United Bank of Africa Plc, on Tuesday joined the league of interim dividend paying banks that have so far presented their audited financials for the half-year ended June 30, 2023. The result came in line with those of its peers, indicating significant growth in gross earnings income on the back of jump in foreign revaluation gains within the period, significant enough to mask the impact of the leap in loan loss provisions made during the half-year.
At the end of the period, the directors recommended an interim dividend of 50 kobo, compared to the previous 20 kobo per share, from Earnings Per Share of N10.95 each from the previous N1.98 each. The dividend is payable electronically on Friday, October 6, to those on the register of shareholders as of Tuesday, September 26, 2023
According to the financials, the UBA Group grew its gross earnings by 164% to N981.78bn as at June 2023, up from N372.36bn recorded last year in June 2022, a breakdown of which showed that Nigeria remains the group’s biggest playfield, contributing N16.747bn, compared to N218.891bn in the comparative period of last year; followed by the N248.157bn from the rest of Africa, up from N150.666bn; and N48.335bn from its global operations, rising from N17.093bn. Interest income jumped from N257.361bn to N428.292bn, helped by the N125.732bn interest from term loans to corporates, which improved from N91.667bn; followed by overdrafts of N37.823bn from N24.027bn; while investment in treasury bills fetched N97.722bn from N57.694bn. ahead of the N90.779bn from bonds, up from N47.303bn. Interest expense also increased from N79.899bn to N150.179bn, the lion’s share of which was the N98.932bn paid on customer deposits, compared to the previous N54.962bn. This resulted in a net interest income of N278.113bn, up from N177.462bn.
Impairment charge for credit losses on loans soared from N11.765bn to N143.932bn, after the impairment charge for credit losses on customer loans and advances increased from N11.101bn to N153.814bn, which included an additional provision of N98bn “expected to serve as buffer towards unfolding economic scenarios,” the management noted in the explanatory notes. The bank’s portfolio impairment (stage 1), it explained, was increased “in line with heightened credit default risk in the portfolio but which are yet to materialise, due to several policy shifts introducing significant changes in the macro-economy.” Also, allowances for credit losses to banks amounted to N2.16bn from N1.001bn. This was mitigated by the recoveries in allowances for credit loss of N13.088bn, up from N941m. Net impairment charges on other financial assets, therefore, stood at N10.012bn from N3.435bn lifted by the N7.848bn impairment charge on investment securities, from Na reversal of N188m in the prior half-year; following which net interest income after impairment on financial instruments dropped to N124.169bn from N169.132bn.
Fee and commission income improved to N125.934bn from N96.395bn, lifted by the N51.076bn income from electronic banking, being income taken on transactions processed via electronic channels such as ATM, POS, mobile banking as well as credit and debit card transactions, rising from N36.324bn; while commission on transactional services of N17.828bn from N5.965bn; and credit-related fees and commissions of N15.87bn, from N15.497bn. Fee and commission expense grew but at a slower pace to N47.638bn from N36.479bn, helped by N41.458bn paid on electronic banking, from N27.279bn; as trade related expenses fell from N6.762bn to N5.086bn, and funds transfer expense of N1.094bn from N2.438bn; leaving net fee and commission income t N79.296bn from N59.916bn.
Net trading and foreign exchange gain rose from N9.145bn in the first half of 2022 to N418.278bn; other operating income was flat at N9.271bn from N9.146bn; employees benefit expenses increased to N69.389bn from N52.295bn; depreciation and armotisation rose marginally to N16.117bn from N13.035bn; other operating expenses climbed up to N140.861bn from N96.568bn, boosted by the N40.917bn banking sector resolution cost paid to the Asset Management Corporation of Nigeria (AMCON), which rose from N31.184bn.
Profit before tax, therefore, rose to N403.647bn from N85.75bn; while income tax expense increased to N25.412bn from N15.415bn; while profit after tax stood at N378.235bn from N70.335bn.
Exchange differences on transaction of foreign operation rose to N282.943bn from a negative N35.469bn.
Total assets increased from N10.761tr to N15.369bn at the end of the last financial year; boosted by the N4.501tr in customer loans and advances, among others. Total liabilities improved from N9.935tr to N13.67tr of which customer deposits accounted for N11.139tr, compared to the previous N7.824tr.
Commenting on the resulting, a statement by the UBA quoted its Group Managing Director/Chief Executive Officer, Oliver Alawuba, as saying the exceptional performance underscored the Group’s commitment to consistently deliver value to its shareholders. UBA, he said, made progress in digital payments, retail penetration and also benefitted from the effect of revaluation gains, arising from the harmonization of foreign exchange rates at the different access windows in Nigeria.
The result, he noted, “also reflects the effect of sizeable revaluation gains, arising from the harmonization of currency exchange rates in Nigeria.
“Our reporting currency found a new exchange level at about N756 to US$1 as of 30 June 2023, compared to N465 at the beginning of the year. The results again demonstrate the benefits of our long-held diversification strategy across Africa and globally. The growth of our international business, most recently in the UAE, only reinforces this earnings quality.
“Our business is on a steady growth trajectory, as we further strengthen our risk management traditions and practices necessary technology investments to deliver premium service to our customers. We have also continued to finance landmark projects in critical sectors of the economies across Africa, facilitating intra-Africa trade with our valuable offerings and provide a versatile last-mile distribution network for Africa-bound donor and multilateral agency funds.”
Continuing, Alawuba said “the three core geographical pillars of our business (Nigeria, Rest of Africa and Rest of the World) are making strong contributions to the Group profit, further justifying our global strategy and business positioning across Africa, UAE, France, UK and USA, and demonstrating the benefits of positioning UBA as the financial intermediary for Africa and the rest of the world.”
On the plans for the rest of the year, Alawuba said: “As we approach the last quarter of the year, the Group remains strategically positioned to sustain the strong performance, consolidating on H1 2023 results, to deliver superior returns to our esteemed shareholders.”
Also commenting, UBA’s Executive Director Finance & Risk, Ugo Nwaghodoh, said the half year 2023 financial numbers reflect an excellent performance across key metrics, as the bank diligently executes its strategic priorities.
“Our HY2023 financial numbers reflect excellent performance across key metrics, as we diligently execute our priorities for the year. Annualized return on average equity at 57.7% was bolstered by improved operating income and revaluation gains.” he explained.
Nwaghodoh also stressed that the Group maintains robust capital buffers to support business growth and loss absorbency. The Group’s shareholders’ funds stood at N1.7trillion, with a capital adequacy ratio of 36.4%”.