UBA’s Gross Earnings Decline in First Quarter, 2016

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United Bank for Africa Plc on Tuesday released its results for the first quarter ended March 31, 2016. The bank posted gross earnings of N54.941 billion, showing a decline 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  Q1.
However, reacting to the results, analysts at Cordros Capital Limited said the  bank’s  annualised  earnings per share(EPS)) 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 per cent), operating expense (-1.5 per cent) and loan loss charges (57.2 per cent),” they said.
The analysts noted that net interest income increased by 11.8 per cent 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 per cent (7.0 per cent behind our estimate) as loans grew by only 1.2 per cent while interest expense slumped by 26 per cent (16.5 per cent behind our estimate),” they said.
The analysts said non-interest income fell by 25 per cent, and came roughly behind their  estimate (6.4 per cent variance).

“The decline was majorly as a result of a slump in net trading income (-71.1 per cent) which was impacted by a drop in foreign exchange income. Importantly, fee income remained resilient, as a 45.1 per cent rise in other fees muted the impact of a 55.1 per cent 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 per cent, driven by a reduction in personnel costs.
PBT declined by 1.7 per cent while a lower effective tax rate (-173 bps) pushed after tax earnings up,” they said.