September 30, 2024/CSL Research

UBA’s H1 2024 audited numbers showed a strong 134.3% y/y growth in Interest Income to N1,003.6bn driven mainly by growth in Interest Income on Investment Securities and loans. Q/q, Interest Income was up 27.7% in Q2 2024 compared with Q1 2024. Net Loans to customers grew 29.9% in H1 2024 compared with the December 2023 position, inclusive of the impact of devaluation on foreign currency loans. Interest Expense also grew strongly, up 119.0% y/y and 34.8% q/q bringing H1 2024 Cost of Funds (CoF) to 3.08% c0mpared with 2.65% in H1 2023. Customer Deposits were up 34.9% in H1 2024 compared with the December 2023 position. Overall, Net Interest Income was up 142.6% y/y to N674.6bn for H1 2024 compared with N278.1bn in H1 2023. Net Interest Margin was up to 8.28% compared with 6.83% in H1 2023.

Net Fee and Commission Income saw a significant increase, rising by 85.3% y/y and 33.4% q/q. The strong y/y growth was driven by notable increases in several fee lines: Commission on turnover surged by 203.2%, account maintenance fees grew by 41.0%, funds transfer fees increased by 188.7%, credit-related fees and commissions rose by 147.3%, remittance fees jumped by 228.2%, and trade transactions were up 83.4%. E-banking income, which accounted for 41.3% of total Fees and Commission in H1 2024, grew by 107.8% y/y, reaching N106.2 billion. However, this growth was tempered by high e-banking expenses of N83.2 billion, resulting in a net e-banking income of N23.0 billion.

UBA H1 2O24

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Source: Company’s Financials, CSL Research.

Other Income (Net Trading and Foreign Exchange Income and Other Operating Income) declined 72.7% y/y to N116.9bn in H1 2024 from N427.5bn in H1 2023. Q/q, Other Income grew strongly, up 542.5% in Q2 2024 to N101.1bn compared with 15.7bn in Q1 2024. The y/y decline was mainly due to Net fair value loss on derivatives of N311.7bn reported in H1 2024 compared with a gain of N384.4bn in H1 2023. The bank however reported strong FX revaluation gain of N326.2bn in H1 2024 compared with only N29.2bn in H1 2023.

Total Impairment Charge (Loan impairments and impairments on other financial assets) declined significantly, down 60.9% y/y to N60.2bn in H1 2024 from N153.9bn in H1 2023. Impairment charge for credit losses on Loans of N58.6bn was reported, bringing H1 2o24 annualised Cost of Risk to 1.7% compared with 3.3% for FY 2023. NPL ratio grew to 6.18%. in H1 2024 from 5.85% in H1 2023 while NPL coverage declined to 63.73% from 77.55% in H1 2023.

OPEX grew significantly, up 109.7% y/y to N474.8bn in H1 2024 from N226.4bn in H1 2023 driven by significant growth in Employee benefit expenses (up 92.9% y/y which we attribute to cost of living adjustments), and a significant growth in other operating expenses. Inflationary pressures, exchange rate devaluation and increased regulatory costs due to a significantly larger balance sheet pressured other operating expenses. The strong growth in OPEX compared with only a moderate growth in Total Operating Income, up 19.5% y/y led to a steep deterioration in Cost to Income Ratio (ex-provisions) to 50.7% in H1 2024 compared with 28.9% in H1 2023.

Overall, Pre-tax Profit declined marginally 0.5% y/y to N401.6bn while Profit after Tax declined by 16.4%y/y to N316.4bn due to a steep rise in tax rate to 21.2% in H1 2024 compared with 6.3% in H1 2023 bringing H1 2024 annualised ROAE to 25.2% compared with 41.2% for FY 2023. Q/q however, Pre-tax profit was up 56.9% in Q2 compared with Q1.

The bank’s management proposed an interim dividend of f N2.00/s compared with N0.50/s last year. This has excited investors resulting in a 10% increase in its share price post the announcement.

We have a Buy recommendation on the stock with a target price of N41.25/s Current Price N28.30/s.

Kindly click on the below link to download the full report.

​UBA H1 2024 Quick Take.pdf​​​​​​​