United Bank for Africa (UBA) Plc has sped up its earnings growth momentum in the first quarter with a net trading and foreign exchange gain of N418 billion that powered a 437.8 percent high jump in profit at half a year.
The bank’s bottom line hit N378 billion at the end of half-year operation, already more than twice the closing after-tax profit of N170 billion it posted for the 2022 full year.
The bank’s audited financial report for the half year ended June 2023 shows that net trading and foreign exchange gain multiplied about 46 times from only N9 billion in the same period last year to provide a quickening force on earnings performance this year.
Much of the gain rolled in in the second quarter, lifting the half-year figure from N26 billion recorded in the first quarter.
The bank’s report also shows that net fair value gain on derivatives accounted for N348.4 billion of the net trading and foreign exchange gain. It also shows intensifying challenges facing the bank on the other side of costs.
Two major cost lines appear to have overflowed their bounds at the end of half-year operations, accelerating from already rapid increases seen in the first quarter.
Net impairment charges on financial assets, which grew by 74 percent to N6.6 billion in the first quarter, broke free to a massive swelling from N8.3 billion in the same period last year to N153.9 billion at half year.
The half-year asset impairment figure is already more than three and half times the total net impairment expenses on financial assets of N42 billion for the entire 2022 operations.
The rapid increase in credit losses has been on for the bank since last year when net impairment charges multiplied more than three times in the year.
The second revenue-consuming expense line is interest cost, which has extended its high rise of almost 80 percent in the first quarter to an increase of 88 per cent year-on-year to over N150 billion at half year.
The pattern of interest expenses growing much faster than interest income seen in the first quarter was maintained in the second. Interest income grew by 66.4 percent at half a year to N428 billion compared to the 88 percent rise in interest expenses.
The sustaining incursion of cost of funds on interest earnings limited the increase in net interest income to 56.7 percent to close at over N278 billion at the half year, improving however from 41 percent in the first quarter.
More than all the increase in net interest income was consumed by the massive growth in loan loss expenses, resulting in a drop of 26.6 per cent in net interest income after loan impairment charges to close at N124 billion at the end of half-year trading.
The figure represents a modest top-up of N11 billion in the second quarter on the closing figure of N113 billion in the first quarter.
The inflow of net trading and foreign exchange gain made the difference in the bank’s earnings story from declining net income to the huge swelling of the bottom line.
UBA keeps going strong on revenue for the second year with equally strong growth in interest earnings supporting the robust growth from the side of non-interest income.
Gross earnings rose by over 163 percent year-on-year to the region of N980 billion at the half year, already standing above the gross income of N853 billion the bank recorded for the 2022 full year.
As much as N732 billion of the figure or 74.7 percent was raked in in the second quarter to build up from the N248 billion gross earnings at the end of the first quarter.
Net profit margin advanced from 18.9 per cent in the same period last year to a record of 38.6 per cent at half year, one of the highest margins among the big players in the Nigerian banking industry.
The combination of rapid growth in revenue and the big gain in profit margin is the fact behind the over five times jump in UBA’s after-tax profit at half year.
The bank earned N10.95 per share at the end of half-year operations, advancing from N1.98 per share in the same quarter in 2022. It has announced an interim cash dividend of 50 kobo per share to be paid on 6th October 2023.