April 23, 2025/Cordros Report

United Bank for Africa Plc (UBA) published its Q1-25 interim financials today (April 23), recording a 35.1% y/y growth in EPS to NGN5.35 (Q1-24: NGN3.96). The expansion in the group’s earnings was underpinned by impressive growth across its core (+36.1% y/y) and non-core (+44.2% y/y) income lines in the review period.

The group recorded a 36.1% y/y growth in interest income to NGN599.83 billion, supported by the still elevated yields amid an increase in the group’s earning assets (+3.1% YTD to NGN26.26 trillion). Analysing by contributory lines, UBA recorded higher income from investment securities (+45.0% y/y to NGN291.86 billion), loans to customers (+17.4% y/y to NGN229.35 billion), placement with banks (+17.0% y/y to NGN47.42 billion), and loans to banks (+770.6% y/y to NGN31.20 billion).

UBA recorded a 77.0% y/y growth in interest expense to NGN247.96 billion, as the high interest rates also resulted in higher funding costs. Parsing through the breakdown, the group incurred higher costs on its deposits – customers (+98.4% y/y to NGN167.82 billion) and banks (+85.8% y/y to NGN53.44 billion) – amid a soft decline in borrowing costs (-0.3% y/y to NGN26.33 billion). Accordingly, the group’s net interest income grew by 17.0% y/y to NGN351.88 billion, while net interest income ex-LLE settled 13.6% y/y higher at NGN337.70 billion after accounting for the NGN14.18 billion in impairment charges.

Further supporting earnings, non-interest income advanced during the period by 44.2% y/y to NGN112.36 billion, driven majorly by gains from net fees and commission income (+15.7% y/y to NGN71.96 billion) and investment securities (+230.6% y/y to NGN20.46 billion), which offset the declines in FX trading (-21.1% y/y) and FX revaluation gains (-1.4% y/y). Consequently, operating income rose by 19.9% y/y to NGN450.06 billion.

Further down, operating expenses grew by 12.3% y/y to NGN245.79 billion, triggered by increasing regulatory costs and persistent inflationary pressures. Precisely, the group incurred higher costs on personnel expenses (+27.2% y/y to NGN84.32 billion), AMCON (+28.4% y/y to NGN22.94 billion), and NDIC premium (+19.2% y/y to NGN12.83 billion). Nonetheless, given that the group’s operating income grew faster than the operating expenses, cost-to-income ratio settled lower at 54.6% (Q1-24: 58.3%).

Overall, profit before tax grew by 30.7% y/y to NGN204.27 billion, while profit after tax expanded by 33.1% y/y to NGN189.84 billion following a 4.8% y/y increase in income tax expense.

Comment: The elevated interest rate environment remains supportive for banks, acting as a catalyst for core earnings growth. We expect UBA to continue leveraging the high-yield backdrop to grow interest income, while increased digital adoption should sustain momentum in non-core income. Our estimates are under review.