United Bank Limited has successfully executed Pakistan’s largest-ever Interest Rate Swap (IRS) with Pakistan Mobile Communications Limited (Jazz), involving a notional amount of PKR 75 billion. The landmark transaction allows Jazz to convert its floating-rate exposure into a fixed-rate obligation. As a result, Jazz significantly improves cost visibility and long-term financial planning certainty.
Under the arrangement, Jazz has locked in its borrowing costs on a previously floating-rate loan linked to KIBOR. The benchmark rate was last reset in November 2025. This places Jazz’s total borrowing cost in the estimated range of 11.5% to 12.0%. The calculation is based on six-month KIBOR plus a 60-basis-point spread. By fixing the rate, Jazz has reduced its exposure to future interest rate volatility. Additionally, Jazz has reduced exposure to potential upward movements.
According to the sensitivity analysis, the transaction structure could generate meaningful upside for UBL. For every 50 to 200 basis point decline in floating interest rates, the bank could earn an estimated annual gross benefit, before tax, of approximately PKR 0.38 billion to PKR 1.50 billion. This highlights the earnings potential of structured risk management solutions beyond traditional lending.
The deal represents a significant step in the structural development of Pakistan’s derivatives market. It reflects growing institutional confidence in a medium-term interest rate-easing cycle. This also signals a shift toward more sophisticated balance-sheet and risk-management practices. By taking long-term fixed-rate exposure without deploying balance-sheet capital, UBL has positioned itself for a structurally lower interest rate environment.
Market participants say the transaction could influence pricing behaviour across the banking sector and support compression in medium- to long-term bond yields. Furthermore, it demonstrates how banks can create risk-based earnings streams while offering value-added solutions to corporate clients.
For corporates, the UBL–Jazz swap underscores the rising sophistication of liability management strategies in Pakistan. For banks, it opens a new avenue for earnings diversification. Moreover, it strengthens resilience in an evolving financial landscape and sets a precedent for future large-scale derivatives transactions.
