United Bank for Africa Plc or “UBA”, the third largest bank in the country by total assets, deposits, and profit just released its second quarter financial results that beat analysts’ expectations.
Earnings spiked, while management was able to utilize the resources of owners in generating higher profit.
This means management has met its primary objective of maximizing the value of shareholders.
The lender has benefitted from efficiency gains that drove margins improvement, while it continues to strengthen its foorint across Africa continent.
Aside strong margins, robust balance sheet, increased earnings and strong capital position, UBA also has one of the best risk management strategies as evidenced in its good asset quality. Non Performing Loans (NPLs) are below the regulatory threshold.
UBA has 19 operations across key Africa market including big cities like London, New York, and Paris, while aggressively making inroads into globally strategic market.
Shareholders and investors are drinking wine from the golden goblet as the Nigerian lenders’ shares have gained 95.78 percent since the start of the year, outperforming the Nigerian Stock Exchange (NSE) All Share Index (ASI).
With well-diversified operations across the continent, UBA could see earnings surge in the next 5 years as its branches in these countries are increasingly contributing to Group earnings.
The Nigerian lender has total market capitalization of N319.62 billion as at September 9, 2017. The shareholders fund was N438.43 billion as at June 2017.
Better Pricing, Improved Yield on Assets Drives Gross earnings. For the first six months June 2017, UBA’s gross earnings spiked by 34.50 percent to N222.71 billion as against N165.58 billion as at June 2016.
Gross earnings has been growing by 16 percent (CAGR) over the last 3 years as the Bank continues to leverage on scale and scope of operations as well as gographic diversification.
Hide original message
Interest income surged by 44.30 percent to N154.95 billion in June 2017 as against N107.41 billion the previous year. The growth in interest income was driven by better pricing and asset allocation as well as increased interest income on loans and advances.
UBA’s non-interest income increased by 16 percent to N60.39 billion in June 2017 from N52.06 billion as at June 2016. Non-interest income contributed some 30 percent of gross earnings as increased FCY liquidity enhanced FX trading income.
Improved Interest Income Drives Profit
UBA’s profit after tax spiked by 56.20 percent to N42.34 billion in June 2017 from N27.10 billion as at June 2016. Profit before tax surged by 65.51 percent to N57.53 billion as against N34.75 billion as at June 2016.
Operating income followed the same growth trajectory as it increased by 39.20 percent to N161.77 billion in June 2017 compared to N116.75 billion the previous year.
Efficiency Gains Continue To Drive Margin Improvements
UBA’s net margin, a measure of efficiency, increased to 19.01 percent in June 2017 from 16.36 percent as at June 2016. Net interest margin (NIM) improved 20 basis point to 7.3 percent in the period under review from 7.10 percent at June 2016, reflecting improved yield on assets and stable funding cost, as the Group continues to leverage its franchise in mobilizing low-cost, stable deposits.
The NIM improvement was also buoyed by enhanced balance sheet management, high sovereign yield in Nigeria and Ghana as well as improving pricing on the loan book.
The management of UBA has successfully utilized the resources of shareholders in generating higher profit as return on average equity (ROAE) moved to 18.20 percent in June 2017 from 17.30 percent as at June 2016. Return on Average Assets.(ROAA) increased to 2.40 percent in the period under review as against 2.20 percent as at June 2016.
Cost to income Ratio (CIR), another measure of efficiency, improved to 58.60 percent in the period under review compared to 64.20 percent as at June 2016. A low CIR means a lender is efficient.
Operating expenses increased by 27.20 percent to N94.80 billion as inflationary environment and the devaluation of thje currency continues to balloon the lender’s operating expenses.
Well Diversified Portfolio Validates Risk Management Strategy
UBA has a stable and well diversified loan portfolio which is supported by solid capital liquidity with intense focus on asset quality.
UBA has a well-diversified loan book with compelling asset quality as Non-Performing Loans (NPLs) as at June 2017 stood at 4.20 percent, which is lower than the 5.0 percent regulatory threshold.
Customer deposits dropped by 1.50 percent to N2.44 trillion in the period under review from N2.48 trillion the previous year. Net loans an advances increased by 3.70 percent to N1.56 trillion in June 2017 from N1.50 trillion as at June 2016.
Total assets stood at N3.69 trillion in June 2017, a 5.30 increase from N3.50 trillion recorded last year.
BALA AUGIE
