United Bank for Africa Plc Q1’20 unaudited results – Higher net interest income buoys earnings

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CardinalStone Research
United Bank for Africa Plc recorded a 5.1% YoY increase in earnings to N30.1 billion in its unaudited Q1’20 result. The growth in earnings was propelled by higher operating income (+12.2% YoY) which offset the increases in impairment charges (+53.1% YoY) and operating expenses (+12.9% YoY).
Highlights:
  • Interest income rose 10.7% YoY, supported largely by higher interest income from loans and advances (+25.0% YoY). The growth in lending based interest income likely relates to the 9.3% increase in gross loans and advances to customers during the quarter. Overall, net interest income increased by 12.6% YoY
  • Non-interest revenue (NIR) rose 11.3% YoY to N28.5 billion in the quarter. Key drivers were 11.6% YoY increase in net fees and commission income and a 48.9% YoY growth in net trading gains. Growth in fee-based income was largely supported by credit (+44.3% YoY) and transaction (+31.8% YoY) related fees; whereas, the increase in net gains mostly reflected much lower derivative losses during the quarter (Q1’20: N10 million; Q1’19: N5.7 billion)
  • Operating expenses climbed 12.9% YoY, nonetheless, the cost-to-income ratio was relatively flat at 62.4% (vs. Q1’19: 62.1%). Personnel expenses (+21.5% YoY) was the notable driver of operating costs during the period. On the other hand, the cost of risk moderated to 0.4% from 0.8% in December 2019 despite the 53.1% YoY increase in loan loss provisions
  • Annualised ROE was 19.9% (December 2019: 16.2%). Gross loans rose 9.3% while deposits from customers rose 11.5% during the quarter.
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