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UBA Plc – PBT and PAT Advanced by 41% and 62% Respectively in Q1 2017

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Thursday, April 27, 2017/ 4:30PM / FBNQuest Research                                                               


Event: United Bank for Africa (UBA) reports Q1 2017 results

Implications: Upgrades to consensus 2017 forecasts likely

Positives: PBT and PAT advanced by 41% y/y and 62% y/y respectively.

Negatives: Spike in loan loss provisions and opex 

This afternoon the NSE published UBA’s Q1 2017 results which showed that PBT and PAT grew by double-digits: 41% y/y and 62% y/y to N25.5bn and N22.8bn respectively. The stellar results were underpinned by a 43% y/y growth in pre-provision profits to N72.6bn.  

Although provision for loan losses and opex spiked by 489% y/y and 37% y/y respectively, the y/y expansion in profit before provisions was significant and completely offset the negative contribution of both lines. In terms of the split of pre-provision profits, both revenue lines contributed to the strong results.  

While funding income advanced by 55% y/y, non-interest income increased by 20% y/y. Further down the P&L, PAT accelerated by 62% y/y, thanks to a strong positive result of N1.5bn on the other comprehensive income (OCI) vs. a loss of -N2.3bn  in Q1 2016.  

Sequentially, PBT declined by 12% q/q mainly because  non-interest income was around 39% weaker on a q/q basis. Funding income also declined by around 3% q/q. Despite the y/y decline in PBT, PAT grew by 12% q/q, thanks to the positive result on the OCI line. Compared with our forecasts, PBT and PAT both beat by 14% and 10% respectively.      

The provision for loan losses and opex were the only negative points in UBA’s results. When annualised, the provisions imply a cost-of-risk of 0.8% (vs. 0.4% Q1 2016). Although, this is still in within management guidance of 1.5% for 2017, further deterioration in asset quality through the year may lead to  a potential worsening of the ratio relative to management’s guidance.  

When annualised UBA’s Q1 2017 PAT implies an ROAE of around 20%, amongst the best within our coverage universe. UBA’s Q1 PBT tracks ahead of consensus PBT forecast of N78.3bn for 2017. As such, we expect to see a positive reaction from the market and upward revisions to consensus PBT forecasts. 

Ytd the shares have outperformed the market. They have gained 24.4%, outperforming the market by 28.7%.  We rate the shares Outperform. Our estimates are under review.

UBA Q1 2017 results: actual vs. FBNQuest Research estimates (N millions)

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