The recently published FY:2025 financial result by United Bank for Africa (UBA) showed that interest income amounted to NGN2.65trn, which reflects an underwhelming 9.87% YoY growth. Although interest earned on cash and bank balances (+26.89% YoY to NGN185.37bn) and investment securities (+22.12% YoY to NGN1.47trn) saw considerable increases, the relatively weak growth in interest income can be traced to the 2.73% YoY decline in interest on loans and advances to NGN993.45bn, underpinned by the absence of a substantial expansion of the loan book, which moderated by 0.68% YoY by the end of 2025.

Meanwhile, interest expense grew at a faster pace of 19.97% YoY to NGN1.03trn, driven by the contraction in Current Account & Savings Account (CASA) mix (86.35% in FY:2025 vs 88.34% in FY:2024), as more costly term deposits dominated the rise in deposits. 

We anticipate an improvement in earnings for FY:2026 despite the relatively slow start in the first quarter. Based on our estimates, we expect PAT to reach NGN615.65bn by year end.  This premise is based on our expectation of stronger loan growth (36.43% in FY:2026 vs 0.68% in FY:2025) and a modest average growth rate of 23.96% over our 5-year forecast period, compared to 25.00% in the past five years.

We expect this, accompanied with effective risk management, to amplify earnings assets, which should translate to better asset yield and higher interest income. Moreover, as interest rates remain relatively attractive, we expect investment in securities to support asset yield optimization.

Additionally, we see scope for better performance in terms of non-interest income, supported by a recovery in credit related fee and commission and stronger trade transaction income. Overall, we expect the improvement in earnings to prompt resumption in dividend payment this year. Consequently, we maintain a STRONG BUY rating on the ticker, with an implied return of 22.19% from the current price.

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