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UBA Reports Q3 2017 Results; OPEX Grew 25% YoY

Proshare

Monday, October 16, 2017/ 3:40 PM /FBNQuest 

Event: United Bank for Africa (UBA) reports Q3 2017 results

Implications: Limited revisions to consensus PBT forecasts; Neutral reaction from the market

Positives: Loan loss provisions were well below our expectations

Negatives:  Opex grew 25% y/y
 

This morning UBA published its Q3 2017 results which showed that PBT declined by -14% y/y to N20.8bn. The key drivers behind the y/y decline in earnings were a 25% y/y rise in opex and 52% y/y increase in provisions for loan losses. Although pre-provision profits grew by 12% y/y, the negatives on those two lines proved significant. In terms of the revenue split, non-interest income was the major driver of the expansion in pre-provision profits.

However, funding income was also up by 6% y/y. Moving down the P&L, the decline on the PAT line was greater at 26% y/y, because of a 35% y/y increase in income taxes and base effects on the OCI line. Sequentially, PBT fell by 35% q/q. In contrast to the y/y trends, the non-interest income line declined by -39% q/q (because of base effects) and drove the marked decline in PBT.
 

The weakness on the non-interest income line also led to a 16% q/q drop in pre-provision profits. Compared with our forecasts,  PBT missed by 15%. This was primarily due to a negative surprise in opex (+11% more than what we were modelling).
 

We note that UBA’s opex was also up, by around 20% y/y, in Q2 2017. Given the persistent rise in opex, we expect this line to come under scrutiny by investors. In terms of balance sheet trends, UBA’s loan book and deposits grew by 2% q/q and 3% q/q respectively, better than the 1% and -6% respectively in Q2.
 

UBA’s 9M PBT of N78bn tracks broadly in line with consensus PBT forecast of N103bn for 2017. As such, we expect to see limited revisions to consensus earnings estimates and a broadly neutral reaction from the market.
 

We rate UBA Neutral. Our estimates are under review.
 

UBA
Q3 2017 results: actual vs. FBNQuest Research estimates (N millions)

 

Actual

Y/y

Q/q

FBNQuest est.

Actual vs FBN Quest est. (%)

Actual

Y/y

FBNQuest est.

Actual vs FBN Quest est. (%)

Interest income

83,138

10.0%

6.3%

82,230

1.1%

238,092

30.1%

237,184

0.4%

Interest expense

-32,220

16.6%

13.5%

-28,587

12.7%

-85,795

21.0%

-82,162

4.4%

Net interest income

50,918

6.2%

2.3%

53,642

-5.1%

152,297

35.9%

155,021

-1.8%

Other income

24,205

26.5%

-38.6%

23,382

3.5%

84,603

18.8%

83,780

1.0%

Profit before provisions

75,123

12.0%

-15.8%

77,024

-2.5%

236,900

29.3%

238,801

-0.8%

Provisions

-3,468

52.3%

-45.3%

-6,637

-47.7%

-12,909

41.9%

-16,078

-19.7%

Share of profit in JV and assoc.

34

n/a

n/a

-16

n/a

33

n/a

-17

-292.4%

Operating expenses

-50,895

24.9%

0.2%

-46,002

10.6%

-145,699

26.4%

-140,806

3.5%

PBT

20,794

-13.5%

-35.1%

24,370

-14.7%

78,325

33.2%

81,901

-4.4%

Tax

-2,213

35.2%

-81.7%

-2,924

-24.3%

-17,405

87.4%

-18,116

-3.9%

-Tax rate

10.6%

 

 

12.0%

 

22.2%

 

22.1%

 

Discontd ops

0

n/a

 

0

n/a

0

n/a

0

n/a

Other comprehensive income

3,704

-70.8%

n/a

0

n/a

14,581

-78.8%

10,877

34.1%

PAT before min. Interest

22,285

-36.5%

-24.0%

21,445

3.9%

75,501

-36.2%

74,661

1.1%

Minority interest

-1,743

-76.3%

n/a

-122

n/a

-3,171

n/a

-1,550

104.6%

PAT after minority interest

20,542

-25.9%

-29.2%

21,324

-3.7%

72,330

-32.8%

73,112

-1.1%

Source: NSE; FBNQuest Estimates 

Proshare Nigeria Pvt. Ltd.

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