According to the recently released H1:2025 financial statements, United Bank for Africa (UBA) recorded an increase of 32.89% YoY in interest income to NGN1.33trn, indicating sustained trend of higher core income business amid the attractive interest rate environment.

This was on the back of the increase in interest earned on cash and bank balances (+136.34% YoY to NGN113.25bn), loan and advances (+18.12% YoY to NGN526.13bn) and investment securities (+33.69% YoY to NGN1.29trn). Interest expense also advanced following the uptick in interest incurred on deposits (+85.05% YoY to NGN478.50bn) and borrowings (+16.65% YoY to NGN80.08bn). As a result, net interest income rose by 14.59% YoY to NGN773.03bn in H1:2025.

Non-interest income Moderates Amid Wanning FX gains: Following a sluggish 1.19% YoY increase in fees and commission income, non-interest income declined by 25.35% YoY to NGN274.34. This contraction in non-interest income was further exacerbated by the slowdown in net trading and FX gains, which slid into a loss of NGN10.05bn, compared to the NGN98.18bn gain recorded in H1:2024. We highlight that the slowdown resulted from the significant 87.46% YoY drop in FX revaluation gain to NGN40.89bn in the review period. This comes without surprise, as exchange rate volatility has been contained in recent months following various policy reforms by the central bank. However, other operating income increased by 64.66% YoY to NGN30.79bn, driven by the 162.12% jump in other income. Overall, gross earnings saw a modest 17.28% YoY expansion to NGN1.61trn in H1:2025.

Bottom-line Stays Roughly Flat: In H1:2025, OPEX rose marginally by 9.61% YoY to NGN520.43bn, essentially driven by employee benefit expenses, which increased by 28.65% YoY to NGN172.21bn. Consequently, bottom-line performance was roughly flat despite the moderate increase in operating costs, mirroring the relatively weak growth in top-line. Profit before tax declined by 3.28% YoY to NGN388.41bn, while profit after tax increased by 5.98% YoY to NGN335.53bn following 37.95% reduction in income tax due to deferred tax income. More so, EPS moderated by 0.45% YoY to NGN8.86 in H1:2025. In terms of profitability ratios, ROE decreased to 21.73%, compared to 23.25% in the previous year, while ROA inched up by 4bps to 2.54% in H1:2025. The bank declared an interim dividend of NGN0.25 (dividend yield of 0.56%), which is well below the NGN2.00 (dividend yield of 5.88%) that was paid to shareholders in the same period in 2024.

Outlook: Going forward, we anticipate an increase in earnings in coming quarters driven particularly by higher core business income amid our expectation of further expansion in the loan book by over 15.00% by year end. Although, we expect non-interest income to slow down due to the stability in the foreign exchange market, we opine that interest should be strong enough to deliver improved year-on-year earnings by FY:2025. As such, we hold an OVERWEIGHT rating on the stock.

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