TheCable

United Bank for Africa (UBA) gained much speed on earnings growth in 2022 with after tax profit advancing by 43.5 percent to N170.3 billion, a growth record unmatched any time in nine years.

Much of the gain in momentum happened in the final quarter that accounts for over 35 percent of the revenue and roughly 32 percent of the profit figures of the bank for the year. This stretched out profit growth from 11.5 percent at the end of the third quarter (Q3) to 43.5 percent at full year.

Also, as we expected in our full year outlook for the bank, UBA achieved the strongest growth in gross income in more than a decade at 29.2 percent to N852.9 billion — advancing from one of the slowest increases in revenue in years at 7 percent to N660 billion in 2021.

The bank’s full year audited financial report at the end of December 2022 shows that the outstanding profit improvement in the year happened against an upsurge in credit loss expenses.

Net impairment charges on financial assets multiplied more than three times to N42 billion from less than N13 billion in the preceding financial year. Much of the credit losses rolled in in the final quarter — which accounted for N28.4 billion or 67.6 percent of the full year figure.

Revenue growth is led by net foreign exchange income that multiplied more than four times at 340 percent increase to N72 billion. This is a rebound from 70 percent drop in 2021.

Fee and commission income also grew strongly by 32.7 percent to N210 billion while the main revenue line — interest income improved by 17.5 percent, still the strongest growth rate since 2018.

A major operating advantage of the bank in 2022 is cost saving from interest expenses, move against the general trend in the banking industry in the year. At N177.7 billion, interest expenses grew by 12.8 percent, slower than the 17.5 percent growth in interest income.

With two preceding years of declines in cost of funds, the closing figure for 2022 still stands lower that the bank’s interest expenses of N183 billion in 2019.

Cost saving from interest expenses powered net interest income, which grew by 19.8 percent to N379.5 billion at the end of the 2022 operations. This represents additional inflow of N62.8 billion in net interest earnings for the year.

A large part of the increase in net interest income was, however, consumed by the upsurge in loan loss expenses. This lowered the increase in net interest income after loan impairment charges to 11 percent to close at N337.5 billion at the end of the year.

Another cost savings was achieved from operating expenses, which grew at a slower pace than revenue at 25.6 percent compared to 29.2 percent. At N350.4 billion, operating expenses claimed 41.1 percent of gross income at the end of the year, down from 42.3 percent at the end of 2021.

The cost savings from the two major expense lines of the bank — interest and operating expenses more than diluted the incursion on earnings from loan loss expenses.

The result is that UBA was able to deliver 43.5 percent rise in after tax profit from 29.2 percent growth in revenue. This reflects a gain in net profit margin from 17.6 percent in 2021 to 19.4 percent in 2022 — the highest net profit margin for the bank since 2013.

The bank closed the 2022 operations with earnings per share of N4.84, an improvement from N3.39 per share in 2021. The directors have announced a final cash dividend of 90 kobo per share for the 2022 operations, having paid an interim of 20 kobo per share in the course of the financial year.

The N10.9 trillion bank carries a net loan portfolio of N3.4 trillion, an investment basket of over N4 trillion and cash and bank balances of N2.6 trillion. The assets are built with customer deposits of N7.8 trillion, due to banks of N1.2 trillion and an equity cushion of N922 billion.