The management of United Bank for Africa (UBA) have released its nine-month interim report for the year 2021 during the weekend, which showed that the bank recorded strong earnings growth during the period. According to the report the overall, profit-before tax was 36.4% year on year higher at N122.27 billion while profit-after-tax grew by 35.6% year on year to N104.60 billion compare to N77.13 billion in the previous period following the higher income tax expense that grew by 41.2% year on year to N17.67 billion.
In the report showed the bank’s core segment continued to support the growth in profitability consequent on higher income from loans, lower funding and impairments costs. On the other hand, the non-core income segment declined year-on-year. Also, the bank recorded a 36.1% year-on-year growth in EPS to N2.94 in the year under review to that of 2020 which stood at N2.16.
“Interest income grew by 8.4% year-on-year to N343.71 billion as its contributory lines save for cash and bank balances declined by 12.0% year-on-year to N10.00 billion recorded gains while interest on loans and advances to banks stood at 421.2% year-on-year to N13.73 billion, loans and advances to customers stood at 9.8% year-on-year to N187.06 billion grow, and investment securities also grew by 0.1% year-on-year to N132.92 billion.
The report also disclosed that bank reversed the decline in its loan book recorded last quarter as loans to customers grew by 9.0% quarter on quarter in Q3 2021 – Year TO Date: up by12.4% to N2.87 trillion, which contributed significantly to the strong performance on a Year TO Date basis.
“Interest expense declined by 12.7% year-on-year to N114.44 billion as the bank recorded substantial moderations across the various liabilities categories. The most decline emerged from interest expense on deposits from financial institutions declined by 57.6% year-on-year to N6.73 billion and expenses on customer deposits declined by 5.8% year-on-year to N78.49 billion, as the bank’s CASA mix slightly improved in nine-month interim report in 2021stood at 82.3% as against 81.8% in full year of 2020.
However, analysts believe that this moderation could be linked to the more conservative approach of accumulating liabilities from customers which up by 7.2% in nine-month interim report in 2021 as against 35.7% in nine-month interim report in 2020.
“The combined impact of higher interest income and lower expenses on liabilities drove net interest income higher by 23.2% year-on-year to N229.27 billion. This was further supported by the decline in loan impairment charges declined by 70.3% year-on-year to N3.41 billion, as macro-economic conditions and obligors’ repayments improve. Consequently, net interest income ex-LLE expended by 29.4% year-on-year to N225.86 billion.
Contrastingly, non-interest income declined by 5.0% year-on-year to N102.42 billion, due to the lower marked-to-market gains from trading investment securities declined by 50.4% year-on-year to N8.24 billion and FX revaluation losses of N11.20 billion compared to the gains of N9.23 billion in the nine- month 2020. According to the report the declines across these lines outweighed the impressive growth in FX trading up by 78.8% year-on-year to N35.56 billion and net fees and commission up by 18.6% year-on-year to N45.77 billion incomes. We still see scope for more growth in (1) e-banking fees as the industry continues to record growth in electronic transaction volumes given the sustained recovery in economic activities and, (2) FX trading given the better repositioning for DMBs following the CBN’s ban on sales of dollars to BDCs.
“Operating expenses inched higher by 6.9% year-on-year, albeit it represents a marginal increase from the 0.5% growth recorded as at six months of 2021. This was largely driven by increased regulatory charges by NDIC premium up by 27.9% year-on-year to N10.38 billion and AMCON levy which up by 24.1% year-on-year to N27.82 billion, given the balance sheet size growth.
However, the bank was able to maintain other opex items like personnel and building maintenance expenses below the prevailing inflation level. Overall, the faster increase in operating income up by 16.3% year-on-year) compared to opex led to an improvement in operational efficiency – cost-to-income ratio (ex-LLE) moderated to 62.8% relative to 68.2% in the prior year’s corresponding period.
Overall, profit-before tax was 36.4% year-on-year higher at N122.27 billion while profit-after-tax grew by 35.6% year-on-year to NGN104.60 billion (9M-20: NGN77.13 billion) following the higher income tax expense up by 41.2% year-on-year to N17.67 billion.
Analysts at Rodros research saying The bank’s sustained growth in earnings in the face of challenging industry conditions remains impressive. In the last quarter leading up to full-year results, we expect the momentum in earnings growth to be sustained as more efforts are made to accelerate risk assets and reinvest maturing assets at higher yields. Similarly, we also expect improvements in the major non-funded income components and operational efficiencies to further propel earnings