KARACHI - The United Bank Limited consumer lending portfolio is likely to decline further to Rs 41 billion by end of 2008 against Rs 43 billion witnessed in June 2008 however, by 2009 UBL expects improvement in consumer activity due to mortgage and credit card financing products for consumer growth. The management of UBL unveiled it while discussing a detail accounts for 1H2008. Moreover, provisions for non-performing loans are expected to continue as the bank cleans up its consumer loan portfolio. According to the management, the current macroeconomic environment and the over leveraged situation of individuals have made 2008 a year of consolidation for UBL's consumer portfolio. After taking some provisioning in the individual and auto loans segment, the bank has tightened its lending criteria and is currently in consolidation phase. Moving forward, given the impact of the 5% minimum profit on savings, the management expects the average cost of liabilities to rise to 4.9% by end of 2008, while average cost of deposits are likely to remain around 4.1%. The bank posted a decline 0.7% in earnings. During 1H2008, average cost of deposits was recorded at 3.5%, while average cost of liabilities was 4.2%. These are still decent given the currently tight monetary situation. While cost of funds would witness some further increase in the coming months, higher KIBOR would ensure better yield on advances, and hence help keep interest spreads and NIMs (Net interest margins) more or less stable.  The international operations of the bank would remain a major contributor to future earnings with an expected growth of 25% in 2008. As a result, the total contribution to profit after tax is likely to remain around 25%, similar to the levels witnessed in 2007, said a analyst at JS Research, adding that UBL witnessed a 10% growth in advances during the period which rose to Rs329bn from Rs299bn in Dec 2007. This helped Net Interest Income (NII) to grow by 11% to Rs13.2bn in 1H2008 as against Rs11.9bn in 1H2007, hence improving its market share slightly to 9.5% (9.4% as of Dec 2007). One of the prime advantages of UBL over its local peers is its strong international operations, which regularly contribute a significant portion of the company after tax earnings. 1H2008 was no different as the advances from international operations grew by 13%YoY while deposit growth was recorded at 37% during the same period. Despite weaker economic fundamentals, continued growth in advances and solid non-interest income performance helped the bank maintain its earnings profile. This is significant especially as provisions for non-performing loans rose by nearly 531% to Rs1.95bn due to removal of Forced Sale Value benefit. Moreover, non-interest income posted a handsome growth of 43%YoY, to Rs6.03bn versus Rs4.21bn recorded in 1H2007, thus contributing significantly to 1H2008 earnings. Improved commission from trade activities on both domestic and international operations along with higher number of corporate finance deals were major reasons behind this strong growth in non-interest income. In addition, gains on the derivatives portfolio also contributed to income growth. Going forward, the management expects commission on trade activities and fee income from Investment Banking to remain robust though gains from derivatives are likely to slowdown.