United Capital Plc gained speed on the earnings front in the third quarter when it achieved an upturn in group quarterly profits to push the nine-month position to N8.5 billion.
Quarterly profit figures took a leap forward from N2.4 billion in the first quarter and N2.3 billion in the second quarter to N3.8 billion in the third quarter.
The third quarter unaudited financial report of the financial and investment services group made up to September 2023 shows that the challenge of costs encroaching on revenue continued in the third quarter but management was able to keep profit improving.
Gross earnings went up by 20.4 percent in the third quarter to N6.5 billion with interest earnings exclusively accounting for the growth. Fee and commission income for the quarter went down by 13.8 percent to N2 billion while a net trading loss of N307 million occurred against a net trading gain of N350 million in the same quarter last year.
On the other hand, total expenses for the period grew two and half times ahead of revenue at 50 percent to N2.5 billion for the quarter.
Operating profit improved by 5.8 percent in the quarter to less than N4 billion – which was supported by an increase of 62 percent in the share of associate profit to N200 million as well as a sharp drop of 34 percent in tax expenses to N395 million for the quarter.
The two favourable developments were the facts behind the elevated profit delivery the company made in the third quarter. The third quarter profit figure of N3.8 billion represents an increase of 15 percent year-on-year.
The company’s nine-month earnings position shows gross earnings of N17.5 billion for the group, which is an increase of 20.3 percent year-on-year. Interest income, the company’s main revenue line is also the exclusive earnings growth driver so far this year.
At N8.9 billion, interest earnings grew by 35 percent year-on-year while fee and commission income went down by 8.4 percent to N5.7 billion and net trading income dropped by 48.5 percent to N315 million over the same period.
Total expenses grew more than twice as fast as revenue at 44 percent to N8.3 billion at the end of the third quarter. The increase was mostly driven by other operating expenses that jumped by 75.5 percent to N4.9 billion while net impairment charges for credit losses remained relatively large at N1 billion.
The growth in other operating expenses accelerated from 69 percent at half year but credit losses keep slowing down from more than four times the jump in the first quarter to an 18.6 percent increase at half year and further to flat growth at the end of the third quarter.
The much stronger growth in costs than revenue remained the challenge for management at the end of the third quarter, as rising costs consumed much of the revenue increase and kept margins under pressure.
The operating profit margin was pressured down from 60.5 percent in the same period last year to 52.8 percent at the end of the third quarter of operations. This is an improvement however from 47.8 percent in half a year.
At N9.2 billion, operating profit improved by 5 percent over the review period. This was reinforced by an increase of 49.4 percent in the share of associate profit, which stepped up pre-tax profit by 6.6 percent to N9.7 billion at the end of the third quarter.
A drop of 11.3 percent in tax expenses to N1.2 billion stepped up after-tax profit growth to about 10 percent to N8.5 billion at the end of the period.
Net profit margin went down from 53 percent in the same period last year to 48.4 percent at the end of the third quarter, improving however from 42.6 percent at the half year.
United Capital earned N1.88 per share at the end of the third quarter, improving from N1.71 per share in the same period last year.