United Bank Limited (United Bank Limited) has completed Pakistan’s largest-ever Interest Rate Swap (IRS) transaction with Pakistan Mobile Communications Limited, with a notional value of Rs. 75 billion, marking a major step forward for the country’s financial derivatives market.
Under the agreement, Jazz has converted its floating-rate borrowing into a fixed-rate obligation. This allows the telecom operator to lock in its financing cost, protect itself from future interest rate volatility, and gain long-term certainty for financial planning.
The underlying loan was previously linked to the six-month Karachi Interbank Offered Rate (KIBOR) and was last reset in November 2025. At that time, Jazz’s total borrowing cost was estimated between 11.5% and 12.0%, based on six-month KIBOR plus a spread of 60 basis points. By entering the swap, Jazz has secured predictable financing costs over the life of the arrangement.
Market analysts say the transaction could also deliver meaningful upside for UBL. Shahid Ali Habib of Arif Habib Ltd noted that sensitivity analysis suggests that for every 50 to 200 basis-point decline in floating rates, the bank could earn an estimated annual gross benefit of Rs. 0.38 billion to Rs. 1.50 billion, before tax.
The deal is being widely viewed as evidence of growing maturity and structural depth in Pakistan’s derivatives market, alongside increasing institutional confidence in a medium-term easing interest rate cycle. By taking long-term fixed-rate exposure without deploying balance-sheet capital, UBL is positioning itself for a lower-rate environment, a move that could influence pricing trends across the banking sector and contribute to compression in medium- to long-term bond yields.
For corporates, the transaction reflects rising sophistication in liability and risk management. For banks, it opens an additional stream of risk-based earnings beyond traditional lending, helping diversify revenues and strengthen Pakistan’s financial markets as demand for hedging instruments continues to grow.
