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United Bank for Africa (UBA) reported first-quarter profit that beat analysts’ estimates. The result was driven by margin expansion as the lender continues to overcome macroeconomic headwinds.
The Bank’s net income increased by 32 per cent to N22 billion, higher than N21 billion average estimates of 8 analysts in a BusinessDay survey. Revenue increased 43 per cent to N77 billion from N54b billion a year ago.
Analysts say that the decision of Central Bank of Nigeria (CBN) to let the market determine the exchange rate will ease the flow of dollars to UBA and other lenders that have been grappling with liquidity crisis and decreasing asset quality.
The growth of the bottom line was supported by foreign exchange income of N8 billion in the period under review.
UBA displayed efficient management in the process of growing earnings as cost to income ratio fell to 61 per cent in March 2017, from 63 per cent levels the previous year. This means that the spread (i.e. difference between rates they charge borrowers and the rate they pay to depositors) has grew within the period.
UBA’s loans and advances to customers increased by 2 per cent to N1.53 trillion in the period under review from N1.50 trillion as at March 2016. Deposits from customers rose by 4.40 per cent year-on-year to N2.59 trillion in March 2017.
The bank has 14 million customers, through one of the most revered diverse channels in Africa; it boasts of 1,000 branches and customer touch points, 1,750 automated teller machines, 13,500 points of sale (POS), and robust online and mobile banking
CBN’s latest move to lure back traders who had fled the system in the in the last through a system it called Investors’ and Exporters’ FX Window appear to have yielded result for the country’s banking system as Other tier 1 lenders in Africa’s biggest economy also posted impressive performance to kick-off the year. Margin expansion similarly accounted for the result.
Experts say that such a policy could woo foreign investors that had jettisoned naira assets as they feared imminent devaluation of the local currency.
In addition, UBA’s enhanced risk management and control framework with clear definition of risk appetite proved effective. Non-performing loans (NPLs) stood at 4 per cent, lower than the 5 per cent threshold set by the apex regulatory body.
The lender’s share price gained 3.74 per cent to close at N5.22 as at 2 pm local time on the floor of the local bourse, putting its value at N209 billion. Total assets stood at N3.65 trillion; shareholder’s fund was N472 billion as at March 2017.
BALA AUGIE
