Kindly click here to download the report.

April 28, 2022/FSDH Research

Key Performance Highlights:

• United Bank for Africa reported stable net profit numbers for 1Q22, with the gross earnings rising a whopping 18.3% YoY and the profit increasing 8.8% YoY to N41.5 billion in 1Q22. The growth in gross earnings was driven by a solid 14.1% YoY growth in net interest income to N84.9 billion, coupled with a 42.9% YoY surge in net trading and foreign exchange income to N15.0 billion and a 20.4% rise in fee and commission income to N42.1 billion in 1Q22 from N35.0 billion in 1Q21. The bank’s Interest income on amortised cost and FVOCI securities rose 15.1% YoY to N124.9 billion due to a 73.4% increase in the interest income on bond investment securities, resulting in a 14.1% YoY increase in net interest income.
   
• A handsome growth in Fee & Commission income (+20.4% YoY) was offset by more than a proportionate increase in Fee & Commission expense (+22.1% YoY), limiting net Fee & Commission income growth at 19.3% YoY to N24.3 billion in 1Q22. The Fee & Commission income was boosted by a 109.2% YoY increase in the trade transactions income to N7.4 billion, supported by a 21.0% YoY rise in the electronic banking income to N15.1 billion, partially offset by a 28.5% decline in Funds transfer fee to N1.8 billion and a 16.0% drop in the commissions on transactional services to N5.8 billion in 1Q22. The company also experienced a massive 230.9% YoY rise in trade-related expenses to N2.5 billion in 1Q22. The group reported a net gain in trading and foreign exchange operations of N15.0 billion, compared to N10.5 billion in the prior-year quarter. The growth was primarily driven by a 435.4% rise in income from fixed income securities to N5.9 billion, offset by a Foreign currency revaluation loss of N955 million this quarter compared to N26 million profit in 1Q21. Resultantly, non-interest income jumped 27.1% YoY to N 41.0 billion in 1Q22. 
   
• The impairment charge for credit losses on loans increased a massive 222.6% YoY to N3.8 billion, owing to a higher allowance for credit loss. However, the impairment charges on financial assets dropped by 56.1% YoY to N371 million in 1Q22 compared to N846 million in 1Q21.
   
• The bank’s employee benefit expenses increased 20.0% YoY to N25.6 billion, and the other operating expenses grew by 21.0% YoY. Consequently, profit before tax was up 9.6% YoY to N44.5 billion in 1Q22 against N40.6 billion in 1Q21. The after-tax profit stood at N41.5 billion, compared to N38.2 billion in 1Q21, 8.8% YoY growth. The group earnings per share went from N1.04/share to N1.14/share in 1Q22.
   
• On a sequential basis, the company recorded a steady 8.8% QoQ growth in gross earnings to N183.9 billion in 1Q22. However, the net interest income declined 2.9% QoQ to N84.9 billion, primarily due to a decrease in interest Income from amortised cost and FVOCI securities. This was offset by net trading and foreign exchange gain of N15.0 billion in 1Q22 compared to a loss of N10.9 billion in 4Q21, leading to a 13.1% QoQ growth in Operating Income to N125.9 billion in 1Q22. The company paid the income tax at an effective tax rate of 6.7% in 1Q22, down from 52.6% in 4Q21, resulting in a humongous 194.7% QoQ jump in the net profit to N41.5 billion in 1Q22.

Market Reaction: United Bank for Africa stock closed 1.23% up at N8.20 on April 27, against a marginal 0.01% rise in the All-Share Index.

United Bank for Africa 1Q22 Earning Highlights

Source: Company Financials, FSDH