October 22, 2024/CSL Research

UBA’s 9M 2024 unaudited numbers showed a strong 170.0% y/y growth in Interest Income to N1,798.9bn driven mainly by growth in Interest Income on Investment Securities and loans. Q/q, Interest Income was up 41.3% in Q3 2024 compared with Q2 2024. Net Loans to customers grew 46.8% in 9M 2024 compared with the December 2023 position, inclusive of the impact of devaluation on foreign currency loans. Interest Expense also grew strongly, up 211.6% y/y and 94.1% q/q bringing 9M 2024 Cost of Funds (CoF) to 3.99% c0mpared with 2.65% for FY 2023. Customer Deposits were up 54.2% in 9M 2024 compared with the December 2023 position. Overall, Net Interest Income was up 149.0% y/y to N1,103.3bn in 9M 2024 compared with N443.1bn in 9M 2023. Net Interest Margin was up to 8.03% compared with 6.83% in 9M 2023.

Net Fee and Commission Income saw a significant y/y increase, rising by 104.6% y/y though quarter-on-quarter (q/q) growth was more moderate at 7.0%. The strong y/y growth was driven by notable increases in several fee lines: Commission on turnover surged by 201.0%, account maintenance fees grew by 45.2%, funds transfer fees increased by 163.1%, credit-related fees and commissions rose by 161.0%, remittance fees jumped by 175.3%, and trade transactions were up 62.3%. E-banking income, which accounted for 36.8% of total Fees and Commissions in the first nine months of 2024, grew by 90.8% y/y to reach N144.5 billion. However, this growth has been consistently offset by high e-banking expenses, which amounted to N135.4 billion, resulting in a net e-banking income of N9.1 billion.

​

UBA 9M 2O24

​

Source: Company’s Financials, CSL Research.

Other Income (Net Trading and Foreign Exchange Income, Other Operating Income and Net monetary loss on hyperinflation) declined 56.1% y/y to N201.99bn in 9M 2024 from N460.3bn in 9M 2023. Q/q, Other Income also declined, down 15.8% in Q3 2024 to N85.1bn compared with 101.1bn in 9M 2024. The y/y decline was mainly due to Net fair value loss on derivatives of N243.4bn reported in 9M 2024 compared with a gain of N339.96bn in 9M 2023. The bank however reported strong FX revaluation gain of N251.4bn in 9M 2024 compared with only N32.6bn in 9M 2023.

Total Impairment Charge was down 14.6% y/y to N123.5bn in 9M 2024 from N144.6bn in 9M 2023 bringing 9M 2024 annualised Cost of Risk to 2.4% compared with 3.1% for FY 2023. NPL ratio grew to 7.32%. in 9M 2024 while NPL coverage improved to 99.8% from 77.55% in December 2023.

OPEX grew significantly, up 119.0% y/y to N812.2bn in 9M 2024 from N370.9bn in 9M 2023 driven by significant growth in Employee benefit expenses (up 102.9% 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 a slower growth in Total Operating Income, up 51.3% y/y led to a steep deterioration in Cost to Income Ratio (ex-provisions) to 52.8% in 9M 2024 compared with 36.4% in 9M 2023.

Overall, Pre-tax Profit increased 20.2% y/y to N603.5bn while Profit after Tax increased by 16.9%y/y to N525.3bn bringing 9M 2024 annualised ROAE to 24.95% compared with 41.2% for FY 2023. Q/q however, Pre-tax profit was down 17.7% in Q3 compared with Q2.

We have a Buy recommendation on the stock with a target price of N41.25/s Current Price N26.50/s.

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

​​​UBA 9M 2024 Quick Take.pdf​​​​​​​