UBA Eyes Second Position On Q1 Impressive Balance Sheet
The increase is already more than the N545 billion growth in asset base the bank recorded in all of 2019. With a closing balance sheet size of N6.35 billion for the first quarter, the bank may be jockeying for the position of the second-largest bank in Nigeria from its fourth place ranking at the end of 2019.
The asset expansion was led by cash and bank balances – which rose by N373 billion over the 2019 closing figure to stand at about N1.8 trillion at the end of March 2020. The strength for the big asset expansion came from an outstanding growth in customer deposits during the period.
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Customer deposits advanced by a surprising N440 billion to close at N4.27 trillion over the three months period of the year. This is well above the total increase of N340 billion the bank achieved in all of 2019. UBA’s closing customer deposit figure for the first quarter is also higher than the closing figure of any other bank at the end of last year.
The application of customers’ low-cost liabilities to build high earning assets enabled the bank’s management to raise interest income ahead of interest expenses in the first quarter. That resulted in an increase of close to 13 percent in net interest income over the period.
Further strength came from an improvement of 11 percent in non-interest income, leading to a rise of over 12 percent in operating income at N94 billion at the end of the first quarter.
Loan impairment expenses are on the rise this year for UBA at a jump of 54 percent in the first quarter. Operating cost is also growing ahead of revenue, which is encroaching on profit margin. The impact of the two expense lines on revenue caused a decline in profit margin in the first quarter. Profit, therefore, improved at less than half the growth rate in revenue during the period.
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Gross earnings amounted to over N147 billion for UBA at the end of the first quarter, which is an improvement of 11.8 percent year-on-year. The strength for revenue growth came from both interest and non-interest income, which grew by 10.7 percent to N109 billion and 11.3 percent to N28.5 billion respectively.
Interest expenses grew at a moderated rate of less than 8 percent to N43.7 billion in the quarter. This is the lowest growth rate in interest expenses the bank is seeing in four years. The cost-saving here permitted an increase of 12.6 percent in net interest income – which amounted to over N65 billion at the end of March 2020.
Net impairment loss on loans and advances grew by 54 percent to N2.64 billion over the period. The figure remains relatively small though the volume is likely to grow in the course of the year by the bank’s operating pattern as well as the rapid growth in credit volume.
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Operating expenses grew by 13 percent to N58.6 billion during the quarter, which is ahead of the less than 12 percent improvement in gross earnings during the period. This means that both loan loss expenses and operating cost claimed increased proportions of revenue in the first quarter.
The ability to convert revenue into profit declined for UBA in the first quarter. Operating cost claimed an increased share of gross income at 40 percent during the period. Net profit margin went down from 21.7 percent in the same period last year to 20.4 percent at the end of March this year.
UBA closed the first quarter with an after-tax profit of N30 billion, which is an improvement of 5 percent year-on-year. The bank had grown after-tax profit by over 13 percent to N89 billion in 2019.
The outlook for the bank for the current financial year indicates a slowdown that would be further extended by the coronavirus-induced economic lockdown. Loan impairment expenses are an area to watch this year after jumping by over 300 percent to more than N18 billion in 2019.
