UBA posts positive bottom-line performance as PAT grew 27% y/y to N38.2bn in Q1

Charles Abuede

United Bank for Africa (UBA) Plc in its recently released unaudited financial results for the first quarter ended 31st March 2021 recorded a 25.29 per cent surge in bottom line even as interest income declined by 0.47 per cent during the first three months of 2021. Giving tribute to the banking group’s strong revenue growth and reduction in credit impairments, UBA’s first-quarter profit after tax (PAT) from continuing operations grew 27 per cent year on year to N38.2 billion from N30.1 billion in the corresponding quarter of 2020.

A breakdown of the numbers filed to the local bourse saw that at the bottom of the double-digit earnings growth were increases of 13 to 14 per cent year on year on both revenue lines and a negative year on year reduction by 23 per cent in credit loss impairments. These positives underpinned UBA’s profit before tax (PBT) growth of 24 per cent year on year to N40.6 billion in Q1 2021 from N32.7 billion in 2020. Further down the profit and loss, the PAT growth after other comprehensive income and minorities accelerated by 275 per cent year on year because of the improvement in the Other Comprehensive Income to N70 million as against the loss of N15 billion recorded in Q1 ’20.

Taking a conservative stance on impairments due to uncertainties about the pace of economic recovery and credit defaults in the wake of the coronavirus pandemic, the bank’s Q1 ‘21 PAT implies a return on assets and equities (ROAE) of 20.9 per cent on an annualised basis. But despite the strong set of results, a subdued market reaction is expected due to the current negative investor sentiment.

Further on the company financials, the cost-to-income ratio declined by 200 basis points year on year to 60.4 per cent and these resulted in profit before tax growth of 24 per cent year on year. Consequently, a 200 basis point year on year reduction in income tax expense led to faster growth of 27 per cent year on year on the PAT from the company’s continuing operations line. The trends were also positive on the balance sheet as customer loans and deposits both expanded by 7 per cent quarter on quarter and 2 per cent quarter on quarter respectively. Meanwhile, the group’s operating expenses increased by 10 per cent year on year to N64.5 billion from N58.7 billion in the corresponding period of 2019 as the loan impairment charges declined by 48 per cent year on year to N1.18 billion from N2.26 billion in the previous year.