FSDH Initial Reaction: United Bank for Africa FY23 results 
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April 15, 2024/FSDH Research

Key Performance Highlights:

• The United Bank for Africa posted solid financial results for FY23 despite soaring inflation and currency depreciation ravaging key markets amidst pockets of regional conflicts and security challenges. The Company’s Gross Earnings remarkably increased by 143.3% YoY to N2,075.4 billion, and the Net Profit jumped 3.6x to N607.7 billion in FY23. The growth in Gross earnings was primarily driven by a robust 92.8% YoY growth in Interest Income on amortized cost and FVOCI securities (51.7% of FY23 gross earnings) to N1073.2 billion, a 46.0% YoY rise in Fee and Commission Income (14.8% of FY23 gross earnings) to N307.3 billion, and a solid spike in Net trading and foreign exchange income (31.8% of FY23 gross earnings) to N659.2 billion from N72.1 billion a year ago. Despite the Interest Expense doubling to N367.8 billion, mainly due to higher customer deposits, the Net Interest Income surged 86.4% YoY to N707.5 billion. Revenue growth was visible across all segments, with Treasury & Financial Markets segment revenues increasing 207.2% YoY to N498.2 billion Vs. N162.2 billion in FY22. The growth in Loans and Advances was mainly driven by the Retail and Commercial segment, of 180.4% YoY.
   
• Net Fee and Commission income surged 47.8% YoY to N189.0 billion in FY23, compared to N127.9 billion a year ago. The growth in Fee and Commission Income (up 46.0% YoY) was partially offset by the increased Fee and Commission Expenses, up 43.2% YoY to N118.2 billion compared to N82.6 billion in FY22. The Fee and Commission Income growth was primarily driven by higher Electronic banking income, Funds transfer fees, Commissions on transactional services and Credit-related fees and commissions. Further, the higher Fee and Commission expenses primarily reflected increased E-banking expenses during the year.
   
• UBA’s FY23 Net trading and foreign exchange income shot up to N659.2 billion from a mere N72.1 billion in the prior year, largely due to the net fair value gain on derivatives, which soared to N457.2 billion from N6.5 billion in FY22. Other Operating Income also more than doubled to N33.5 billion, compared to N13.0 billion in the previous year, mainly due to higher dividend income. The Impairment charge for credit losses on loans increased substantially to N144.0 billion from N19.7 billion a year ago. As a result, the total non-interest income surged 4.13x to N881.8 billion in FY23.
   
• The Group reported a Net monetary loss on hyperinflation in FY23 (4Q) of N32.8 billion (FY22:0) (IMF considered Ghana and Sierra Leone as hyperinflationary economies from FY23). The Employee benefit Expenses surged 60.4% YoY to N182.8 billion, while Other operating expenses soared 77.4% YoY to N372.2 billion in FY23, resulting in a 78.4% rise in total Operating Expenses of UBA. Subsequently, Profit Before Tax climbed to N757.7 billion from N200.9 billion in FY22. Although Income tax expense significantly increased to N150.0 billion, compared to N30.6 billion in the previous year, Net Profit jumped 256.9% YoY to N607.7 billion (FY22: N170.3 billion). UBA’s Earnings per share demonstrated a significant surge to N17.49 in FY23 (FY22: N4.84).
   
• Looking at the quarterly performance, UBA posted solid 4Q23 numbers, with Gross Earnings almost tripling compared to last year at N766.5 billion. This was driven by strong growth in both the Net Interest Income as well as the Non-Interest Income during the quarter. Although operating expenses increased during 4Q23, Profit Before Tax shot up to N255.6 billion from N62.2 billion. Net Profit for the quarter increased 193.3% YoY to N158.4 billion in 4Q23 vs. N54.0 billion in 4Q22.
   
• The bank’s total assets rose remarkably from N10.9 trillion in FY22 to close at N20.6 trillion in December 2023. Further, UBA Group’s cost-to-income ratio dropped from 59.2% in FY22 to 37.2%, reflecting the Group’s improving efficiency. UBA recorded a 61.3% growth in loans to customers, moving up to N5.5 trillion in FY23, while customer deposits improved by 90.3% to N14.9 trillion, compared to N7.8 trillion recorded in FY22, reflecting increased customer confidence, enhanced customer experience, successes from the ongoing business transformation program and the deepening of its retail banking franchise.
   
• UBA proposed a final dividend of N2.30 per share for every ordinary share of 50 kobo, bringing the total dividend for the year to N2.80 (FY22: N1.10). The final dividend is subject to the ratification of the shareholders during its upcoming AGM.

Market Reaction: The investor reaction to the FY23 results was buoyant as the United Bank for Africa stock rose 4.57% to close at N26.30 against a 0.71% decline in the All-Share Index on 12/4.

United Bank for Africa FY23 Earning Highlights

Source: Company Financials, FSDH