United Bank for Africa (UBA) kept revenue accelerating for the third year running at the end of third quarter operations in September but profit slowed down during the period on loss of profit margin. The bank maintains a top industry growth rate in profit but a decline in net profit margin from 19% in the second quarter to 18.2% in the third has slowed down the growth momentum.
Gross earnings amounted to N333.91 billion at the end of September, a year-on-year increase of 26%. Interest income continues to lead revenue growth in the current year at an increase of over 30% year-on-year at the end of September to N238 billion. Non-interest income however stepped up from an increase of 16.5% in the second quarter to close to 19% growth in the third quarter.
The full year revenue outlook is slightly revised from N450 billion to N447 billion for UBA at the end of the 2017 financial year. That indicates an expected growth of 16.5% in gross earnings for the bank in the year. The bank’s 22% growth in gross earnings in 2016 was led by a 46% advance in non-interest income.
Growth in earning assets is still being led by investment securities, which grew by about 12% from the year’s opening figure to N1.08 trillion at the end of September. Loans and advances to customers stepped up to an increase of 6% while lending to other banks, which dropped by one half at the end of June picked up at an increase of over 20% at the end of the third quarter. The bank’s customer loan portfolio stood at about N1.6 trillion at the end of the review period.
Interest expenses remain upbeat from a marginal increase of 2.9% at the end of 2016 to a rise of 21% year-on-year at the end of the third quarter. This is a slight moderation from the 24% growth seen at the end of the second quarter. It also remains a moderated growth compared to the 30% increase in interest income. Net interest income therefore grew by 36% year-on-year to over N152 billion at the end of September.
Net loan impairment expenses remain relatively low at N12.91 billion notwithstanding an increase of 42% year-on-year at the end of September, 2017. The growth in loan loss expenses so far this year is nothing to compare with an upsurge of 448% to N27.68 billion in 2016.
Operating expenses stepped up during the third quarter and grew virtually at par with gross earnings at 26.4% to N145.7 billion. That put out of the way the moderated growth that led to a decline in the cost margin in the second quarter. The increase came from a leap of nearly 40% in other operating expenses during the period.
UBA has maintained a trend of operating cost moderation for the preceding two years and operating cost margin declined further to 42.6% at the end of June. From less than 40% at the end of last year, operating cost margin climbed back up to 43.6% at the end of September, which encroached on the bank’s profit margin.
Net profit margin slipped from 19% at the end of the second quarter to 18.2% in the third and is also slightly down from 18.6% in the same period last year. The accelerated growth in operating expenses prevented the bank from converting revenue into profit.
Growth in after tax profit therefore slowed down from 56% at the end of June to 23% at the end of September to stand at N60.92 billion. The initial after tax profit projection of N87 billion is revised downward to N83 billion for UBA at the end of 2017. The bank closed last year’s operations with an after tax profit of N72.26 billion.
The bank earned N1.74 per share at the end of September compared to N1.42 kobo in the same period last year. The full year earnings per share expectation is N2.29 for UBA in 2017.