Kayode Tokede
The present macroeconomy challenges are very obvious and are affecting companies operating in the economy. However, some companies, including financial institutions, are defying the headwinds and reporting impressive results that are giving investors great hope for a better future
One of such firms is United Bank for Africa (UBA). The pan-African financial institution has sustained its impressive performance as shown in the unaudited financial statement for nine months ended September30, 2024.
Prior to the release of the nine months results, UBA had announced profit before tax (PBT)of N156.34 billion for the first quarter(Q1) ended March 31, 2024.
This showed a significant increase of 155per cent from N61.7 billion in Q1 2023, while profit after tax (PAT) jumped from N53.5 billion to N142.5 billion, representing an impressive rise of 165per cent.
In the half year ended June, 2024, the lender announced PBT of about N403 billion and PAT of N316 billion.
The Board of Directors of UBA had declared an interim dividend of N2.00 per share for every ordinary share of N0.50 each held by its shareholders, representing 300per cent increase compared to the N0.50 declared in the similar period of 2023.
The 7.8 per cent dividend yield had ranked UBA as the highest among other listed financial institutions that have declared interim dividend payout to shareholders on the Exchange.
UBA in 2023 financial year paid shareholders a final dividend of N2.30 per share (N0.90 per share in 2022).
The proposed final dividend of N2.30 per share and the N0.50 per share interim dividend paid in September 2023, brings the total dividend for the year to N2.80 in 2023 from N1.10 per share total dividend paid in the 2022 financial year.
However, in the latest result and accounts, for the nine months ended September 31, 2024, the management of UBA declared N603.48 billion PBT, representing an increase of 20.2 per cent from N502.09billion recorded at the end of the nine months of 2023, while PAT also rose remarkably by 16.9 per cent from N449.26 billion to N525.31 billion in the period under review.
Consequently, Return on Equity (ROE) and Return on Asset (ROA) settled at 25.49per cent and 2.85per cent in nine months of 2024.
The nine months 2024 financial statements revealed an impressive performance in income from core business. Specifically, interest income rose by 169.99per cent to N1.79trillion in nine months 2024 driven by the high yield environment which positively impacted earning assets.
Thus, interest earned on cash (+406.74per cent to N220.99billion), loans and advances 141.54 per cent to N784.08billion) and investment securities (+153.82per cent to N754.49billion) mainly boosted the higher interest income in the review period.
In the same vein, interest expense grew by 211.6 per cent to N695.57billion due to the tight financial conditions amidst the contractionary policy stance of the apex bank.
As a result, interest paid on deposits from banks (+575.09 per cent to N207.05billion), deposit from customers (+153.06 per cent to N405billion) and borrowing (+183.16per cent to N80.93billion) contributed mostly to the jump in interest expense.
Notably, the increase in interest income exceeded that of interest expense, resulting in a net interest income of N1.10trillion as against N443.08 billion reported in nine months of 2023.
From the loss & profit figures, UBA’ non-interest income came in lower at N435.84billion, representing a 24.14per cent decline. This was on the back of the 59.47per cent contraction in net trading and foreign exchange income to N182.48billion, which outweighed the 115.47per cent recorded in fee and commission income of N392.84billion.
The lower trading and foreign exchange income stemmed from the material N243.38billion loss from fair value gain on derivatives as against the N339.96billion gain recorded in the same period in 2023.
Meanwhile, other operating income rose by 137.85per cent to N23.79billion following the increase in dividend income (+137.22per cent to N10.51billin) and other income (+146.76per cent to N13.00billion).
In nine months of 2024, UBA’s operating expenses amounted to N812.20billion, 118.97 per cent higher, given the expansion in employee benefits (+102.88 per cent to N225.42billion) and depreciation and amortization (+49.59 per cent to N33.82billion).
Furthermore, other operating expenses increased by 133.12per cent to N552.96billion due to the rise in regulatory costs, fuel and maintenance and contract services.
Consequently, the group’s earning per share (EPS) amounted to N14.78 in nine months of 024, compared to N12.93 in the corresponding period of 2023.
UBA maintained a very strong balance sheet, with total assets rising to N31.801 trillion as of September 2024, representing a 54 per cent increase over the N20.653 trillion recorded at the end of December 2023, just as the bank benefitted largely from its technology-led initiatives targeted at improving customer experience over the past few years, with total deposits rising to N26.50 trillion, representing a 52.7 per cent rise, up from N17.355 trillion at the end of the last financial year.
UBA shareholders’ funds remained very strong at N3.585 trillion up from N2.030 trillion recorded in December 2023, again reflecting a strong capacity for internal capital generation and growth.
Commenting on the result, Group Managing Director/CEO, UBA, Mr. Oliver Alawuba, expressed pleasure that the Group continues to record strong and sustainable growth in its various revenue streams, building on its strong performance earlier in the year.
“The UBA Group achieved a profit before tax of N603.5 billion and our intermediation business continues to show strong growth with net interest income expanding by 149 per cent YoY to N1.10trillion and NIM closing at 8.03 per cent, which is 17.60 per cent above the 2023 position, despite persisting macroeconomic headwinds, geopolitical tensions, insecurity, inflationary pressure and exchange rate volatilities across our markets,” Alawuba stated.
According to the GMD, the bank’s performance has been underpinned by consistent strong growth on all core and sustainable banking income lines, as he added that “Our substantial investments in technology are yielding tangible business value. This commitment is instrumental in delivering enhanced customer experiences and optimising operational efficiency.”
The Executive Director, Finance & Risk, UBA, Ugo Nwaghodoh, said: “I am delighted at the milestone reached in driving operational efficiency, reflected in cost-to-income ratio normalizing around the 50 per cent range. Shareholders’ funds recorded a 77 per cent growth from N2 trillion at FYE2023 to N3.59 trillion demonstrating the Group’s significant capacity for future growth.
On plans to consolidate its performance for the rest of the 2024 financial year and beyond, Nwaghodoh said: “We remain on track with various strategies to optimize our cost of funds and operating expenses. Furthermore, the Group has finalized plans to shore up its share capital to support its medium to long term aspirations, whilst aligning with the recent regulatory requirement in Nigeria and other jurisdictions.”
He explained that UBA remains committed to sustainable growth in its core banking revenue lines and maintaining its strong compliance and risk management culture, even as the Group identifies further opportunities to expand.
Also reacting to the performance, analysts at Cordros Research, said: “We like that UBA effectively leverages the rising interest rates environment in the debt market and solid asset base (N31.80 trillion) to improve the group’s funded income.
“We are optimistic that the group’s earnings will continue to expand in Q4-24 positively, supported mainly by the impact of elevated interest rates and improved risky asset creation in the forecasted period.”
Similarly, looking ahead, analysts at Investment One Research said: “we postulate that UBA will likely maintain its impressive top line performance, which should be propelled by higher interest income amid the sustained high yield environment.
“Furthermore, non-interest income is also expected to improve and support the anticipated expansion in gross earnings by FY’2024. Overall, we remain positive on the bank’s future performance across major income lines.”
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