Monday, April 23, 2018 /06:00PM
Event: United Bank for Africa (UBA) reports Q1 2018 results
Implications: Limited revisions to consensus 2018E PBT forecast
Positives: PAT grew 45% y/y, thanks to strong OCI gains
Negatives: Pre-provision profits fell -14% q/q driven by a -30% q/q reduction in non-interest income
UBA’s Q1 2018 results which were published this afternoon showed that PAT grew by 45% y/y to N33.0bn, largely driven by a positive result of N11.2bn in other comprehensive income (OCI). Further up the P&L, the growth on the PBT line was more modest at 4% y/y. The growth in PBT was underpinned by a -53% y/y reduction in loan loss provisions and a 7% y/y growth in pre-provision profits. The positives on both lines were strong enough to offset opex growth of 13% y/y growth. Moving back to pre-provision profits, although both revenue lines grew y/y, non-interest income which grew by 14% y/y was the stronger of the two revenue lines. Funding income managed single digit growth of 4% y/y. Sequentially, PBT declined marginally (-1.4%) q/q mainly because of negative surprises in non-interest income and opex. However, PAT grew by 20% q/q, thanks to the OCI gains.
Compared with our forecasts, PBT missed by 8% mainly because of a negative surprise in non-interest income. However, PAT beat our forecast by 52%, thanks to positive surprises in OCI and tax.
In terms of balance sheet trends, similar to other banks that have reported their Q1 2018 results, UBA’s loans declined by around -2%q/q despite management’s loan growth guidance of 15% for 2018E. UBA’s Q1 PAT puts it on track to deliver a 2018E ROAE of >25%.
When annualised, UBA’s Q1 2018 results put it on track to meet consensus 2018E PBT forecast of N106bn. Consequently, we expect to see limited revisions to consensus 2018E PBT forecast and a subdued reaction from the market.
We rate UBA shares Neutral.