UBA records N1.80trn interest income in Q3, 2024

Onome Amuge

The latest financial report released by United Bank for Africa Plc (UBA) today, October 21, has revealed a 170.0 percent year-on-year growth in core income.

The stellar performance, according to an assessment by Cordros Securities, was substantial enough to counterbalance a decline of 24.1 percent in non-core income, resulting in 14.3 percent growth in earnings per share (EPS) to N14.78 (9M-23: NGN12.93).

UBA recorded  170.0 percent year-on-year growth in interest income, climbing to N1.80 trillion. This impressive performance was driven by higher income across all contributory lines, with significant increases seen in investment securities (+166.3% y/y to N793.82 billion), loans to customers (+123.7% y/y to N665.16 billion), placement with banks (+406.7% y/y to N220.99 billion), and loans to banks (+335.5% y/y to N118.93 billion).

As highlighted by Cordros Securities, the impressive growth across UBA’s income lines was propelled by the rise in the yield environment, coupled with a 72.1 percent year-to-date increase in the group’s interest-earning assets to N28.20 trillion.

UBA’s interest expense witnessed a 211.6 percent year-on-year growth, amounting to N695.57 billion in the nine months period of 2024. The growth was largely attributed to the elevated rates in the debt market, which resulted in higher costs across several key components of the group’s interest expense.

In a further examination of the contributing factors to UBA’s heightened interest expense, it was found that deposits from customers, deposits from banks, and borrowings experienced significant year-on-year increases in costs.

This is as deposits from customers saw a 153.1 percent increase, amounting to N405.00 billion in the 9-month period from January to September 2024.

Moreso, deposits from banks grew 575.1 percent  in costs, reaching N207.05 billion , while borrowings recorded 183.2 percent increase in costs, amounting to N80.93 billion.

As a direct consequence of these factors, UBA registered a 149.0 percent year-on-year increase in net interest income, alongside a 228.3 percent year-on-year growth in net interest income, excluding loan loss expenses (LLE). This growth was further accentuated by the fact that credit impairment charges declined by 14.6 percent year-on-year

The decline in non-interest income was attributed to a significant fair value loss on derivatives, amounting to N243.38 billion, which outweighed the gains recorded in foreign exchange revaluation (671.2% year-on-year growth to N251.37 billion), net fees and commission income (104.6% year-on-year growth to N233.85 billion), FX trading (222.0% year-on-year growth to N91.39 billion), and investment securities (68.5% year-on-year growth to N83.10 billion).

However, the increase in interest income more than made up for the decline in non-interest income, resulting in a 62.2 percent year-on-year growth in UBA’s operating income, reaching N1.42 trillion.

In line with the rise in operating income, UBA’s operating expenses also registered a substantial 119.0 percent year-on-year growth, totaling N812.20 billion.

UBA’s operating expenses increased across several key areas, including a 102.9 percent year-on-year growth in personnel expenses to N225.42 billion, a 127.9 percent year-on-year growth in fuels, repairs and maintenance to N104.07 billion, a 71.9 percent year-on-year increase in the AMCON levy to N70.33 billion, and a 110.1 percent year-on-year growth in the NDIC premium to N34.21 billion.

While UBA’s operating income grew at a strong pace, the group’s operating expenses grew even faster, leading to a decline in operational efficiency as the cost-to-income ratio (excluding loan loss expenses) increased from 42.5 percent in the previous year to 57.4 percent.

The substantial increase in operating expenses notwithstanding, UBA’s overall profitability strengthened as the group recorded a 20.2 percent year-on-year growth in profit before tax, reaching N603.48 billion.