UBA’s Gross Earnings Decline in First Quarter of 2016

Fri, Apr 22, 2016
By publisher
2 MIN READ

Banking Briefs

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THE United Bank for Africa Plc results for the first quarter ended March 31, 2016, shows that the bank posted gross earnings of N54.941 billion, declining from N58.669 billion in the corresponding period of 2015. Net interest income rose from N30.783 billion to N34.421 billion. Profit before tax stood at N18.083 billion, showing a decline from N18.389 billion in 2015, while profit after tax increased from N16.956 billion to N16.986 billion.

Market operators said the performance is a reflection of the economic headwinds and lull that characterised the first quarter. However, reacting to the results, analysts at Cordros Capital Limited said the bank’s annualized earnings per share of N1.96, outperformed both their estimate of N1.40 and consensus’ N1.48.

“Return on average equity (ROAE) remained at the 20 (recorded in FY’15), outperforming our forecast of 14.8 per cent. The outperformance may be attributed to positive surprises on the banks cost’s lines: interest expense (-26.4 percent), operating expense (-1.5 percent) and loan loss charges (57.2 percent),” they said.

The analysts noted that net interest income increased by 11.8 percent from the previous year and was roughly in line with their estimate. “The low interest environment had a greater impact on both the interest income and interest expense lines than we had estimated. Interest income fell by 6.4 percent (7.0 percent behind our estimate) as loans grew by only 1.2 percent while interest expense slumped by 26 percent (16.5 percent behind our estimate).”

The analysts said non-interest income fell by 25 percent, and came roughly behind their estimate (6.4 percent variance). “The decline was majorly as a result of a slump in net trading income (-71.1 percent) which was impacted by a drop in foreign exchange income. Importantly, fee income remained resilient, as a 45.1 percent rise in other fees muted the impact of a 55.1 percent decline in account maintenance fee charges,” they added.

The noted, however, that UBA continued to outperform in terms of asset quality, with a reversal on collective impairments contributing to a 57.2 per cent slump in loan loss charges, significantly deviating from their estimate (-66.8 per cent).

“Operating expense declined by 1.5 percent, driven by a reduction in personnel costs. PBT declined by 1.7 percent while a lower effective tax rate (-173 bps) pushed after tax earnings up,” they said.

— May 2, 2016 @ 01:00 GMT

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