UBL & Jazz Seal Record Rs75bn Interest Rate Swap

United Bank Limited (UBL) has concluded Pakistan’s single largest interest rate swap transaction to date, valued at Rs75 billion, with Pakistan Mobile Communications Limited (Jazz), an arrangement that market observers widely regard as a watershed moment for the maturation and deepening of the country’s derivatives and hedging ecosystem.

The transaction, finalised on Friday, enables Jazz to transform its existing floating-rate liability—tied to the Karachi Interbank Offered Rate (KIBOR)—into a fixed-rate obligation, thereby securing long-term borrowing cost certainty and eliminating exposure to prospective rises in benchmark interest rates.

Arif Habib Limited (AHL), in its client note released on Monday, highlighted that the swap markedly enhances financial predictability for the telecom operator, reinforcing its ability to undertake robust medium- and long-term capital budgeting and infrastructure planning. At the November 2025 KIBOR reset, Jazz’s effective borrowing cost ranged between 11.5% and 12.0%; the fixed-rate conversion insulates the company from any adverse rate trajectory, exemplifying the increasing sophistication of liability and interest-rate risk management among Pakistan’s leading corporates.

JazzWorld CEO Aamir Ibrahim described the swap as integral to the company’s structured financial risk governance framework, noting that proactive hedging delivers cash-flow visibility essential for sustained capital expenditure in nationwide digital connectivity expansion, 5G rollout preparedness, and advanced network modernisation initiatives.

UBL President & CEO Muhammad Jawaid Iqbal emphasised the transaction’s catalytic potential to invigorate the domestic interest rate swap market and the derivatives segment more broadly. He underscored UBL’s proven capability to structure, negotiate, and execute high-value, complex financial products, expressing confidence that the precedent would stimulate greater participation by other commercial banks in similar large-ticket derivative arrangements.

From UBL’s vantage point, AHL projected substantial economic benefit: assuming a 50 to 200 basis points decline in floating benchmark rates, the bank could realise an annual pre-tax gross gain estimated between Rs0.38 billion and Rs1.50 billion. The brokerage interpreted the swap as a deliberate strategic positioning by UBL to capitalise on an anticipated medium-term monetary policy easing cycle—acquiring long-duration fixed-rate exposure without balance-sheet utilisation—thereby potentially influencing sector-wide pricing norms and contributing to a narrowing of medium- to long-term bond yields.

Market analysts further observed that the deal illustrates rising corporate proficiency in advanced debt and interest-rate risk mitigation strategies, while simultaneously creating a meaningful new non-interest income channel for banks through derivative spreads and fees, thereby supporting earnings diversification and resilience beyond conventional credit intermediation.