UBA Plc Offers N0.20 Half-year Dividend, As Non Interest Income Lifts Profit 30% Up

The United Bank for Africa Plc, closed Friday as one of the most sought after stocks, as investors reacted apparently to its audited half-year report presented through the Nigerian Stock Exchange (NSE), highlight of which was that net profit rose at 30%, rose faster than the 13.95% growth in gross earnings for the half-year ended June 30, 2019. UBA Plc’s 7.75m shares changed hands for N45.868m to rank fifth on the transactions volume table for the day, even as the general mood of the market may have hushed reactions to the result.
Help came from the robust 60.08% growth in net trading and foreign exchange income, at a time interest income could only inch 9.39% up, while expense soared 24.33% up.
The directors have recommended a dividend of 20 kobo per share to shareholders on the register of members as at end of Thursday, 12, 2019, from Earnings Per Share of N1.62, compared to N1.23. As a result, the register of members will be closed on Friday, September 13; while payment is slated for Wednesday, September 18, 2019.
Gross earnings for the period rose to N294.032bn from N258.042bn, a breakdown of the figure showed that Nigeria remained the group’s honey-pot, accounting for N211.285bn of revenue, followed by the rest of Africa with N81.241bn, while the rest of the world contributed N11.566bn. A further breakdown showed that the retail banking business contributed the lion’s share of n156.929bn; followed by the corporate banking segment’s N88.212bn; while treasury and financial markets pooled N48.548bn.
Interest income inched to N204.885bn from N187.294bn, driven by the N82.982bn from term loans, up from N71.116bn; overdrafts contributed N16.283bn, down from N24.82bn; even as investment in treasury bills attracted N63.103bn, compared to N43.729bn in 2018; while bonds attracted N24.621bn income, compared to N35.181bn in the preceding half-year. Interest expense was up by 24.33% from N76.218bn to N94.762bn, the biggest chunk- N66.629bn of which went to paying interest on customer deposits, from N48.66bn. This resulted in net interest income of N110.123bn, marginally lower than the previous half-year’s N111.076bn.
Allowance for credit losses on financial assets dropped to N3.12bn to N6.732bn; a breakdown of which showed that allowances for credit losses on customer loans and advances fell significantly from N6.989bn in 2018 to N2bn; just as allowances for credit losses on off-balance sheet items stood at N1.764bn. The effect of which was mitigated by the recoveries on loans written-off which increased from N1.842bn to N2.232bn.
Fees and commission income was up 14.18% from N45.845bn in 2018 to N52.344bn, lifted by the N16.862bn earned from electronic banking, as against the N12.146bn in the prior half-year, followed by the trade transactions income of N7.52bn, a drop from the N10.214bn in 2018. Credit-related fees and commission dropped from N5.503bn to N4.553bn; account maintenance fees inched from N2.913bn to N3.388bb; funds transfer fee, N5.04bn, up from N3.303bn; remittance fee, N4.183bn from N2.468bn; commission on transactional services climbed from N5.981bn to N7.709bn; just as pension funds custody fees dropped slightly from N2.8bn to N2.473bn.
Fees and commission expenses increased by 22.95% from N13.248bn to N16.289bn, of which e-banking expense accounted for N13.192bn from N10.709bn; followed by the N2.334bn funds’ transfer expenses from N116m. This resulted in net fee and commission income of N35.055bn, up from N32.597bn, a 10.61% rise. Net trading income and foreign exchange income soared to N32.746bn from N20.456bn; other operating income however dropped by 14.06% from N4.323bn to N3.715bn.
Employee benefit expenses inched to N37.178bn from N35.214bn; depreciation and amortization increased by 55.72% from N5.659bn to N8.812bn; ‘other operating expense’ was flat at N63.597bn, compared to the N62.831bn in the previous half-year. The biggest portion of this was the N19.992bn contributed into the banking sector resolution cost- Asset Management Corporation of Nigeria (AMCON), up from N14.659bn; followed by fuel, repairs and maintenance cost of N10.685bn, up from N9.392bn.
UBA’s “share of the profit of equity-accounted investee” jumped by 175.81% from N124m in 2018, to N342m.
Profit before tax, therefore, stood at N70.274bn, up from N58.14bn, an increase by 20.87%; tax expense dropped slightly from N14.348bn to N13.535bn; leaving a net profit for the period at N56.739bn, compared with the previous N43.792bn.
Nigeria also accounted for N35.689bn of net profit, or 62.72%; followed by N21.943bn from the rest of Africa; and N5.985bn from the rest of the world; the bulk of net profit for the period came from corporate banking, which pooled N33.309bn, a significant rise from N16.66bn in the corresponding period of 2018. Retail and commercial banking accounted for N13.161bn, up from N11.698bn; just as treasury and financial markets, N10.269bn, a decrease from the N15.43bn of the 2018 half-year.
On the balance sheet, total assets rose to N5.102tr from N4.869tr, boosted by the N1.687tr customer loans and advances, a drop from N1.715tr in 2018; total liabilities climbed from N4.367tr to N4.559tr, out of which customer deposits increased from N3.349tr to N3.51tr. Shareholders’ funds, therefore, rose from N483.469bn to N523.75bn.