BY: CHARLES ABUEDE
United Bank of Africa, which prides itself as African global bank, saw its topline numbers come home respectfully in 2021 with gross earnings rising 6.9 percent year on year to N658.3 billion from N615.8 billion in 2020.
The positive gross earnings were driven by driven by a solid 22.1 percent year on year growth in net interest income to N316.7 billion, and a 22.1 percent year on year jump in fee and commission income to N100.9 billion, which was partially offset by a 70.1 percent decline in net trading and foreign exchange income to N16.4 billion in 2021, from the N54.8 million recorded in 2020.
Consequently, UBA’s profit before tax was up by 20.3 percent year on year to N153.1 billion. This increase was offset by an increase in the effective tax rate to 22.5 percent in full-year 2021 from 14.2 percent in 2020, leading to an after-tax profit of N118.7 billion, compared to N109.2 billion last year, a 8.7 percent year on year growth.
The Group’s earnings per share went from N3.10 in 2020 to N3.39 per share in 2021, with the board proposing a final dividend of N0.80, which brought the total dividend for the financial year ended December 31, 2021, to N1.
Africa’s global bank in the full-year audited financial statement also reported that the earnings from interest income on FVTPL securities fell massively by 93.2 percent year on year to N353 million due to a significant decline in interest income from promissory notes. Nevertheless, UBA’s interest income on amortised cost and FVOCI securities rose 12.1 percent year on year to N473.9 billion due to a 117.7 percent increase in the interest income on loans and advances to banks, resulting in a 22.1 percent year on year increase in net interest income.
According to the results, there was significant growth on a year on year basis in the bank’s fee and commission income, which was offset by a 30.2 percent increase in the fee and commission expenses, resulting mainly from the rise in the E-banking expenses and limiting the net fee commission income growth at 22.1 percent year on year to N100.9 billion in full-year 2021.
The bank’s employee benefit expenses amplified 6.5 percent year on year to N93.2 billion, and the other operating expenses grew by 14.6 percent year on year.
Also, the company’s net trading and foreign exchange income also fell 70.1 percent, majorly from N19.4 billion loss on derivatives. Other operating income spiked 47 percent, owing to a N1.9 billion gain on disposal of property and equipment. As a result, non-interest income dropped 12 percent year on year to N126.3 billion in 2021.
Meanwhile, there was a considerable tumble in impairment charge for credit losses on loans, waning by 56.1 percent year on year to N9.8 billion while impairment charges on financial assets dropped by 34 percent year on year to N3 billion, leaving the net interest income after impairment loss growth at 14.4 percent year on year to N430.1 billion in the first quarter of 2021.
A look at the company’s fourth-quarter performance shows net interest income jumped 19.1 percent year on year to N87.5 billion, majorly from interest income on FVTPL securities during the last three months of 2021.
This was offset by net trading and foreign exchange loss of N10.9 billion in Q4 of 2021, leading to a marginal 1.9 percent year on year growth in operating income to N111.3 billion in the review period.
In another development, a 27.6 percent increase in the total operating expenses eroded the marginal operating income growth, leading to a massive 19.4 percent year on year drop in profit before tax to N29.7 billion during the quarter. The company paid the income tax at an effective tax rate of 52.6 percent in the fourth quarter of 2021, up from 13.2 percent in the year 2020, further resulting in a huge 56 percent year on year drop in the net profit to N14.1 billion.
As reported in the group’s consolidated full-year results, UBA recorded a net loans and advances growth of 7.7 percent to N2.8 trillion, with exposure mostly to resilient economic sectors including oil and gas, agriculture, and manufacturing.
Customers’ deposits grew 12.2 percent, crossing the N6 trillion mark to N6.4 trillion. Also, the bank managed to protect its net interest margin while it achieved a downward moderation of cost of funds (CoF) by 70 basis points to 2.2 percent from 2.9 percent in the prior year through active and diligent assets and liabilities management.
Meanwhile, the Group’s capital adequacy ratio at 24.9 percent is well above the required regulatory minimum and reflects a strong capacity for business growth.
Non-performing loan ratio improved further to 3.6 percent from 4.7 percent at the end of 2020, while the bank’s Cost-to-Income ratio came in at 63 percent at the end of the year.
