9 Month 2022: UBA Solid Growth In Funded and Non-Funded Income Propels Earnings

..as PAT rose to N116.04 billion

United Bank for Africa Plc (UBA) has reported an EPS growth of 11.2% y/y to NGN3.27/s (9M-21: NGN2.94/s), supported by solid growth in the bank’s funded (+22.3% y/y) and non-funded income (+29.1% y/y) for it’s 9 month interim report financial statement 2022.

In the Bank’s statement posted on the NGX Exchange website on Monday, Interest income expanded by 22.3% y/y to NGN420.23 billion, majorly driven by the high yields in the fixed income market and the bank’s increased appetite for risk assets, evidenced by the growth on loans and advances to customers (+13.8% YTD to NGN3.05 trillion). Breaking down the contributory lines in nominal terms, loans and advances to customers (+16.4% y/y to NGN217.78 billion), investment securities (+27.0% y/y to NGN168.87 billion), loans and advances to banks (+46.8% y/y to NGN20.27 billion) and cash and bank balances (+34.2% y/y to NGN13.42 billion) all recorded increases.

The bank’s interest expense expanded by 20.3% y/y to NGN137.72 billion as all contributory lines save for the cost on interest-bearing borrowing (-28.6% y/y to NGN20.53 billion) recorded gains – expenses on deposits from financial institutions (+155.1% y/y to NGN17.16 billion) and deposits from customers (+26.4% y/y to NGN99.23 billion). We highlight that the expansion in the cost of deposits is due to the 10.4% YTD and 19.6% YTD increase in the bank’s deposits from customers and financial institutions, respectively.

Accordingly, net interest income settled at NGN282.51 billion, translating to a +23.2% y/y growth. Consequent to the 299.0% y/y increase in credit impairment charges, the net interest income ex-LLE expanded by 19.4% y/y to NGN268.93 billion.


Similarly, non-interest income rose by 29.1% y/y to NGN131.20 billion due to the higher gains from trading investment securities (+182.1% y/y to NGN23.24 billion) and foreign exchange (+14.7% y/y to NGN40.77 billion) lines. The aforementioned, coupled with an increase in the net income from fees and commission (+21.1% y/y to NGN82.22 billion), offset the NGN25.61 billion loss from FX revaluation.

Further down, operating expenses inched higher by 27.5% y/y, primarily driven by an increase in personnel expenses (+21.5% y/y to NGN80.77 billion), depreciation and amortization (+13.1% y/y to NGN18.44 billion) and regulatory charges – NDIC premium (+19.5% y/y to NGN12.40 billion) and AMCON levy (+12.1% y/y to NGN31.18 billion). Considering the bank’s OPEX (+27.5% y/y) advanced faster than operating income, the cost-to-income ratio (ex-LLE) settled higher at 65.5% relative to 62.8% in the prior year.

Overall, profit before tax was 13.3% y/y higher at NGN138.49 billion, while profit-after-tax grew by 10.9% y/y to NGN116.04 billion following a higher income tax expense of NGN22.45 billion (+27.1% y/y).

According to a leading research firm in the domestic economy, Cordros, it said,  “We like that UBA maintained earnings growth amid the challenging macroeconomic environment. We highlight that inflationary pressures impacted the bank’s operational inefficiency (cost-to-income ratio – 65.5% vs 9M-21: 62.8%); however, we believe the bank’s profitability is threatened if cost is not adequately managed. For the rest of the year, we expect UBA to sustain the growth momentum as the bank continues to accelerate risk assets and take advantage of higher yields on fixed-income securities. In addition, we expect improvements in the major non-funded income components and operational efficiencies to support the outturn for 2022FY. Our estimates are under review.

Post Author: Friday Ekeoba