United Bank Limited (UBL) has executed Pakistan’s largest-ever Interest Rate Swap (IRS) transaction with Pakistan Mobile Communications Limited (Jazz), with a notional value of Rs. 75 billion, marking a major milestone in the development of the country’s financial derivatives market.
Under the transaction, Jazz has converted its floating-rate borrowing exposure into a fixed-rate obligation, allowing the telecom operator to lock in financing costs and gain long-term visibility for financial planning.
The move protects Jazz from future interest rate volatility and potential increases in benchmark rates.
The floating-rate loan linked to the six-month Karachi Interbank Offered Rate (KIBOR) was last reset in November 2025, with Jazz’s total borrowing cost estimated in the range of 11.5 to 12.0 percent, based on 6M KIBOR plus a 60 basis-point spread.
By fixing the rate through the swap, Jazz secures predictable financing costs over the tenor of the agreement.
Analysts note that the transaction could also generate significant benefits for UBL.
Shahid Ali Habib from Arif Habib Ltd stated that the sensitivity analysis suggests that for every 50 to 200 basis-point decline in floating rates, the bank could earn an estimated annual gross benefit, before tax, of around Rs. 0.38 billion to Rs. 1.50 billion.
The deal is being seen as a sign of structural deepening in Pakistan’s derivatives market and growing institutional confidence in a medium-term easing cycle.
By taking long-term fixed-rate exposure without deploying balance-sheet capital, UBL is positioning itself for a lower interest-rate environment, which could influence pricing behavior across the banking sector and contribute to compression in medium- to long-term bond yields.
For corporates, the transaction highlights rising sophistication in liability management, while for banks it opens a new stream of risk-based earnings beyond traditional lending. Market participants say such instruments can help diversify bank revenues and strengthen Pakistan’s financial markets as demand for hedging tools increases.
