The United Bank for Africa (UBA) released its full-year 2019 earnings report ended 31st, December 2019. The bank’s performance showed persistent improvement in Operating income when compared with the corresponding quarter of 2018. The bank recorded Gross Earnings of NGN 559.80 billion in FY 2019 from N494.04 billion in FY 2018 indicating an increase of 13.31% in earnings year-on-year (y/y). The growth in Gross Earnings was driven by the sustained rise in Interest income and Non-Interest Income by 11.55% and 18.13% respectively.
Interest Income rose by 11.55% to NGN 404.83 billion from NGN 362.92 billion in FY 2018, driven by growth in interest received on Investment securities (T-bills) by 15.24%, interest received on loans and advances to corporations and overdraft facility by 10.71% and 17.57% respectively which further propped the spike in the bank’s loan book by 20.16% to NGN 2.01trillion in FY 2019. Furthermore, Net Interest Income rose by 7.89%, which was supported by the 11.55% y/y growth in Interest Income to NGN 404.83 billion, although Interest Expense advanced by 16.33% from NGN157.27 billion in FY 2018 to NGN 182.95 billion in FY 2019.
The bank’s Non-Interest Revenue continues to drive growth in topline, advancing by 18.13%, propped by increased net gains from trading and Foreign exchange income (18.79%), Other operating income(24.51%) and Net fees and commission (22.24%) in the period under review.
The advancement in fees and commission was a result of the bank’s drive towards its digital banking strategy as its electronic banking and credit-related fees rose by 38.83% and 54.53% respectively.
The Tier 1 lender recorded a 4.23% and 13.13% increase in Profit before tax and Profit after Tax to NGN 111.28 billion and NGN89.8 billion respectively driven by improved growth in operating income and deduction in tax payment.
Asset quality; Loans and advances in the period under review increased by 20.46% to NGN2.06 billion. Total assets expanded by 15.07% to NGN 5.60 trillion from NGN 4.86 trillion in FY 2018. Also, Customer deposits rose by 14.44% to NGN3.83 trillion from NGN3.34 trillion in FY 2018.
The Bank declared a final dividend per share of N0.80K (interim of N0.20k), representing a dividend yield of 12.40%. Our blended target price is N15.33. Along with Our forward P/E x ratio of 2.12x. We recommend a BUY at the current market price, as the stock trade’s at a discount to our estimated value.
Greenwich Research
