By Philemon Adedeji
A leading Pan-African financial institution, United Bank of Africa (UBA), have delivered all-round impressive performance for it’s third quarter financial results (Q3) ended September 30th, 2022, recorded a significant improvement across key indicators such as Gross Earnings, Profit Before Tax , Profit After Tax , Total Assets, amid severe challenges in banking sector.
This results released is replicated to the commendable performance it derived in the first two quarters of the current fiscal year
Absolutely, according to the analysis of the results indicates that the group gross earnings grew marginally to a decent 12.3 per cent Year -on-Year to N608 billion in Q3 2022 from N493 billion accounted in Q3 2021, driven by significant improvement in net interest income and non interest income contributing growth of 23.23 per cent and 24.9 per cent respectively.
From the released statement on the Nigerian stock Exchange (NSE), the group Profit Before Tax rose significantly to N138.5 billion in nine months of 2022, from N123.4 billion achieved in nine months of 2021, reflecting an increase of 12.3 per cent Year -on-Year
While, Profit After Tax rose by a decent 10.9 per cent Year-on-Year to N116 billion in Q3 2022 from N104.6 billion achieved Q3 2021, this enable to sustain it’s anualised return on average equity for Q3 2022 at 19.2 per cent.
During the period, the bank also grew its interest income by 22.2 per cent to N420.234 billion in nine months of 2022 compared to N343.709 billion achieved during the comparable period last year. The increase in interest income was driven by investment securities in treasury bills, bonds and others.
Net fee and commission income stood at N82.219 billion in Q3 2022 from N67.918 billion in Q3 2021, representing a marginal difference of 21.05 per cent.
Interest income expanded by 22.3 per cent y/y to N420.23 billion, majorly driven by the high yields in the fixed income market and the bank’s increased appetite for risk assets, evidenced by the growth on loans and advances to customers (13.8 per cent year-to-date (YTD) to N3.05 trillion). Breaking down the contributory lines in nominal terms, loans and advances to customers (16.4 per cent y/y to N217.78 billion), investment securities (27.0 per cent y/y to N168.87 billion), loans and advances to banks (46.8 per cent y/y to N20.27 billion) and cash and bank balances (34.2 per cent y/y to N13.42 billion) all recorded increases.
The bank’s interest expense expanded by 20.3 per cent y/y to N137.72 billion as all contributory lines save for the cost on interest-bearing borrowing (-28.6 per cent y/y to N20.53 billion) recorded gains – expenses on deposits from financial institutions (155.1 per cent y/y to N17.16 billion) and deposits from customers (26.4 per cent y/y to N99.23 billion). We highlight that the expansion in the cost of deposits is due to the 10.4 per cent YTD and 19.6 per cent YTD increase in the bank’s deposits from customers and financial institutions, respectively.
Accordingly, net interest income settled at N282.51 billion, translating to a 23.2 per cent y/y growth. Consequent to the 299. per cent y/y increase in credit impairment charges, the net interest income ex-LLE expanded by 19.4 per cent y/y to N268.93 billion.
Similarly, non-interest income rose by 29.1 per cent y/y to N131.20 billion due to the higher gains from trading investment securities (182.1 per cent y/y to N23.24 billion) and foreign exchange (+14.7 per cent y/y to N40.77 billion) lines. The aforementioned, coupled with an increase in the net income from fees and commission (21.1 per cent y/y to N82.22 billion), offset the N25.61 billion loss from FX revaluation.
Further down, operating expenses inched higher by 27.5 per cent Year-on-Year , primarily driven by an increase in personnel expenses (21.5 cent y/y to N80.77 billion), depreciation and amortization (+13.1 per cent y/y to N18.44 billion) and regulatory charges – NDIC premium 19.5 per cent Year -on-Year to N12.40 billion) and AMCON levy (12.1 per cent y/y to N31.18 billion). Considering the bank’s OPEX (27.5 per cent y/y) advanced faster than operating income, the cost-to-income ratio (ex-LLE) settled higher at 65.5 per cent relative to 62.8 per cent in the prior year.
Operating income rose by 23.75 per cent to N414.397 billion in nine months of 2022 as against N334.846 billion accounted in nine months of 2021.
