The regulatory headwinds from Central Bank of Nigeria (CBN) tightening policy combined with induced costs, such as the Asset Management Corporation of Nigeria (AMCON) charge, are taking a toll on the bottom-line performance of UBA Group as first-half profit shrank by 19.57 percent.
For the first six months of the year, the bank’s profit before tax (PBT) fell by 13.09 percent to N28.89 billion from N33.24 billion in the same period of the corresponding year (HY) 2013, while gross earnings increased by 8.60 percent to N138.31 billion.
The bank’s net income also took a hit as it shrank by 19.57 percent to N22.85 billion in HY 2014, compared with N28.41 billion as of HY 2013.
Earnings per share (EPS) slid by 18.43 percent to 1.46k from 1.79k as of HY 2013.
The banking sector Resolution Cost fund, otherwise known as the sinking fund, was created by the AMCON Act of 2010, and mandates banks to contribute 0.5 percent of their total assets to it on a yearly basis.
Further crimping the growth potentials of lenders is the reduction in of commission on turnover fees and the scrapping of the N100 Automated Teller Machine (ATM) fee.
UBA’s cost-to-income ratio jumped to 61.46 percent in 2014, as against 55.74 percent in 2013.
Net margin, another measure of efficiency and profitability, fell to 39.15 percent in HY 2014, from 55.37 percent as of HY 2013.
UBA’s profit dip contracts other lenders whose profits have spiked, such as Stanbic IBTC, which reported a 56 percent spike in net income, despite the regulatory induced cost.
With majority of the 170 million Nigeria yet to have a bank account, UBA can exploit the embryonic state of the industry and bolster performance.
The bank’s loans-to-deposits ratio rose to 45.61 percent in HY 2014, from 43.61 percent as of HY 2013, as deposits and loans extended both fell.
Deposits from customers dipped by 8.26 percent to N1.98 trillion in HY 2014, compared with N2.16 trillion the preceding year.
Loans and advances to customers also reduced by 3.51 percent to N904.24 billion from N937.62 billion the preceding year. Total assets were down by 5.73 percent to N2.49 trillion in HY14, from N2.64 trillion the preceding year.
The bank’s share price closed at N7.90 on the floor of the Nigerian Stock Exchange last Friday, while capitalisation was N260.55 billion.
BALA AUGIE
