United Bank for Africa (UBA) Plc reined in credit losses in the third quarter, cutting down the figure from about N154 billion at half-year to N144.6 billion at the end of the third quarter.
Net loan impairment charges of over N147 billion made in the second quarter changed to a net write-back of N9.3 billion in the third quarter, which lightened the weight on the side of cost.
The cost saving plus the biggest revenue boost on record for the bank this year powered four times multiplication of after-tax profit to over N449 billion at the end of the third quarter operations.
UBA’s interim financial report for the third quarter ended September 2023 shows that net trading and foreign exchange income remain the pivot of the galloping growth in profit so far this year.
The income line jumped about 12 times year-on-year to over N450 billion at the end of the third quarter, representing over 36 per cent of gross earnings of N1.24 trillion the bank posted at the end of the third quarter. Its contribution to revenue scurried from less than 7 per cent in the same period in 2022.
The bank’s main income line – interest earnings also maintained a strong growth at an increase of 55.6 per cent year-on-year to over N666 billion at the end of the third quarter, already ahead of the full-year interest income of N557 for the 2022 financial year.
Gross earnings of the bank rose by about 125 per cent to N1.24 trillion at the end of the third quarter – a record growth in revenue the bank hasn’t seen in decades. The figure is standing at about N387 billion above the full-year gross income of N853 billion the bank reported for the 2022 full year.
Added to the big boost in earnings is the net write-back position in credit losses in the third quarter, which lightened the weight of bad loans on the bank’s cost-income balance.
Net interest income after bad loan charges upturned from a drop of 26.6 per cent at half year to an increase of 11 per cent year-on-year to N298.5 billion at the end of the third quarter.
Despite the cut down in credit losses in the third quarter, the closing figure still stands in the region of three and half times the total net loan loss charges of N42 billion for the entire 2022 operations.
The upturn in interest earnings net of credit losses was reinforced by the big boost in non-interest income led by net trading and foreign exchange gain. Total non-interest earnings of the bank surged by 335.6 per cent year-on-year to N574.5 billion at the end of the third quarter.
Operating income jumped two and a half times to stand at over N1 trillion over the review period.
With the net write-back on bad loan expenses in the third quarter, UBA tackled one of the two major cost lines that overflowed their bounds at the end of half-year operations.
The other cost line is interest expenses, which is yet to be tamed though it has slowed down from an increase of 88 per cent in the half-year. At over N223 billion at the end of the third quarter, the cost of funds grew by 62 per cent compared to the increase of 55.6 per cent in interest income.
Some progress was however made in the third quarter when interest expenses grew at a slower pace of 26 per cent than over 46 per cent growth in interest income in the quarter – which led to the slowdown in interest expenses at the end of the third quarter.
The slowdown of interest expenses in the third quarter improved net interest earnings, which rose by 57 per cent to N165 billion for the quarter – the highest quarterly growth rate for the bank this year, accounting for 37 per cent of the nine-month figure.
The nine-month position shows an increase of 56.8 per cent in net interest income to over N443 billion.
Adding to the positives for the bank in the earnings field is cost saving from operating expenses with operating cost margin going down from 47.6 per cent to less than 30 per cent over the review period.
The cost saving has widened the net profit margin from 21 per cent to over 36 per cent over the review period – the highest in years. UBA closed the third quarter with earnings per share of N12.93, about four times the earnings per share of N3.27 recorded in the same period in 2022.
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