As Contributions From African Operations Rise Further
Despite the seemingly unfriendly operating environment, the board of United Bank for Africa Plc, on Friday published its audited financials for the year ended December 31, 2019, indicating double-digit growth in earnings income and net profit.
The result showed that while the bottom-line could have been relatively more robust, were it not for the 303% rise in allowance made by the group for credit loss on financial and non-financial instruments which jumped from N4.529bn to N18.252bn. The impact was however slightly mitigated by the 21.17% reduction in tax expenses.
Specifically, gross earnings for the period jumped 13.3% up from N494.464bn in 2018 to N559.805bn, of which N400.803bn was derived from its Nigerian operations, as against the previous N338.798bn; followed by N166.267bn from the rest of Africa, from N151.977bn; just as other parts of the world contributed N17.771bn, as against N14.179bn.
A further breakdown of the group’s earnings, according to the operating segments revealed that the retail and commercial business took the lead with N303.161bn, up from N283.865bn; followed by corporate banking wit N156.75bn, as against the previous N122.951bn; while treasury and financial markets garnered N99.894bn from N87.229bn.
The amount was boosted by the interest income of N404.83bn, up by 11.55% from the prior year’s N362.922bn, lifted by N162.274bn derived from term loans, up from N146.577bn; followed by N162.274bn earned from overdrafts, which fell slightly from N37.551bn. while investments in treasury bills contributed N123.47bn, from N107.137bn; and N40.209bn from bonds, a decline from N47.021bn in 2018.
Interest expense increased by 16.33% to N182.955bn, up from N152.276bn, the lion’s share of which was the N125.046bn interest paid on customer deposits, compared to the previous N106.01bn; and N41.408bn on borrowings, which rose from N35.151bn.
This left a net interest income of N221.875bn, an increase of 7.89% from N205.646bn in the preceding year, just as net interest income after impairment on financial and non-financial instruments stood at N203.623bn, slightly above the previous year’s N201.117bn.
Fees and commission income grew by 17.62% to N110.561bn from N93.997bn, boosted by the N38.766bn income from electronic bank, which rose from N27.923bn; ahead of the N15.155bn commissions on transactional services, as against the previous N13.009bn; while trade transactions income fell from N19.492bn to N14.127bn; among others. Fees and expense rose marginally from N28.551bn to N30.557bn, with electronic banking expense alone gulping N28.454bn, from N23.758bn; after trade-related expenses dropped to N1.541bn from N4.391bn; following which net fee and commission income stood at N80.004bn, as against the preceding full-year’s N65.446bn, representing a 22.24% notch.
Net trading and foreign exchange income climbed to N37.627bn, from N31.675bn, of which foreign exchange trading income contributed N24.563bn, down from N29.872bn; while net fair value gain on derivatives slowed down from N26.58bn to N12.594bn. The figure would have been even more robust but for the forex revaluation loss of N10.171bn, down from N31.482bn. Other operating income was up 24.54% from N5.451bn to N6.787bn; just as total non-interest income improved by 21.3% to N124.418bn from N102.572bn. Operating income, therefore, increased by 8.02% from N303.689bn to N328.041bn.
Employee benefit expenses inched 5.54% up to N75.099bn from N71.158bn; depreciation and amortization, at N15.49bn increased by 31.26% from N11.801bn; other operating expenses notched 10.66% from N114.383bn to N126.578bn. Total operating expenses also increased by 10.05% to N217.167bn from N197.342bn, mainly driven by the N23.057bn spent on fuel, repairs, and maintenance, which rose marginally from N22.053bn; ahead of the N19.992bn banking sector resolution cost, rising from N16.628bn.
Profit before tax for the period was up 4.23% from N106.76bn to N111.287bn; while the drop in tax expense from N28.159bn to N22.198bn left net profit at N89.089bn from N78.607bn, which translated to N2.52 earnings per share, up from N2.20 in the similar period of 2018.
A breakdown of the net profit showed that the percentage contribution from the group’s Nigerian business stood at N55.946bn, or 62.79%; up from N39.41bn while the rest of Africa pooled a significant N40.865bn, compared to the previous N31.736bn. Corporate banking, however, remained the most profitable operating segment with its N47.903bn, up from N34.373bn in 2018; ahead of the N24.355bn by the retail and commercial business, compared to N16.513bn; and N16.831bn by treasury and financial markets segment, down from N27.721bn in the preceding year.
The directors have, therefore, proposed a dividend per share of 80 kobo for approval at the annual general meeting, which if approved as expected, brings total payout for the 2019 financial year to N1.00 per share, considering that the bank had paid an interim dividend of 20 kobo per share at half-year. The final dividend is also an improvement over the 65 kobo paid in 2018.