Home Money UBA’s FY2018 earnings surpass forecast, grows balance sheet by 20 percent

UBA’s FY2018 earnings surpass forecast, grows balance sheet by 20 percent


…Boosted by income from treasury bills

MON, MARCH 18 2019-theG&BJournal-Interest income from short term government securities adds impetus to United Bank for Africa (UBA)’s gross earnings as the lender continues to stamp its foot print across the continent.

For the year ended December 2018, UBA’s interest income increased by 11.44 percent to N362.92 billion as against N325.65 billion the previous year.

The growth in interest income was largely driven by a 58.47 percent increase in income from treasury bills to N107.13 billion in the period under review as against N67.60 billion as at December 2017.

Banks in Africa’s largest economy have refused to extend credit to the economy as they take advantage of a high interest rate environment. For instance Treasury bill yields hovered around 18 percent and 22 percent in 2017 but it is now between 15 percent and 17 percent.

In the last five, UBA has made a total of N2.20 trillion in gross earnings as fees and commission income, foreign exchange revaluation, and commission on turner continues to drive revenue.

As a result of a reduction in foreign exchange income, net income increased by 1.40 percent to N78.60 billion in December 2018 as against N77.54 billion as at December 2017.

“Defying the relatively weak economic growth in Africa, earnings were positive and we grew our balance sheet by 20 percent, driven by the 23 percent growth in our deposit funding. In a period of economic uncertainty, we have focused on retail deposit mobilization, with exciting results,” said Kennedy Uzoka Group Managing Director/CEO, of UBA.

“We recorded a 48 percent year-on-year growth in retail deposits and improved our CASA ratio to 77 percent, optimizing our funding mix, which will enhance our net interest margin (NIM), over the medium term,” Uzoka said.

UBA’s cost to income ratio moved to 64 percent in the period under review from 58.40 percent the previous year; the deterioration in the ratio was largely drive by a 6 percent decline in total operating income despite a operating expenses growing marginally by 4 percent.

Impairment charge was down 86 percent to N4.5 billion in the period under review from N32.9 billion in 2017, bringing Cost of Risk (COR) down to 0.3 percent in December 2018 compared to 2.0 percent  in 2017 and significantly below our forecast of 1.1 percent.

Analysts at CLS Stock Broker had forecast that UBA would have needed to take more provisions on its 9 Mobile exposure as it appeared there were some reversals.

UBA has remained aggressive about lending even amid IFRS 9 implementation as loans and advances to customers rose by 3.36 percent to N1.71 trillion in December 2018 from N1.65 trillion the previous year.

Deposit to customers increased by 23.07 percent to N3.52 trillion in December 2018 from N2.86 trillion the previous year, reflecting increased customer confidence and enhanced service channels.

The bank proposed a final dividend of N0.65/s, bringing total dividend to N0.85/s and implying a dividend yield of 11.4% based on today’s closing price of N7.45/s.

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