The United Bank for Africa (UBA) released its Q1 2020 earnings report ended 31st, March 2020. The bank’s result showed a moderate performance in earnings when compared with the corresponding quarter of 2019. The bank recorded gross earnings of NGN 147.16 billion in Q1 2020 from NGN 131.69 billion in Q1 2019 indicating an increase of 11.75% in earnings year-on-year (y/y). The growth in gross earnings was driven by the collective positive performance of interest income and non-interest income by 10.67% and 11.27% respectively.
Interest income rose by 10.67% to NGN 109.10 billion from NGN 98.59 billion in Q1 2019, supported by growth in interest received on investment securities (T-bills) by 3.46%, interest received on loans and advances to corporations (25.25%) and interest on loans and advances to individuals (21.52%). However, the bank’s loan book spiked by 9.47% to NGN 2.25 trillion in Q1 2020. Also, interest expense advanced by 7.91% from NGN 40.48 billion in Q1 2019 to NGN 43.69 billion in the period under review. The rise in interest expense resulted from the rise in interest paid on borrowings by 5.99% to NGN 10.57 billion, which accounted for about 60% of interest expense. Also, interest expense on bank deposit increased by 103.12% to NGN 5.20 billion while interest expenses on customers deposit dropped marginally by 0.13% to NGN 10.23 billion in the period. Consequently, net interest income settled higher by 12.64% to NGN 65.41 billion from NGN 58.07 billion in Q1 2019.
The bank’s non-interest revenue advanced by 11.27% to NGN 28.52 billion in Q1 2020, propped by increased net gains from trading and foreign exchange income(48.89%) and net fees and commission (11.59%) in the period under review. Although other operating income dropped by 75.16% due to flat dividend income. The increase in foreign exchange income was a result of the drop in fair value loss on the derivative instrument by 99.82%. Operating income stood at NGN 93.34 billion from NGN 83.71 billion, indicating an increase of 12.22% from the corresponding period. Also, operating expense increased by 12.92% to NGN 58.65 billion due to a rise in depreciation expenses (11.56%), personnel expenses (21.47%) and other operating expenses(7.69%). Consequently, the bank’s cost to income ratio stood flat at 62.44% from 62.05% in Q1 2019. The bank recorded a 8.82% and 5.01% increase in profit before tax and profit after tax to NGN 32.72 billion and NGN 30.10 billion respectively.
Net loans and advances in the period under review advanced by 6.48% to NGN 2.30 trillion. Total assets expanded by 13.32% to NGN 6.35 from NGN 5.60 trillion in FY 2019. Also, Customer deposits rose by 11.47% to NGN 4.27 billion from NGN 3.83 trillion in FY 2019. With a blended target price of N12.55, we maintain a BUY rating for UBA stock at current market price, as its trade’s at a discount to our estimated value.