United Capital plc, a Nigeria investment bank and asset manager, recorded a 12.54 percent drop in full- year 2014 profit, after it took a hit from spiking operating expenses that squeezed bottomline.
The audited 2014 financial statement showed pretax profit plummeted by 12.54 percent to N2.30 billion from N2.63 billion the same period of the corresponding year (FY) 2013, while gross revenue grew by 2.1 percent to N4.67 billion.
Profit after tax (PAT) increased by 4.54 percent to N1.84 billion in 2014 compared with N1.76 billion the preceding year.
The percentage rise in after tax profit and the 2.1 percent dip in gross revenue are lower than the 8.4 percent January inflation figures.
Analysis of the financial statement shows the investment bank is inefficient in the area of cost reduction, which culminated in weighing on operating profit.
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United Capital’s cost to income spiked to 62.87 percent in 2014 compared with 52.80 percent the preceding year, while operating expenses increased by 18.57 percent to N2.49 billion in 2014 from N2.10 billion last year.
Analysts say the bank can cut costs to income ratio by turning to information technology (IT).
A reduction in costs should lead to increase return on equity (ROE) and share price, the measures of greatest interest to shareholders.
United Capital’s return on equity (ROE) reduced to 20.44 percent in 2014 as against 21 percent in 2013, while the return on assets (ROA) dipped to 1.93 percent in 2014 compared with 2.21 percent the preceding year.
Net margin, another measure of profitability, remained flattish at 39.40 percent. Earnings per share (EPS) rose by 6.80 percent to 31k in 2014 from 29k, still below the inflation figures.
Total assets grew by 19.80 percent in the review period to N95.28 billion in FY 2014, compared with N79.47 billion last year.
The growth in assets was backed by a 138.98 percent surge in loan receivables.
Other borrowed fund in the balance sheet surged by 172.18 percent to N14.48 billion compared with N5.32 billion the preceding year.
The company’s shareholders voted last year to stop its regional expansion due to of Ebola outbreak and to transfer N402 million ($2.2m) of proceeds from a rights offer into Nigerian infrastructure projects and working capital instead.
United Capital (previously called UBA Capital plc) was incorporated in Nigeria as a public liability company on August 3, 2012, to act as the ultimate holding company for the United Capital Group.
The firm’s share price closed at N1.56 on the stock exchange on Wednesday.
