UBA Rated Buy on Higher Earnings Expectation
For the financial year 2022, equity analysts at Meristem Securities Limited have projected a healthy growth for United Bank for Africa (UBA) Plc, anchored on the strength of the group’s digital earnings performance.
The bank stock is rated Buy with price target sets at N9.15, providing an upside potential of 18.06% at a reference market price of N7.75. According to its unaudited financial statement for the first three months, UBA Plc achieved a gross earnings jump of 18.39% year on year to N183.91 billion.
This performance resulted from an increase in both the funded and non-funded income streams, according to Meristem analysts’ outlook on the Pan African financial behemoth.
The investment firm explained that UBA’s funded income grew by 15.10% year on year to N124.86 billion in the period under review, while fee-based income advanced significantly by 25.55% to N58.83 billion.
Analysts spotted that inflationary pressure in operating regions elevated the group’s operating costs by 20.46% to N77.64 billion. Consequently, the cost-to-income ratio inched higher by 127 basis points to 61.67% between the first quarter of 2021 and 2022.
Despite pressures on in the operating environment, UBA Plc. delivered a 9.73% year-on-year increase in the bottom line, with profit after tax printed at N41.87 billion.
Balancing its outlook for the year, Meristem hints that impressive topline and bottom-line expansion are positive for the outlook for the year. Meanwhile, the firm said increased operational costs and cost to Income ratio are downside risks.
As such, analysts at Meristem Securities pointed out that they expect non-funded income to push gross earnings and cost control measures to drive net income in 2022. READ: Access Bank Rated Strong Buy, Analysts Estimate 33% Upside
“We maintain our forecast for gross earnings and net income at N722.14 billion and N137.74 billion, respectively, in 2022”, analysts noted in the review. #UBA Rated Buy on Higher Earnings Expectation
