Union Bank, a tier-two financial institution, has revealed in its latest financial report for the first quarter of 2023 that 80.8 percent of its interest income was generated from loans and advances to customers.
“Banks’ interest income, which is the core income from loans and advances to customers, investment securities and cash and cash balances, are mostly driven by interest rate hikes,” Tesleemah Lateef, banking analyst at Cordros Securities Limited, said.
“A loan is given to customers which is backed by the interest rate during the period. At the current interest rate, it is expected that banks reprice assets, which is to increase the rate to be more beneficial to them,” Lateef said.
During the period under review, interest income surged by 25.47 percent, reaching N39.6 billion compared to N31.56 billion recorded in the same period last year.
Simultaneously, loans and advances extended to customers experienced a significant boost, accounting for N32.01 billion compared to N24.9 billion recorded in the corresponding period last year, a growth rate of 28.56 percent.
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Within the interest income category, investment securities witnessed an increase of 61.54 percent. Investment securities rose to N6.3 billion in the first quarter of this year, up from N3.9 billion recorded in the same period last year.
Interest expense saw an increase of 63.9 percent to N29.85 in the first quarter of 2023 from N18.21 billion in the same quarter of 2022.
Profit after tax also saw an increase of 127.6 percent to N12.63 billion in the first quarter of 2023, from N5.55 billion recorded in the same period of last year.
Income tax increased by 70.97 percent N489 million in the first quarter of 2023, from N286 million in the same period of last year.
Fees and commission income however saw a decrease of 4.44 percent to N4.08 billion in the period under review from N4.27 billion recorded in the same period of last year.
Fees and commission expenses saw an increase of 22 percent to N1.09 billion from N893 million in the same quarter of last year.
Operating expenses increased by 15 percent from N11.97 billion in the first quarter of 2023 to N10.4 billion in the same period of last year.
Net cash flow generated used in operating activities saw a decrease of 95.8 percent N2.83 billion in the first quarter of 2023 from N67.96 billion in the same period of last year.
Net cash flow used in investing activities recorded a negative of N113.12 billion in the period under review from a positive figure of N43.38 billion in the same period of 2022 on the back of a loss recorded in the acquisition of investment securities amounting to N111.13 billion.
Cash and cash equivalents at the end of the period amounted to N245.78 billion, a 28.48 percent decrease from N 343.67 billion recorded in the same period last year.
