September 13, 2023/CSL Research
UBA’s H1 2023 audited numbers showed a strong 66.4% y/y growth in Interest Income to N428.3bn driven mainly by a significant growth in Interest Income on Investment Securities and on cash and bank balances. Net Loans to customers grew 43.5% in H1 compared to December 2022, inclusive of the impact of devaluation on foreign currency loans. Interest Expense also grew strongly, up 88.0% y/y on the back of a 237% y/y growth in Interest Expense on deposits from banks, 80% y/y growth on Interest Expense on Customer Deposits, and a 49% y/y growth in Interest Expense on borrowings. Customer Deposits were up 42.4% in June compared with December 2022. Overall, Net Interest Income was up 56.7% y/y to N278.1bn in June 2023 from N177.5bn in June 2022 and up 32.5% q/q to N158.5bn in Q2 2023 from N119.6bn in Q1 2023.
Net Fee and Commission Income also grew strongly, up 30.7% y/y and 70.2% q/q. The y/y growth was driven by growth in account maintenance (+46.1% y/y), funds transfer fees (+84.4y/y), and commissions on transactional services (up 198.9% y/y). E-banking Income, which made up 40.6% of Fees and Commission in H1 2023 was up 40.6% y/y to N51.1bn, but again capped by high e-banking expense of N41.5bn, thus resulting in a balance of only N9.6bn for net e-banking income.
H1 2O23
|
Source: Company’s Financials, CSL Research.
Other Income (Net Trading and Foreign Exchange Income and Other Operating Income) grew significantly to N427.5bn in H1 2023 compared with 18.3bn in H1 2022. The y/y growth was driven mainly by a significant growth in net fair value gains on derivatives to N348.8bn in H1 2023 from a loss position of N22.6bn in H1 2022. The bank also reported a foreign currency revaluation gain of N29.2bn.
Impairment Charge grew significantly to N153.9bn in H1 2023 from N8.3bn in H1 2022, bringing H1 2023 annualised Cost of Risk to 7.7% compared with 0.6% for H1 2022. The growth in impairment charge can be partly accounted for by the impact of devaluation on impairments on FX loans.
OPEX grew significantly, up 39.8% y/y to N226.4bn. The significantly lower y/y increase in opex compared with a 206.6% growth in Total Operating Income led to a strong improvement in Cost to Income Ratio (ex-provisions) to 28.9% in H1 2023 compared with 63.3% in H1 2022.
Overall, Pre-tax Profit buoyed by strong operating performance and strong derivatives gains grew strongly, up 370.7% y/y to N403.6bn while Profit after Tax was up 437.8%y/y to N378.2bn bringing H1 2023 annualised ROAE to 57.4% compared with 19.7% for FY 2022.
The management proposed an interim dividend of N0.50/s compared with N0.20/s in H1 2022.
We have a Buy recommendation on the stock with a target price target of N18.87/s. Current Price N13.80/s. Our estimates are being reviewed.
Kindly click on the below link to download the full report.
