KARACHI: United Bank Limited’s (UBL) consolidated profit dropped 41% to Rs3.3 billion in the quarter ended June 30, 2018 due to unexpectedly high pension payments to ex-employees, according to a notification posted on the Pakistan Stock Exchange (PSX) website on Thursday.

The bank had registered a profit of Rs5.71 billion in the same quarter last year.

Earnings per share dropped to Rs2.78 in the Apr-Jun 2018 quarter compared to Rs4.67 in the corresponding quarter of previous year.

The board of directors recommended an interim cash dividend of Rs3 per share. The entitlement will be paid to shareholders whose names appear in the register of members on September 10, 2018.

UBL’s stock price fell 4.51%, or Rs7.81, to close at Rs165.71 with 3.74 million shares changing hands at the PSX.

“UBL reported earnings…significantly lower than market consensus,” Topline Securities said in a note to its clients.

“Profits were below expectations due to an unanticipated pension charge of Rs2 billion. This brings total pension charge for the first half of 2018 to Rs8.4 billion, much higher than the estimated range of Rs3.4-5.9 billion disclosed in UBL’s 2017 annual filing,” it added.

Net interest income remained flat at Rs14.7 billion.

During the quarter, total provisions stood at Rs2.4 billion mainly as a result of Rs1.7 billion in provisions for non-performing loans. “We believe majority of this provision to be on the international book,” it said.

Non-mark-up income grew 15% to Rs7.2 billion primarily due to a 91% increase in income from dealing in foreign currencies and 15% increase in fee and commission income.

Similarly, non-mark-up expenses increased 15% as administrative expenses rose 13% and other provisions increased Rs400 million.

For the first half of 2018, the consolidated profit stood at Rs6.1 billion (earnings per share Rs5.06), which was 54% lower than Rs13.3 billion (earnings per share Rs10.81) reported in the corresponding period of previous year.

Key risks for UBL included non-performing loan creation on the international book, lower-than-expected advances growth, delay in interest rate hike and deterioration of Pakistan’s macroeconomic indicators, the brokerage house added.