KARACHI: United Bank Ltd (UBL) share took a battering on the trade floor on Wednesday as rumours swirled around a disclosure that the bank made in its latest annual report of an agreement it entered in 2013 with the Federal Reserve Bank of New York “to address certain compliance and risk management matters relating primarily to compliance with Anti-Money Laundering Regulations including the Banking Secrecy Act”.

The bank scrip dropped by 4.4 per cent amid high volumes, as memories of the Habib Bank Ltd (HBL) episode and its brush with US regulatory authorities on similar matters, were revived in the minds of many investors.

This is the first time that the bank has disclosed this agreement. The rumours were fuelled further when a news report in Bloomberg drew the direct parallel explicitly.

The bank’s spokesman, Ali Habib, in a late night request for comment from Dawn, categorically denied that UBL’s agreement with the FRBNY has any parallels with the earlier episode of HBL. “We reiterate our position as mentioned in our financial statement that our compliance status is in accordance with the best practices and there is no material regulatory risk which in our view at this point could negatively impact our financial position,” he said in a written statement.

The bank’s annual report for the year ending Dec 31, 2017, made the disclosure about the agreement in a small note on page 38. “UBL and its New York branch have entered into a written agreement in 2013 with the Federal Reserve Bank New York (FRBNY) to address certain compliance and risk management matters relating primarily to compliance with Anti-Money Laundering Regulations including the Banking Secrecy Act.

“[The bank] management is in the process of addressing the matters highlighted in the written agreement and in the subsequent inspections. While the bank seeks to comply with all possible laws and regulations and at this stage there is no indication of any financial impact, it is not possible to ascertain the eventual outcome of these matters,” the note reads.

A spokesman of the State Bank declined to provide comment, citing the unavailability of related officials.

“The case of UBL is different from HBL,” said Samiullah Tariq of Arif Habib Research. “UBL branch in New York does correspondent banking while HBL had clearing business.”

In a conference call between Arif Habib Ltd and UBL management held in September 2017, right after the HBL episode, the bank’s head of international operations had assured everyone that UBL was not facing a similar situation.

“It was emphasised that there is no specific investigation ongoing against the bank other than routine reviews undertaken by regulators worldwide,” the note circulated by AHL following that call said.

UBL has sound financial standing and it is evident from the financial results of the bank for the year 2017, the banks spokesman emphasised. “The bank has announced final cash dividend of Rs4 per share (40pc) which is in addition to the interim dividends of Rs9 per share (90pc). The bank is following prudent policies and is mindful of safeguarding the interests of all the stakeholders.”

Published in Dawn, February 22nd, 2018