By Peter OBIORA InvestAdvocate

Lagos (INVESTADVOCATE) – The recent performance of the United Bank for Africa Plc (UBA) recently released Half Year (H1) 2013 unaudited result is mainly driven by 20.1 percent (20.1%) growth in interest income to N88.6 billion compared to N73.8 billion it recorded in H1 2012.

Afrinvest Research Flashnote on UBA’s H1 2013 result affirmed that the bank recorded impressive growth in key parameters with topline growing 16.7% to N125.9bn. “The bank’s PAT had a 5.0% marginal notch to N28.4 billion (H1 2012: 27.1 billion),” the Afrinvest Flashnote said.

According to the flashnote, UBA is obviously leveraging the new business model as discussed in the Afrinvest’s 2013 Banking Sector Report: “Standing on the 4th Pillar”.

The flashnote affirmed that the new 50.0% CRR on public funds remain a serious headwind to our outlook, given UBA’s 71.2% exposure to public sector deposits as at FY 2012.

Also, it said the recent improvement in the Bank’s Information Technology (IT) platform impacted on its cost margin as operating expenses (OPEX) grew 12.0% while Cost to Income ratio declined 500bps to 58.3% from the 64.3% recorded the previous period.

Afrinvest said UBA’s strategy to reduce the impact of the Central Bank of Nigeria’s (CBN’s) new charges regime appears to be yielding results as cost of funds pegged at 3.4% in H1 2013. “In addition, the Bank’s “other Income” grew 17.1% to N37.4bn even as fees and commissions across the industry head south,  most of UBA’s African subsidiaries recorded profits in H1 2013 and outlook on UBA Senegal remain key and positive” Afrinvest report said.

The Flashnote further affirmed that from the balance sheet perspective, UBA grew total deposits to N2.0 trillion (a 13.5% Y-o-Y growth) in H12013, while the total assets now stand at N2.4 trillion. Net loans for the period was N761.2bn, an increase of 10.7% over FY2012 position.

The report said the bank however maintained strong risk ratios with 22.3% CAR, 53.5% liquidity ratio and Non Performing Loan (NPL) ratio of 2.0% (3.2% tier-1 average as at FY 2012).

“We expect mild deviation from these numbers (save for liquidity ratio) for FY 2013. We raise eyebrow on the unavoidable impact of the new 50% CRR on the bank going forward. Public sector deposits accounts for approximately 71.2% of the banks N1.8tn deposits as at FY 2012. This translates to about N1.3 trillion, to which additional 38.0% CRR applies and subsequently 50%,” Afrinvest Flashnote said.