UBA Plc 20201Q1 Net Profit Up 26.75% On Interest Expense Cut, CEO Says Outlook Robust

 

United Bank for Africa Plc, on Monday, became the earliest filer among top banks to present their unaudited financials for the first quarter ended March 31, 2021, through the Nigerian Stock Exchange (NSE), highlights of which included the marginal drop in interest income, which was complemented by the 21.7% cut in interest expense. Others included the 13.52% increase in operating income and 47.81% reduction in an impairment charge for credit losses on loans from N2.265bn in the corresponding period of 2020, to N1.182bn; following which net profit for the period grew by N8.054bn or 26.75%.

Details of the result showed that Gross earnings stood at N155.446bn from N147.169bn, with interest income dropping marginally from N109.107bn in the first quarter of last year, to N108.59bn, boosted by the N53.987bn income from term lo0ans to corporate, which rose from N49.583bn;p and N9.505bn from overdrafts (corporates), compared to N8.821bn in the prior Q1. The numbers could have been rosier, but for the drop in income from investments securities (Treasury Bills) fell from N29.726bn in the corresponding period of 2020, to N18.979bn; the impact of which was reduced by the income from bonds which rose to N19.06bn from N10.978bn.

Interest expense dropped from N43.69bn to N34.209bn, the biggest of which was the reduction in expense incurred on deposits from banks, which fell from N26.633bn to N18.51bn; resulting in net interest income of N74.381bn, up from the previous N65.417bn.

Fee and commission income rose to N34.955bn from N28.237bn, boosted by the N12.483bn income from electronic banking, which increased from N8.301bn; while commissions on transactional services rose from N4.733bn to N5.535bn. Fee and commission expense from N9.535bn to N14.589bn, lion’s share of which was the N13.525bn incurred on electronic banking; resulting in net fee and commission income of N20.366bn, up from N18.702bn.

Net trading and foreign exchange income rose to N10.469bn from N9.145bn, of which fixed income securities trading income grew from N7.14bn to N9.341bn; while other operating income grew from N680m to N1.432bn, with N1.321bn being income on cash handling, which was more than double the previous N599m. Total non-interest income for the period stood at N32.2676bn, as against the previous N28.527bn.

Operating income therefore rose from N93.944bn to N106.648bn; while impairment charge was principally t6he N1.729bn allowance for credit loss, which reduced from N2.425bn; which was reduced by the N1.067bn recoveries on loans previously written-off as bad and doubtful, up from N637m. Net operating income after impairment loss on loans and receivables during the period stood at N104.62bn, as against N91.302bn in the preceding first quarter.

Employee benefit expenses for the period dropped slightly to N21.311bn from N21.979bn; depreciation and amortization rose marginally from N4.18bn to N4.848bn; and other operating expenses from N32.498bn to N38.295bn; resulting in total operating expenses of N64.454bn, up from N58.657bn.

Profit before tax for the period stood at N40.581bn from N32.726bn; while the taxation charge of N2.426bn, down from N2.625bn in the previous Q1, left a net profit of N38.155bn, as against N30.101bn in the comparable period of 2020. The net profit translated to Earnings Per Share ofr N1.04, an improvement from 83 kobo in 2020.

This, the bank said in a statement translated to an annualised 20.5% Return on Average Equity (RoAE), compared to 19.9% in the same period of 2020.

Total assets also rose by 2.5% to N7.892tr, compared to N7.697tr recorded at the end of the 2020 financial year, boosted as always by the N2.733tr customer loans and advances, which rose from N2.554tr; while total liabilities improved from N6.973tr to N7.129tr, with customer deposits accounting for N5.788tr, as against the N5.676tr reported at end of December 2020. Shareholders’ funds, therefore, rose to N762.4bn, up by 5.3% from N724.1 billion as of 2020 full-year.

Uzoka

The statement quoted Kennedy Uzoka, the Group Managing Director/Chief Executive, as expressing satisfaction with the performance, with bust capital and liquidity that have positioned it to support customers across diverse sectors and markets, guided by prudent risk management practices.

“This impressive 2021Q1 results reflect the capacity of our business to sustainably grow earnings even in a highly uncertain macroeconomic environment. We remain upbeat on the macroeconomic outlook of the countries in which we operate, especially as the COVID-19 vaccine distribution gains traction globally, whilst commodity prices and currencies continue to stabilise. Our robust capital and liquidity positions have positioned us to continue to support our customers across diverse sectors and markets, guided by prudent risk management practices,” he stressed.

Uzoka noted the bank’s effort at diligently executing its priorities for the year 2021, as it leverages people, process, and technology to deliver the best customer experience across all its channels and touchpoints, achieving industry leadership and dominance.

In his words, “the bank is making strong progress in Nigeria where our continuous market share and efficiency gains are translating into higher profits. We are committed to sustaining this strong start throughout the year, leveraging our customer-First (C-1st) philosophy and unparalleled execution to deliver even stronger returns to our esteemed shareholders in 2021 and beyond.”

Ugo Nwaghodoh, UBA’s Group Chief Finance Officer particularly expressed satisfaction with the “annualised return on average equity of 20.5% and return on average asset of 2.0%, (being indices that) buttress our commitment to delivering sustainable value to our stakeholders. We continued to deploy our balance sheet efficiency and digital-led cost optimisation initiatives to achieve desired outcomes.”

During the period also, he noted that “cost-to-income ratio improved by 200bps to 60.4% during the period, whilst cost of funds settled at 2.0%, a 130bps reduction from 3.3% in 2020Q1.”

Nwaghodoh expressed confidence that the bank will meet and surpass its target for the remaining three quarters of the year, adding that, “We are confident on the strong prospect for earnings growth, particularly as we are better positioned to consolidate recent market share gains in Nigeria and other geographies where we operate. This result is a strong start for the year, and we are optimistic about sustaining the exciting performance throughout the year and beyond.”

United Bank for Africa Plc is a leading Pan-African financial institution, offering banking services to more than twenty-one million customers, across its over 1,000 business offices and customer touch points, in 20 African countries.

With presence in the United States of America, the United Kingdom, and France, 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, the statement added.

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