FSDH Initial Reaction: United Bank for Africa 1Q23 results 
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April 17, 2023/FSDH

Key Performance Highlights:

• United Bank for Africa reported a robust set of numbers for 1Q23, with the gross earnings vaulting 47.5% YoY to N271.2 billion and the net profit jumping 29.1% YoY to N53.6 billion in 1Q23. The growth in gross earnings was driven by a solid 53.5% YoY rise in interest income on amortised cost and FVOCI securities (70.7% of 1Q23 gross earnings) to N191.6 billion, coupled with a 24.0% YoY surge in fee and commission income (19.2% of 1Q23 gross earnings) to N52.2 billion in 1Q23 and a 74.5% rise in the Bank’s net trading and foreign exchange income (9.6% of 1Q23 gross earnings) to N26.1 billion in 1Q23. Despite interest expense rising 79.7% YoY to N72.2 billion in 1Q23, primarily driven by increased customer deposits to N49.4 billion, up 65.4% YoY, from N29.9 billion in 1Q22, net interest income vaulted 41.0% YoY to N119.6 billion.
   
• A handsome growth in fee & commission income (+24.0% YoY) was offset by more than a proportionate increase in fee & commission expense (+30.4% YoY), limiting net fee & commission income growth at 19.3% YoY to N29.0 billion in 1Q23. The fee & commission income was boosted by a 38.5% YoY increase in the electronic banking income to N20.9 billion. Moreover, the fee & commission income was supported by a 36.4% YoY rise in the account maintenance fee to N5.3 billion and a 9.3% increase in trade transactions income to N8.1 billion, partially offset by a 5.2% YoY decline in the commissions on transactional services to N5.5 billion. The rise in fee & commission expenses was mainly driven by a 33.7% YoY increase in e-Banking expenses to N19.9 billion versus N14.9 billion in 1Q22.
   
• The Group reported a net profit in trading and foreign exchange operations of N26.1 billion, a 74.5% YoY jump compared to a profit of N15.0 billion in the prior period, primarily driven by a 127.4% YoY growth in the fixed income securities to N13.4 billion in 1Q23 compared to N5.9 billion in 1Q22. However, other operating income for the period declined by 43.5% YoY to N1.0 billion in 1Q23, mainly due to lower income on cash handling of N0.9 billion compared to N1.4 billion in 1Q22, a 36.6% YoY contraction. Consequently, non-interest income soared 36.7% YoY to N56.1 billion in 1Q23. Moreover, the impairment charge for credit losses on loans increased a massive 74.0% YoY to N6.6 billion in 1Q23 from N3.8 billion in 1Q22.
   
• The Bank’s employee benefit expenses grew 22.2% YoY to N31.3 billion primarily due to a rise in wages and salaries, and the other operating expenses vaulted by 49.8% YoY to N69.4 billion in 1Q23. Consequently, profit before tax was up 38.0% YoY to N61.4 billion in 1Q23. UBA paid the income tax at an effective tax rate of 12.7% in 1Q23, up from 6.7% in 1Q22, limiting the after-tax profit growth. Resultantly, the after-tax profit improved by a solid 29.1% YoY to N53.6 billion in 1Q23. The group earnings per share went from N1.14/share in 1Q22 to N1.47/share in 1Q23.
   
• Sequentially, the company recorded a steady 10.7% QoQ growth in gross earnings to N271.2 billion in 1Q23. The net interest income grew 23.4% QoQ to N119.6 billion, primarily due to a 36.8% QoQ increase in interest income from amortised cost and FVOCI securities. However, this was offset by a 37.0% QoQ decrease in net fee & commission income to N29.0 billion in 1Q23, compared to N46.0 billion in 4Q22 and a 22.6% QoQ fall in net trading and foreign exchange to N26.1 billion in 1Q23, compared to N33.7 billion in 4Q22, leading to a marginal 1.6% QoQ contraction in operating income to N175.7 billion in 1Q23. The company paid the income tax at an effective tax rate of 12.7% in 1Q23, down from 13.1% in 4Q22, which helped the company to report a net profit of N53.6 billion in 1Q23 compared to N54.2 billion in 4Q22, a marginal 1.2% QoQ contraction.

Market Reaction: The investor reaction to the robust 1Q23 results was positive as the United Bank for Africa stock increased 0.59% to close at N8.50 on Friday (14/4) against a 0.10% fall in the All-Share Index.

United Bank for Africa 1Q23 Earning Highlights

Source: Company Financials, FSDH