Analysts Upbeat on UBA Over Half Year Earnings Carnival
The United Bank for Africa (UBA) Plc announced its half year 2023 earnings carnival which saw key performance indicators edging higher amidst deepening footprints in its pan-African markets. The bank also grew its retail lending, leveraging its rock solid balance sheet quality.
With a flurry of buy recommendations by equities analysts, UBA share turned a new bride in the local bourse with surging demand among alpha seekers who take position ahead of interim dividend payment.
The Bank delivered an impressive earnings performance in the first half of 2023, supported by a solid footprint in the retail markets. Equities investors in the Nigerian Exchange reacted positively to the earnings beat as market valuation rose 8% to about N563 billion.
There was a wide range of earning contributions to the group’s bottom line, driving momentum including its Pan-African footprint in the digital space, improved retail lending and solid positioning in fixed interest securities.
Apart from earnings from interest yielding assets, the bank’s bottom line grew on the back of a top-notch service delivery that pushed non-interest revenue up by more than five folds in the first half of the year.
Reflecting growth in profitability, UBA earnings per share surged by 453.0% year on year to N10.95 from N1.98. Partly, the performance was supported by more than 1300% year-on-year growth in FX revaluation gain. The board proposed an interim dividend of N0.50, which translates to about 67% surged over 12 months from NGN0.20/share in the corresponding period last year.
The Pan African lender said record increase in interest income, though related interest expenses also increased to reflect changing market dynamics following the Central Bank of Nigeria’s inflation-fighting mood.
In the first half of the year, UBA recorded a 66.4% increase in interest income from N257.36 billion to N428.29 billion due to record growth in loan books and investment in fixed interest securities in key markets.
Its first six months’ results showed that income from investment securities grew by 80.1% to N191.08 billion while income from loans and advances improved by 35.6% to N178.59 billion.
Analysts explained that the bank’s net Loans to customers grew 43.5% in H1 compared to December 2022, inclusive of the impact of devaluation on foreign currency loans. Interest expenses accelerated faster compared to interest income growth, rising by 88% to N150.18 billion from N79.90 billion as funding sources became expensive.
Deposit which is usually UBA’s cheapest funding source grew by 42.4% to N11.14 trillion. However, its current and savings accounts (CASA) mix in the period dropped to 83.6% from 85.1% at the beginning of the year.
Also, the group’s non-interest income grew markedly by 544.2% year on year to N505.85 billion, driven by the higher income generated from FX revaluation gain, net fees and commission, and investment securities trading.
Ebanking Income, which made up 40.6% of Fees and Commission in H1 2023 was up 40.6% year on year to N51.1 billion, but again capped by high e-banking expense of N41.5 billion. This resulted in a balance of only N9.6 billion for net e-banking income.
Operating expenses increased by 39.8% in H1-2023 following the higher costs incurred on personnel expenses, AMCON levy, NDIC premium, and depreciation and amortization.
Of note is the fact that AMCON charges surged more than 31% to N40.92 billion as the bank’s balance sheet expanded. NDIC premium came exactly the same, rising by 31.2% year on year to N11.61% while personnel expenses grew by 32.7% to N69.39 billion.
The financial institution recorded growth in impairment charges, which analysts think could be partly accounted for by the impact of devaluation on impairments on FX loan
Notwithstanding, UBA’s operational efficiency improved, according to analysts, recording a cost-to-income ratio of 35.9%, a significant improvement from 65.4% in the equivalent period.
Analysts said this occurred as a result of faster growth in the group’s operating income over an increase in operating expenses in the period. Its financial scorecards showed that operating income rose by more than 154% year on year.
Overall, UBA group profit before tax grew by 370.7% to N403.65 billion over a period of 12 months. Likewise, PAT grew faster by 437.8% to N378.24 billion in the period. #Analysts Upbeat on UBA Over Half Year Earnings Carnival