Fees and commission income grew to N138.079 billion in the third quarter of 2022 from N110.982 billion in 2021 on the back of an increase in credit-related fees and income, electronic banking income, and trade transaction income amongst others.
Electronic banking income stood at N47.957 billion in nine months of 2022 from N41.914 billion in nine months of 2021, hence contributing 34.73 per cent of the total fees and commission income.
Electronic banking income represents income taken on transactions processed via electronic channels such as ATM, POS, and mobile banking as well as credit and debit card transactions. On the other hand, trade transaction income entails one-off charges related to letters of credit and other trade businesses, which are excluded from those included in determining effective interest rates on those carried at amortized.
Earnings Per Share (EPS) recorded for the period increased nearly 11.2 per cent to N3.27 in Q3 2022 from N2.94 in Q3 2021, supported by solid growth in the bank’s funded (22.3 per cent y/y) and non-funded income (29.1 per cent y/y).
STRONG BALANCE SHEET POSITION
The leading Pan-African financial institution, continues to maintain a very strong balance sheet, as total assets deployed for the period of nine months in 2022 stood at N9.3 trillion, representing a growth of 9.1 per cent as against N8.5 trillion recorded at the end of December 2021.
The group largely benefitted from its technology -led initiatives targeted at improving customer experience over few years ago, deposits from customers rose significantly to N7.03 trillion in Q3 2022, an increase of 10.4 per cent, up from N6.4 trillion recorded at the end of December 2021.
However, the total liabilities recorded gained nearly a 9.9 per cent to N8.510 Billion in Q3 2022 from N7.736 billion recorded as of end of December 2021.
UBA shareholders remained very strong at N809 billion up from N805 billion recorded in December 2021 again reflecting a strong capacity for internal capital generation and growth.
Return on assets (ROA) grew by 1.5 per cent in Q3 2022 compared to 1.4 per cent in FY 2021.
The Vice Chairman of Highcap Security, David Adonri said, “UBA’s Q3 2022 result is good. The growth across all indices is a sign of razor sharp cost control efficiency. There is stability in their income and other performance metrics. With this result, they can reward investors with dividend payout not lower than last year.”
According to the analyst at cordoros research, “We like that United Bank of Africa (UBA), maintained earnings growth amid the challenging macroeconomic environment. We highlight that inflationary pressures impacted the bank’s operational inefficiency (cost-to-income ratio – 65.5 per cent vs 9M-21: 62.8 per cent); however, we believe the bank’s profitability is threatened if cost is not adequately managed. For the rest of the year, we expect UBA to sustain the growth momentum as the bank continues to accelerate risk assets and take advantage of higher yields on fixed-income securities.
“In addition, we expect improvements in the major non-funded income components and operational efficiencies to support the outturn for 2022 financial year.”
Commenting on the result, UBA’s Group Managing Director/Chief Executive Officer, Mr. Oliver Alawuba, remarked that the Group continues to show notable operating resilience amid significant headwinds in its presence markets amidst heightened global risk environment, adding that its strong diversification model and unwavering focus on customer satisfaction continues to give the bank an edge over its peers in the industry.
He said, “We continue to reap the benefits of our diversification strategy and Customer -1st philosophy and build resilience in our operations across Africa and the Rest of the World to support the mission of providing superior value to our stakeholders.
“This has translated into strong financial gains evident in growth in our customer deposits and Net interest margin. In addition, we are strategically positioned to drive our market share in our operating countries, with the strong growth of our payments and transaction banking offerings,” Alawuba stated.
Executive Director, Finance & Risk Management, Ugo Nwaghodoh, said, “The Group’s profitability increased by 12.3 per cent to N138.5 billion, with underlying growth in our key income lines and moderation in our cost of funds.
“We remain very cautious in risk asset creation as we defensively position our asset portfolios to minimize the impact of the heightened credit risk. Consequently, our NPL ratio remains within acceptable threshold at 3.2 per cent.”
United Bank for Africa Plc is a leading Pan-African financial institution, offering banking services to more than 25 million customers, across 1,000 business offices and customer touch points in 20 African countries. With presence in New York, London, Paris, and Dubai, UBA is connecting people and businesses across Africa through retail, commercial and corporate banking, innovative cross-border payments and remittances, trade finance and ancillary banking services.