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)