UBA Achieves Remarkable 295.4% Year-on-Year Growth in Earnings in Q3 2023

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United Bank for Africa (UBA) released its unaudited nine-month financial report on October 30, 2023, showcasing a remarkable 295.4% year-on-year increase in its Earnings Per Share (EPS), reaching NGN12.93 (compared to NGN3.27 in 9M-22). This impressive growth in earnings was attributed to substantial expansion in both core (58.6% year-on-year) and non-core (334.6% year-on-year) income streams.

The group experienced a 58.6% year-on-year surge in interest income, totaling NGN666.29 billion, driven by increased income from various contributing sources, including investment securities (up 76.5% year-on-year to NGN298.06 billion), loans to customers (up 36.5% year-on-year to NGN297.31 billion), placement with banks (up 225.1% year-on-year to NGN43.61 billion), and loans to banks (up 35.4% year-on-year to NGN27.31 billion).
This growth was supported by a higher yield environment and a substantial increase in the group’s interest-earning assets (up 46.1% year-to-date to NGN12.99 trillion).UBA’s interest expense also increased by 62.1% year-on-year to NGN223.21 billion in 9M-23, primarily due to elevated interest rates, resulting in higher cost-of-funds (2.5% compared to 2.3% in 9M-22).
Factors contributing to this included increased costs on deposits from banks (up 78.8% year-on-year to NGN30.67 billion) and customers (up 61.3% year-on-year to NGN160.04 billion), as well as borrowings (up 39.2% year-on-year to NGN26.58 billion).
As a result, the group reported an expansion in net interest income (up 56.8% year-on-year).


However, after considering the 964.4% year-on-year growth in impairment charges in 9M-23, net interest income ex-Loan Loss Expenses (LLE) grew at a slower rate, up 11.0% year-on-year to NGN298.47 billion.

Non-interest income continued to advance, surging by 334.6% year-on-year to NGN574.54 billion in 9M-23. This was primarily driven by substantial net fair value gains (NGN348.43 billion, compared to NGN339.96 in 9M-22) generated in H1-23.
Additionally, the group recorded higher revenue from net fees and commission income (up 39.0% year-on-year to NGN114.29 billion) and investment securities trading (up 112.2% year-on-year to NGN49.32 billion).
Consequently, operating income increased by 117.6% year-on-year to NGN873.01 billion.Operating expenses grew by 41.2% year-on-year, driven by increased regulatory and personnel costs.
Notably, the group incurred higher costs on personnel expenses (up 37.6% year-on-year to NGN111.11 billion), AMCON levy (up 31.2% year-on-year to NGN40.92 billion), and NDIC premium (up 31.3% year-on-year to NGN16.28 billion) in 9M-23.
However, due to the faster growth of operating income compared to operating expenses, UBA’s operational efficiency improved, with the cost-to-income ratio (excluding LLE) settling at 42.5% (compared to 65.5% in the previous year).
In summary, profitability showed substantial improvement, with UBA’s profit before tax increasing by 262.5% year-on-year to NGN505.09 billion. The Return on Average Equity (ROAE) and Return on Assets (ROA) for UBA settled at 44.4% and 4.4%, respectively, in 9M-23.
Comment: UBA’s ability to leverage the rising interest rates in the debt market and enhance its digital banking initiatives contributed to the significant growth in both funded and non-funded income. The outlook remains optimistic for the group, with expectations of continued earnings expansion in the fourth quarter of 2023, primarily driven by the elevated interest rates in the forecasted period.

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