Significant Increase in Interest Income: United Bank for Africa (UBA) released its financial statements for the period ended September 2024 which revealed an impressive performance in income from core business. Specifically, interest income rose by 169.99% YoY to NGN1.79trn in 9M’2024 driven by the high yield environment which positively impacted earning assets.

Thus, interest earned on cash (+406.74% YoY to NGN220.99bn), loans and advances (+141.54% YoY to NGN784.08bn) and investment securities (+153.82% YoY to NGN754.49bn) mainly boosted the higher interest income in the review period.

In the same vein, interest expense grew by 211.62% YoY to NGN695.57bn due to the tight financial conditions amidst the contractionary policy stance of the apex bank. As a result, interest paid on deposits from banks (+575.09% YoY to NGN207.05bn), deposit from customers (+153.06% YoY to NGN405bn) and borrowing (+183.16% YoY to NGN80.93bn) contributed mostly to the jump in interest expense. Notably, the increase in interest income exceeded that of interest expense, resulting in a net interest income of NGN1.10trn.

Non-Interest Income Dips Slightly: However, non-interest income came in lower at NGN435.84bn, representing a 24.14% YoY decline. This was on the back of the 59.47% YoY contraction in net trading and foreign exchange income to NGN182.48bn, which outweighed the 115.47% YoY recorded in fee and commission income of NGN392.84bn. The lower trading and foreign exchange income stemmed from the material NGN243.38bn loss from fair value gain on derivatives as against the NGN339.96bn gain recorded in the same period in 2023.

Meanwhile, other operating income rose by 137.85% YoY to NGN23.79bn following the increase in dividend income (+137.22% YoY to NGN10.51bn) and other income (+146.76% YoY to NGN13.00bn).

Bottom line Improves Despite Higher Operating Costs: In 9M’2024, operating expenses amounted to NGN812.20bn, 118.97% YoY higher, given the expansion in employee benefits (+102.88% YoY to NGN225.42bn) and depreciation and amortization (+49.59% YoY to NGN33.82bn). Furthermore, other operating expenses increased by 133.12% YoY to NGN552.96bn due to the rise in regulatory costs, fuel and maintenance and contract services. However, given the strong top line performance, profit before tax stood at NGN603.48bn, while profit after tax increased by 16.92% YoY to NGN525.31bn. Consequently, EPS amounted to NGN14.78 in 9M’2024, compared to NGN12.93 in the corresponding period of 2023. However, ROE and ROA settled at 25.49% and 2.85% in 9M’2024, relative to the 38.93% and 3.94% respectively in 9M’2023.

Outlook: Looking ahead, we postulate that UBA will likely maintain its impressive top line
performance, which should be propelled by higher interest income amid the sustained high yield environment. Furthermore, non-interest income is also expected to improve and support the anticipated expansion in gross earnings by FY’2024. Overall, we remain positive on the bank’s future performance across major income lines.

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