FSDH Initial Reaction: United Bank for Africa 1Q24 results 
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May 7, 2024/FSDH Research

Key Performance Highlights:

• United Bank for Africa reported a robust set of numbers for 1Q24, with the gross earnings vaulting 110.3% YoY to N570.2 billion and the net profit jumping 166.1% YoY to N142.6 billion in 1Q24. The growth in gross earnings was driven by a solid 129.8% YoY rise in interest income on amortised cost and FVOCI securities (77.3% of 1Q24 gross earnings) to N440.4 billion, further boosted by a 117.8% YoY surge in fee and commission income (19.9% of 1Q24 gross earnings) to N113.7 billion in 1Q24. Despite interest expense rising 93.9% YoY to N140.1 billion in 1Q24, primarily driven by increased customer deposits to N84.6 billion, up 71.1% YoY, from N49.4 billion in 1Q23, net interest income surged 151.3% YoY to N300.7 billion in 1Q24.
   
• Significant growth in fee & commission income (+117.8% YoY) was somewhat offset by more than a proportionate increase in fee & commission expense (+121.7% YoY), limiting net fee & commission income growth at 114.6% YoY to N62.2 billion in 1Q24. The fee & commission income was boosted by the 2.1x YoY rise in the electronic banking income to N44.4 billion and a 5.5x YoY spurt in trade transactions income to N30.3 billion in 1Q24. The rise in fee & commission expenses was mainly driven by a 2.3x YoY jump in e-Banking expenses to N45.7 billion versus N19.9 billion in 1Q23.
   
• The Group’s net profit in trading and foreign exchange operations fell 54.4% YoY to N11.9 billion in 1Q24 compared to N26.1 billion in the prior period, primarily due to fair value loss on derivatives. However, other operating income for the period soared 285.2% YoY to N3.8 billion in 1Q24, mainly due to gain on disposal of property and equipment. Consequently, non-interest income grew 38.9% YoY to N77.9 billion in 1Q24. Moreover, the net impairment charge for credit losses on loans decreased a massive 75.8% YoY to N1.6 billion in 1Q24 (1Q23: N6.6 billion), while the net impairment charges on other financial assets increased a massive 323.0% YoY to N1.7 billion in 1Q24 from N0.4 billion in 1Q23.
   
• In 1Q24, the employee benefit expenses surged 112.1% YoY to N66.3 billion primarily due to a rise in wages and salaries, while other operating expenses soared 105.5% YoY to N142.6 billion in 1Q24 owing to maintenance and contract services, resulting in a 104.1% rise in total operating expenses of UBA. Ultimately, Profit Before Tax increased to N156.3 billion from N61.4 billion in 1Q23, a 154.7% YoY rise. Moreover, UBA paid the income tax at an effective tax rate of 8.8% in 1Q24, down from 12.7% in 1Q23, aiding the after-tax profit growth. The net profit jumped 166.1% YoY to N142.6 billion (1Q23: N53.6 billion). UBA’s Earnings per share significantly surged to N3.96 in 1Q24, up 168.9% YoY, compared to N1.47 in 1Q23.
   
• Sequentially, after blockbuster 4Q23, the Group recorded a 25.6% QoQ decline in gross earnings to N570.2 billion in 1Q24 (4Q23: N766.5 billion). Notably, the net interest income grew 13.7% QoQ to N300.7 billion (4Q23: N264.5 billion) owing to increased interest income from amortised cost and FVOCI securities and lower interest expenses. However, this was offset by a 16.9% QoQ decrease in net fee & commission income to N62.2 billion in 1Q24, compared to N74.8 billion in 4Q23 and a 94.3% QoQ fall in net trading and foreign exchange to N11.9 billion in 1Q24, compared to N209.0 billion in 4Q23, leading to a 33.8% QoQ contraction in operating income to N378.6 billion in 1Q24. The company paid the income tax at an effective tax rate of 8.8% in 1Q24, down from 38.0% in 4Q23, which helped UBA to report a net profit of N142.6 billion in 1Q24 compared to N158.4 billion in 4Q23, a 10.0% QoQ contraction.

Market Reaction: The investor reaction to the solid 1Q24 results was upbeat as the United Bank for Africa stock rose 3.20% to close at N25.80 vs. a 0.83% rise in the All-Share Index on 3/5. Moreover, the stock increased 0.78% to close at N26.00 vs. a 0.89% fall in the All-Share Index on 6/5.

United Bank for Africa 1Q24 Earning Highlights

Source: Company Financials, FSDH