May 3, 2024/CSL Research
UBA’s Q1 2024 unaudited numbers showed a strong 129.7% y/y growth in Interest Income to N440.8bn driven mainly by growth in Interest Income on Investment Securities, loans and on cash and bank balances. Net Loans to customers grew 39.5% in Q1 2024 compared with the December 2023 position, inclusive of the impact of devaluation on foreign currency loans. Interest Expense also grew strongly, up 93.9% y/y. Customer Deposits were up 23.4% in Q1 2024 compared with the December 2023 position. Overall, Net Interest Income was up 151.3% y/y to N300.7bn for Q1 2024 compared with N119.6bn for Q1 2023.
Net Fee and Commission Income also grew strongly, up 114.6% y/y. The y/y growth was driven by growth in account maintenance fee (+74.9% y/y), funds transfer fees (+112.6%y/y), credit-related fees and commissions (+52.9% y/y), Remittance fee (+170.4% y/y) and commissions on transactional services (up 451.3% y/y). E-banking Income, which made up 39.0% of total Fees and Commission in Q1 2024 was up 111.9% y/y to N44.4bn but was wiped off by high e-banking expense of N45.7bn.
UBA Q1 2O24
Source: Company’s Financials, CSL Research.
Other Income (Net Trading and Foreign Exchange Income and Other Operating Income) declined 41.9% y/y to N15.7bn in Q1 2024 from N27.1bn in Q1 2023. The y/y decline was mainly due to Net fair value loss on derivatives of N33.8bn reported in the period. The bank reported minimal FX revaluation gain of N3.9bn in Q1 2024.
Total Impairment Charge (Loan impairments and impairments on other financial assets) declined significantly, down 53.4% y/y to N3.3bn in Q1 2024 from N7.0bn for Q1 2023. Impairment charge for credit losses on Loans of N1.6bn was reported, bringing Q1 2o24 annualised Cost of Risk to 0.1% compared with 3.3% for FY 2023. The bank also reported Impairment Charge on other financial assets of N1.7bn.
OPEX grew significantly, up 104.1% y/y to N219.0bn in Q1 2024 from N107.3bn in Q1 2023 driven by significant growth in Employee benefit expenses (up 112.1% y/y which we attribute to cost of living adjustments), and growth in other operating expenses. Inflationary pressures and increased regulatory costs due to a significantly larger balance sheet pressured other operating expenses. Despite the rise in OPEX, Total Operating Income grew slightly stronger, up 115.5% leading to a moderate improvement in Cost to Income Ratio (ex-provisions) to 57.8% in Q1 2024 compared with 61.1% in Q1 2023.
Overall, Pre-tax Profit buoyed by strong growth in Interest and Fee Income, grew strongly, up 154.7% y/y to N156.3bn while Profit after Tax was up 166.1%y/y to N142.6bn bringing Q1 2024 annualised ROAE to 24.6% compared with 41.2% for FY 2023.
We have a Buy recommendation on the stock with a target price of N41.25/s Current Price N25.80/s.
Kindly click on the below link to download the full report.
UBA Q1 2024 Quick Take.pdf
