and, other than a period of two quarters when Pakistan’s central bank asked banks to refrain from distributing dividends, UBL has maintained dividend payments.   4 Source: United Kingdom Private Debt to GDP | 1995-2019 Data | 2020-2021 Forecast | Historical ( 5 Source: Bloomberg 6 Source: UBL Financial results for 9 months of 2020 - Daily Times DIY Investor Magazine · Nov 2021 32 

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