Kayode Tokede
United Bank for Africa Plc (UBA) reported a significant increase in profits on the heels of stronger growth recorded in interest income, net interest income, and operating income to post impressive 2021 financial year results.The performance, which shows the hard work put in by the board, management and staff, has been hailed by stakeholders given the challenging operating environment.
For the 2021 financial year for period ended December 31, 2021, UBA reported 11 per cent increase in its interest income, while net interest income and operating income grew by 22.1per cent and 13.2per cent respectively.
The two key factors to interest income growth was 117.7 per cent growth in interest accrual from loans and advances to banks from N9.52billion in 2020 to N20.73billion in 2021 and 12 per cent increase in interest income generated from loans and advances to customers to N251.89billion from N225.04billion reported in 2020.
UBA in the period under review also improved on its top-line performance by 7.8 per cent to N660.22billion in 2021 from N616.84billion reported in 2020.
The pan-African bank effectively managed its interest expenses and operating expenses to drive profit amid the tight and challenging business operating environment.
Interest expenses was effectively managed in the year under review, dropping by 6.4 per cent to N157.55billion from N168.40billion in prior year. Interest expenses dropped over 28.5 per cent in interest bearing borrowings and other borrowed funds to N32.54billion in 2021 from N45.51billion in 2020 as interest on deposit from customers grew marginally by 0.4 per cent to N104.04billion from N103.63billion in 2020.
The collective impact of higher income and lower expense led to a 22.1per cent increase in net interest income to N316.71 billion from N259.47billion recorded in 2020.
Likewise, impairment charges on loans and other financial assets declined by 52.4per cent to N9.85billion in 2021 from N22.44billion in 2020 over the pre-pandemic levels and supported profitability margins.
The dissimilar to other Tier-1 banks which have released results thus far, non-interest income declined by 14.1per cent to N128.21 billion I 2021 due to losses from foreign exchange revaluation and derivative contracts compared to the gains recorded in 2020 financial and 31.2 per cent drop in foreign exchange trading and mark-to-market gains from trading investment securities (-6.6per cent ).
The decline across these lines offset the robust growth in net fees and commission income that closed 2021 at N45.77billion, about 22.1 per cent growth from N82.61billion reported in 2020 to N100.9billion reported in 2021.
UBA’s operating expenses (opex) increased by 11.7per cent to close at N278.99 billion in 2021 from N249.85billion in 2020 as the balance sheet growth and increasing inflationary pressures in the business environment drove most expense items higher – most significant were regulatory charges for NDIC premium that grew by 38.5per cent to N15.91 billion and AMCON levy rose by 21per cent to N27.98 billion).
UBA’s profit-before-tax was 16.1per cent higher at N153.07 billion from N131.86billion reported in 2020 but further weighed down by the higher income tax expense of about 90.1 per cent to N34.40 billion in 2021 from N18.10 billion reported in 2020.
Consequently, the group closed 2021 financial year with profit after tax increase of 4.3per cent to N118.68 billion from N113.77 billion in 2020 financial year.
Overall, the bank recorded a 9.4 per cent growth in Earning Per Share (EPS) to N3.39 in 2021 from N3.10 in 2020, on which the management proposed a final dividend of N0.80 per share which in addition to the N0.20 per share paid as interim dividend, amounts to a total dividend of N1.00 per share (2020: N0.52 per share) from the retained earnings account as at 31 December 2021.
Total assets crosses N8trn
UBA’s grew its total assets by 11 per cent to N8.5 trillion in 2021 from N7.7 trillion reported in 2020. The growth in total assets was driven about five per cent increase in loans & advances to customers to N2.68trillion from N2.55trillion in 2020, as investment in securities grew by 29.2 per cent to N3.34trillion from N2.58trillion in 2020.
In addition, net loans and advances grew by 7.7per cent to N2.8 trillion with exposure mostly to resilient economic sectors including oil & gas, agriculture and manufacturing.
Deposit from customers grew 12.2per cent, crossing the N6 trillion mark, to N6.4trillion from N5.7trillion in 2020, reflecting increased customer confidence, enhanced customer experience, successes from the ongoing business transformation programme and the deepening of its retail banking franchise.
The Group’s non-performing loan ratio improved further to 3.6per cent in 2021 from 4.7 per cent in 2020. This testifies to the quality of UBA’s loan portfolio even as the bank remains relentless in its resolve to drive down the Cost-to-Income ratio, which stood at 63per cent in 2021
The bank achieved further strides in growing its business and gaining market share across its pan-African operations, with the region accounting for 63.2per cent of the Group’s profitability, compared to 55.4per cent in 2020; Loans and advances as well as Deposit in the region were also up 14.5per cent and 27.3per cent respectively from a year earlier.
Reactions
According to analysts at Cordros securities, “UBA’s strong financial performance and the corresponding increase in payout to shareholders bodes well for the bank, and we expect to see sentiments improve in the short to medium term, which may potentially drive price action.
“We remain optimistic regarding the long-term outlook and expect financial performances to maintain the positive growth trajectory. Our estimates are under review.”
The Group Managing Director/CEO, Kennedy Uzoka, in a statement said that notwithstanding the tight and challenging operating environment, UBA continues to deliver significant performance,
He said: “The year 2021 can best be described as a year of global recovery; economies around the world began to witness early-stage recoveries, as supply chains recover from the devastating disruptions suffered in 2020.”
The GMD explained that the quality of UBA’s portfolio as well as the strength of the bank’s credit risk management frameworks and policies remain the bedrock of the positive results that the bank has been recording over the years, adding that the current performance highlights UBA’s relentless customer focus, and leverage on its key strategic levers – People, Process and Technology.
“Looking forward, I am particularly excited about our ongoing Enterprise Transformation Program which is designed to enhance the bank’s process agility, service delivery and customer experience.
“We are also making sizeable investments in cutting-edge technology and cyber security, to keep our innovative digital banking offerings above the curve, as we tool and re-tool our human resources to compete and win in a rapidly changing and evolving landscape. This will ensure the bank continues to achieve respectable top and bottom-line growth through the medium to long term, “the GMD stated.
