Nine months 2020: UBA reports N77.132 billion profit, lags behind the GAZ in FUGAZ

United Bank for Africa Plc (NSE: UBA), joined the other FUGAZ (FBNH-UBA-GUARANTY-ACCESS-ZENITH) to release it’s financial statement for the period ended 30 September, 2020.

UBA’s profit for the period in terms of size is higher than only that of FBNH, as ACCESS, GUARANTY and ZENITHBANK all reported profit for the period above N100 billion.

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Analysis of the report: Income Statement

The banking group recorded a modest 6.46% increase in interest income for the 9 months period from January to September 2020. The N19.239 billion increase between the 9M 2020 figures (N317.142 billion) and 9M 2019 figures (N297.903 billion) can be attributed to the increase in interest income from term loans to corporate organisation.

In the same period in 2019, UBA earned an interest income of N117.733 billion from term loans to corporates, and earned N137.502 billion in the current financial year. Interest from term loans and overdrafts to individuals also increased from N3.437 billion in 2019 to N5.793 billion in 2020, and from N1.955 billion to N3.438 billion respectively.

By reducing interest expense on deposits from customers from N94.016 billion to N83.288 billion, the Banking group was able to achieve a 5.66% reduction in its interest expenses.

The fees and commission income earned by the bank decreased by 1.76% down from N86.530 billion to N85.011 billion. A growth in some of the components of the fees and commission income was offset by declines in other components.

1. Credit related fees and commissions decreased from N13.494 billion to N8.924 billion
2. Electronic banking income increased from N26,707 billion to N27,867 billion
3. Account maintenance fee increased from N6.043 billion to N6.892 billion
4. Funds transfer fee decreased from N6.575 billion to N5.503 billion
5. Trade transactions income increased by N10.843 billion to N13.888 billion
6. Remittance fees decreased from N5.656 billion to N4.824 billion
7. Commission on transactional services decrease from N13.393 billion to N13.052 billion
8. Pension funds custody fees increased from N3.819 billion to N4.061 billion

A 20.67% increase in the Employee benefit expenses and 17.78% increase in the Other operating expenses pushed the bank’s profit into decline when compared to the preceding year.

In the 9 month period in review UBA spent N64.684 billion as wages and salaries for its employees, it spent N53.357 billion for the same period in 2019.

The bank reported a N90.372 billion Profit Before Tax (PBT), 8.00% lower than the N98.233 billion reported in the same period in 2019.

Profit After Tax stood at N77.132 billion with an Earnings Per Share (EPS) of N2.16. The Return on Average Equity (ROaE) stands at 12.31%.

Analysis of the report: Statement of Financial Position (Balance Sheet)

As at 30 September 2020, 90.72% of the Bank’s Total Asset was funded by its Liabilities, while 9.28% of its Total Asset was funded by Shareholders Equity (as at 31 Dec. 2019, Total Asset was funded by 89.33% Liability and 10.67% Equity).

• Total assets increased by 25.98% to N7.059 trillion from N5.604 trillion. The bulk of assets is inform of Cash and bank balances (N2.103 billion) and Loans and advances to customers (N2.382 billion)
• Total liability increased by 27.93% to N6.404 trillion from N5.006 trillion. An overwhelming contributor to the liability is the Deposits from customer which stands at N5.202 trillion (31 Dec. 2019: N3.832 trillion).
• Total Shareholders Equity increased by 9.59% to N655.327 billion from N578.573 billion. Retained earnings with N234.823 billion and Other reserves N277.921 billion are the major contributors to the Shareholders Equity.

Analysis of the report: Statements of Cash Flows

The Bank’s cash flow as at 30 September was positive, as it reported a Cash and cash equivalents of N453.996 billion (31 Dec. 2019: N576.632 billion).

• OPERATING ACTIVITIES: N613.168 billion was generated from operating, up from N261.082 billion that was used as at 31 Dec. 2019. The huge turn around in cash generation was from a N1.369 trillion change in deposits from customers.
• INVESTING ACTIVITIES: N433.628 was used in investing activities, against the N243.432 billion generated from the same activity as at 31st Dec. 2019. The bank had purchased N333.905 billion worth of investment securities.
• FINANCING ACTIVITIES: N225.765 billion was used in financing activities, as spending to repay borrowings was more than the proceeds of borrowings.

About the Company

United Bank for Africa Plc. (the “Group”) is a Nigerian registered company incorporated on 23 February 1961 to take over the business of British and French Bank Limited (BFB).

UBA listed its shares on the Nigerian Stock Exchange (NSE) in 1970 and became the first Nigerian bank to subsequently undertake an Initial Public Offering (IPO).

The Bank and its subsidiaries are primarily involved in corporate, commercial and retail banking, trade services, cash management, treasury and custodial services.

The company’s registered address is at 57 Marina, Lagos, Nigeria.

Price Movement

The Share price of UBA closed at N8.20 at the end of trading on Friday on the Nigeria Stock Exchange, 2.96% lower than its opening price.

YTD, the share price is up by 14.69%, and up by 29.13% over the past 3 months. It is up by 6.49% for the month of November.

The 52 week high price for the stock is N9.80 while the 52 week low price for the stock is N4.40.

Analyst’s View

We have a HOLD rating on the shares of United Bank for Africa Plc.

By, Nnamdi M.