Wednesday, August 31, 2016 5:22 PM / Research
The microeconomic challenges that influenced business outlook in 2015 financial year are yet to abate in 2016- the banks have witnessed growing headwinds and tougher operating environment in the current year.
The slow economic activities, low global oil price, shortage of FX, technical devaluation of currency with attendant impacts on NPL, floating of Naira, increase in MPR by 200bpts to 14% in the face of growing inflation and negative GDP growth- this had impacted and still impacting both top-line and bottom-line of the banks.
As a result of these persistent macroeconomic challenges and tough regulatory environment, UBA Plc posted mixed performance outlook as top-line experienced modest decline by -0.1% while bottom-line recorded modest growth of +1.9%, with corresponding weakness in RoAE, which closed lower at 18% against 22% growth recorded in previous year comparable period.
The bottom-line closed at N32.62billion against N31.99billion-. The improved cost management as CIR moderated at 63.0% against 64.00% had impacted the bottom-line considerably.
Also, the NPL ratio moved up to close at 2.4% against 1.7% posted in 2015 comparable period- The bank’s NPL ratio reveals weakness in risk assets management and recovery initiatives when compared with previous posture- However, it closed below regulatory benchmark of 5% - this remains commendable.
Summarily, below are the key takeaways from the Half-year 2016 presentation as presented by the management of the bank;
• Hike in MPR impacts funding cost
• Naira devaluation increased cost of funds but improved operating efficiency cushioned the effect
• Gross earnings and operating income remain stable with impressive contribution from various electronic channels
• Annualized return on average equity stands at 18%, still on track to 20% target
• Cost-to-income ratio defies the impact of growth in inflation during the period
• NPL up due to provisions for assets showing deterioration on the back of tough operating environment
• FX revaluation and devaluation of Naira impact loan growth and bottom-line
• Portfolio impairment charges and Naira devaluation impacted Loan loss
• Us dollar portfolio and power sector loans are performing impressively
• The e-banking products impacted bottom-line considerably
• The bank plans aggressive electronic channels to boost market share in Kenya
15. UBA declares N48.56 bln Profit in Q3'15 Result,(SP:N4.18k) – Proshare