…The group recorded a 170.0% y/y growth in interest income to NGN1.80 trillion, driven by higher income recorded across all contributory lines
…In nominal terms, UBA recorded higher income from investment securities (+166.3% y/y to N793.82 billion), loans to customers (+123.7% y/y to N665.16 billion), placement with banks (+406.7% y/y to N220.99 billion), and loans to banks (+335.5% y/y to N118.93 billion)
MON OCT 21 2024-theGBJournal| United Bank for Africa Plc (UBA) overall, profitability grew stronger as the group’s profit before tax rose by 20.2% y/y to N603.48 billion, in 9M-24, driven by strong funded income growth.
The bank in its 9M-24 financials published today, also reported 14.3% growth in earning per share (EPS) to N14.78 (9M-23: N12.93).
The group recorded a 170.0% y/y growth in interest income to N1.80 trillion, driven by higher income recorded across all contributory lines.
In nominal terms, UBA recorded higher income from investment securities (+166.3% y/y to N793.82 billion), loans to customers (+123.7% y/y to N665.16 billion), placement with banks (+406.7% y/y to N220.99 billion), and loans to banks (+335.5% y/y to N118.93 billion).
The growth in these income lines was supported by the impact of the higher yield environment and the significant rise in the group’s interest-earning assets (+72.1% YTD to N28.20 trillion).
UBA’s interest expense grew by 211.6% y/y to N695.57 billion in 9M-24, largely reflecting the elevated rates in the debt market, and driven by incurred higher costs on deposits from customers (+153.1% y/y to N405.00 billion), deposits from banks (+575.1% y/y to N207.05 billion) and borrowings (+183.2% y/y to N80.93 billion) in the review period.
Consequently, the group recorded an expansion in net interest income (+149.0% y/y) and net interest income ex-LLE (+228.3% y/y) after accounting for the 14.6% y/y decline in credit impairment charges.
Non-interest income declined during the period by 24.1% y/y to N435.84 billion as the fair value loss on derivatives (N243.38 billion) undermined the gains from foreign exchange revaluation (+671.2% to N251.37 billion), net fees and commission income (+104.6% y/y to N233.85 billion), FX trading (+222.0% y/y to N91.39 billion), and investment securities (+68.5% y/y to N83.10 billion).
However, the sturdy growth in interest income was enough to outstrip the decline in non-interest income, causing operating income to grow by 62.2% y/y to N1.42 trillion.
Further down, operating expenses grew by 119.0% y/y to N812.20 billion, triggered by increases in the group’s regulatory and personnel costs.
Precisely, the group incurred higher costs on personnel expenses (+102.9% y/y to N225.42 billion), fuels, repairs and maintenance (+127.9% y/y to N104.07 billion), AMCON levy (+71.9% y/y to N70.33 billion), and NDIC premium (+110.1% y/y to N34.21 billion) in 9M-24.
Nonetheless, given that the group’s operating expenses grew faster than operating income, UBA’s operational efficiency deteriorated as the cost-to-income ratio (ex-LLE) settled at 57.4% (vs 42.5% in the prior year).
Analysts at Cordros Research say they are optimistic that the group’s earnings will continue to expand in Q4-24 positively, ”supported mainly by the impact of elevated interest rates and improved risky asset creation in the forecasted period.”
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