United Bank for Africa plc, a lender operating in 19 countries on the continent, started 2015 on an impressive note as it recorded strong growth in earnings, despite tough operating environment for companies operating in Africa largest economy, Nigeria.
For the first three months through March 2015, UBA’s profit after tax (PAT) surged by 34.71 percent to N16.95 billion, compared with N12.58 billion the same period of the corresponding year (Q1) 2014.
Earnings per share increased by 34.78 percent to 217k in 2015 compared with 161k as of March 2014.
The Nigeria lender’s boost at the bottomline can be attributed to its cost control mechanism.
This translated in reduced cost-to-income ratio (CIR) to 63.90 percent in 2015 from 69.89 percent in 2014.
The low CIR means the Nigeria lender is cutting costs while increasing profit.
UBA’s gross earnings increased by 22.10 percent to N83.09 billion in 2015 as against N68.07 billion in 2014, driven primarily by an increase of 17.55 percent in interest income to N58.66 billion from N49.91 billion over the period.
However, interest expense moved by 35.07 percent to N27.08 billion in 2015 compared with N20.64 billion in 2014. Pending management comments, we attribute the increase in interest expense to rise in interest expense on time and interest expense on savings account.
UBA’s healthy growth is coming at the time when most Nigeria commercial banks are ensnared in regulatory induced costs such as Asset Management Corporation (AMCON) charge and the hike in Cash Reserve Requirements (CRR) by the CBN.
Nigeria lenders are to pay 0.5 percent of their total assets to the AMCON sinking fund; a policy analysts say is bleeding profit of lenders.
Also, the CBN raised its benchmark interest rate by 100 basis points to 13 percent. It said the policy was to control inflation and regulate the economy that had been receiving one to two punches due to falling oil price.
Despite the regulatory headwinds, UBA’s operating expenses rose by a mere 3.45 percent to N32.53 billion in 2015 from N31.43 billion in 2014.
Net margin, a measure of efficiency, increased to 20.40 percent in (Q1) 2015 compared with 18.90 percent in (Q1) 2014.
UBA is less aggressive about lending as loans to deposit ratio reduced to 48.53 percent in 2015 from 50 percent in 2014. This explains the single digit growth in loans and deposits.
Total loans and advances increased by 4.50 percent to N1.16 trillion in 2015 compared with N1.11 trillion in 2013.
Total deposits from customers jumped by 7.65 percent to 2.39 trillion in 2015 compared with N2.22 trillion in 2014.
Total assets were up by 7.24 percent to N2.96 trillion in 2015, as against N2.76 trillion as of March 2014.
UBA’s share price closed at N4.92 on the floor of the NSE, while market capitalisation was N159.96 billion.
BALA AUGIE
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