Despite decline in yields in two of its core markets -Nigeria and Ghana- United Bank for Africa Plc recorded growth in gross earnings and profit for the half year ended June 30, 2018, writes Goddy Egene
Most of the banks in Nigeria recorded improved performance in their 2017 financial year.
The strong performance was bolstered by earnings from foreign exchange market and investment in treasury bills and other fixed income securities.
However, experts had predicted that the fall in yields in fixed income securities as well as the slow pace of economic growth would affect banks’ performance negatively.
Some of the apprehensions have manifested in the financial results of some of the banks in their half year (H1) ended June 30, 2018, results released so far.
The development even made some of the banks to record lower bottom-line. But, this was not for the United Bank for Africa Plc, which delivered double-digit growth in gross earnings and higher profit for H1 despite declining yield environment in two core markets, Nigeria and Ghana, where the pan Africa financial institution operates.
United Bank for Africa Plc recorded a growth of 16 per cent rise in gross earnings to N258 billion for the half year ended June 30, 2018, up from N223 billion recorded in the corresponding period of 2017.
Net interest income stood at N111.1 billion, compared with N101.4 billion in the corresponding period of 2017. Credit impairment charges reduced by 28.9 per cent from N9.4 billion to N6.7 billion, while operating expenses rose by 9.4 per cent from N94.8 billion.
Operating income was N168.5 billion, compared to N161.8 billion in 2017, indicating an increase of 4.1 per cent. Notwithstanding the inflation-induced cost pressure in the period, UBA finished the first half of the year strongly, with a profit before tax(PBT) of N58.1 billion, while profit after tax(PAT) rose from N42.3 billion in 2017 to N43.8 billion in 2018, showing a 3.4 per cent growth.
The first half of the year profit, translated to pre-tax and post-tax return on average equity of 23 per cent and 17 per cent respectively.
UBA’s foreign operations continue to grow in importance, contributing 40 per cent of the group’s profit, which according to analysts attests to the benefit of UBA’s pan-African strategy and reinforces the Bank’s objective of achieving 50 percent earnings contribution from offshore subsidiaries.
A further analysis of the results showed that the bank’s total assets grew 4.9 per cent to N4.27 trillion and customer deposits rose by 6.1 per cent to N2.90 trillion, compared to N2.73 trillion as at December 2017. But net profit margin fell from 19 cent to 15.8 per cent in 2018.
In line with its culture of paying both interim and final cash dividend, the board of directors of UBA Plc declared an interim dividend of N0.20 per share for every ordinary share of N0.50 each held on the qualification date of Wednesday, September 05, 2018.
Bank explains performance
Commenting on the results, the Group Managing Director/CEO, United Bank for Africa Plc (UBA), Mr. Kennedy Uzoka said: “Our performance in the first half the year reflects the resilience of our business model and strategies. Despite declining yields in two core markets, Nigeria and Ghana, we delivered double digit growth in gross earnings. Our performance demonstrates the success of our digital banking initiatives and broader Customer-First strategies”
“We are integrating banking to our customers’ lifestyle, simplifying processes for routine transactions and driving financial inclusion by making banking services accessible and affordable. We are creating opportunities for wealth creation and economic progress, as we empower our customers through innovative platforms and solutions that support their personal and business growth. Our commitment to delivering excellent service is paying-off, as we increasingly win a bigger share of customers’ wallet across our chosen markets. We won the highly coveted “Africa’s Best Digital Bank” Award by Euromoney, demonstrating our pioneering initiatives are being recognised with Leo, our digital banker having been name checked by Mark Zuckerberg.”
He explained that the bank’s enhanced asset-liability management strategies improved asset yield and grew interest income by 21 per cent despite prevailing yield environment.
“Our re-engineered sales structure provided the impetus for renewed retail deposit growth. I am particularly pleased by the 24 per cent year-to-date growth in retail savings and current account deposits, underpinning the increasing penetration of our digital offerings and the Group’s overarching goal of democratizing banking across Africa.
“We improved net interest margin to 7.4 per cent in line with our 2018 target, notwithstanding strong competition for wholesale deposits and the impact of rising global interest rates on our foreign currency funding,” Uzoka said.
Speaking in the same vein, the Group Chief Financial Officer, Ugo Nwaghodoh said: “We finished the first half of the year in a stronger position and we are optimistic on the future of our business. Amidst economic recovery and uncertainties in Nigeria, our largest market, we grew net interest income and operating income by 9.6 per cent and 4.1 per cent respectively.
“We doubled revenue from trade services and grew e-banking income by 24 per cent, a testament to our market share gain, which is driven by innovative offerings.
“Our foreign operations contributed 40 per cent of group’s profit, underlining the benefit of our Pan-African strategy.”
According to him, the bank sustained asset quality, with cost of risk at 0.8 per cent.
“Whilst the loan book declined by 6.5 per cent due to prepayments from some customers in Nigeria and Ghana, we grew the overall balance sheet by five per cent in the first half of the year. The Group’s capital adequacy ratio of 23 per cent, bank’s liquidity ratio of 48 per cent and loan-to-deposit ratio of 57 per cent all reinforce our capacity to grow, with ample headroom for risk asset creation,” Nwaghodoh said.
Enhancing customer experience
Analysts said the introduction of Leo, the UBA Chat Banker which enables customers make use of their social media accounts to carry out key banking transactions, is a big boost for the bank and its customers.
The introduction of Leo was the first time that a financial institution in Africa has come up with that manner of solution to simplify the way customers transact.
According to the bank, with the launch of the chat banking, customers would be able to open new accounts, receive instant transaction notifications, check their balances on the go, transfer funds and airtime top up.
They would also be able to confirm cheques, pay bills apply for loans, freeze accounts, request for mini statements, amongst other things.
“The formulation of this product is consistent with the bank’s customer 1st philosophy, where we are doing things not the way we like, but focusing on what the customers want, where they want it, and in the exact platform they want it.’
“At UBA, we have been working with technology giants that have the global capacity to ensure not only seamless but also effortless banking for millions of our customers across Africa. We at UBA, have collaborated with Facebook to come up with this innovation that is capable of revolutionising the way banking is done in Africa,” he said. Uzoka noted that Leo will in the nearest future, show up on other social platforms and added that all it takes to enjoy the services is simply to have a Facebook account,” Uzoka said.
Also speaking on Leo, the Group Head of Online Banking at UBA, Mr. Austine Abolusoro said it is not just a chat machine, but an artificial intelligence personality meant to address any type of banking concerns raised by customers.
“Leo is ready and waiting to help with most transactions and to deliver any form of banking services. Leo is operating a lifestyle banking platform on facebook messenger to assist with your transactions while chatting with your friends and business partners. The security with this platform is that for every transaction, an OTP (One Time Password) is generated to the phone number that is registered on your account.”