UBA H1 2021 Audited Result: Bottom line Sunny as Loans and Advances Rise


Monday, October 4th, 2021 / 1:13 AM / By Adaeze Nwachukwu, Proshare Research / Header Image Credit: UBA Group

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With a recent upgrade of United Bank for Africa's (UBA) National short-term Issuer Default Rating (IDR) by Fitch to 'F1+(nga)' from 'F1(nga)', the H1 2021 results also reflect the basis on which its ratings were upgraded. Improvement in earnings was supported by improvement in interest income, fees and commission income. Cash and bank balances accounted for a large percentage (58%) of total income, while income from electronic banking contributed the highest (42%) of total income from non-fees and commission.

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H1 2021 Result: Key Highlights

  • Gross earnings rose year-on-year (Y-o-Y) by +5.13% to N316.04bn in H1 2021 from N300.61bn in H1 2020.
  • Net interest income was up Y-o-Y by +24.09% to N148.07bn from N119.32bn in H1 2020
  • Net interest margin increased to 5.80% in H1 2021 from 5.4% in full-year 2020.
  • Profit before tax inched up by +33.36% to N76.19bn from N57.13bn in H1 2020
  • Basic and diluted earnings per share rose Y-o-Y by +36.29% to N1.69 from N1.24 in H1 2020
  • Loans and advances to customers rose Y-o-Y by +20.50% to N2.63trn in H1 2021 from N2.19trn in H1 2020
  • Deposit from customers grew by +26.98% to N6.09trn from N4.80trn in H1 2020
  • Total assets inched up by +22.73% in H1 2021 to N8.32trn from N6.78trn in H1 2020
  • Shareholder's fund was up +22.73 to N752.52bn in H1 2021 from N634.73bn in H1 2020
  • Return on average equity grew to 17.50% from 14.40% in H1 2020
  • The cost-to-income ratio fell to 62.30% from 67.00% in H1 2020
  • The capital adequacy ratio rose to 23.90% in H1 2021 above the regulatory minimum of 15%
  • The non-performing loans ratio of the group improved to 3.50% in H1 2021 from 4.1%. 

A Technical Look

UBA's year-to-date (YTD) share price movement showed a negative return of -13.87% as of 29th September 2021. the stock traded at its highest between January and February; it tanked to its lowest in March 2021. Although the equity price has a bullish trend, it has not gotten to the levels it had at the beginning of the year.

Although the trend of the Bank's share price moved in the same direction with the Banking Sector index, UBA's stock value had a higher negative return against both the Sector's index and the NGX All Share Index (ASI), which both fell by -5.36% and -1.68% respectively (see chart 1 below).

Calculating the correlation coefficient between UBA and its Tier 1 counterparts, it has a positive relationship between all of them, however, had different levels of strength between them. A positive relationship indicates that the share price both move in the same direction when one falls the other falls. For the sake of a diversified and balanced investment portfolio, if a portfolio contains more than one stock of the tier 1 banks, when the price of a stock goes down, the price of the other stock will most likely fall as they both in the same direction.  

The correlation coefficient of UBA and FBNH was 0.22, which was positive but weak, while GTCO, Access Bank, Zenith Bank, and ETI were all positive and strong at 0.55, 0.52, 0.77, and 0.87, respectively.


Chart 1: YTD Share Price and Banking Sector Index Movement As of 29th September 2021

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Source: NGX, Proshare Research

Profitability-A Modest Upward Nudge

The tier 1 institution's gross earnings were up Y-o-Y by +5.26% to N316.04bn in H1 2021 from N300.28bn in H1 2020. Interest income accounted for 70%, while non-interest income contributed 30% to the bank's gross earnings in the period.

The growth in gross earnings was supported by a +8.29% rise in interest income and a -13.56% fall in interest expense.

The bank had its highest percentage growth of +37.53% in gross earnings in H1 2017, while H1 2020 had the lowest percentage growth of +2.24% during the period under review (see chart 2 below).

In contrast to the growth in Naira terms, gross earnings fell Y-o-Y by -7.36% to US$770.52m from US$831.74m in H1 2020 (the I & E FX Window rate was used for the conversion). The decline in gross earnings was associated with the devaluation of the domestic currency.

Chart 2: UBA's Gross Earnings H1 2017 - H1 2021 (N'bn)

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Source: UBA's Financial Statement, Proshare Research


Profit Before Tax

UBA's top and bottom-line earnings were supported majorly by declining expenses, both operating and interest. The +8.36% growth in operating income outpaced the +0.54% rise in operating income, supported the +33.36% growth in profit before tax (PBT).

The bank still saw its highest percentage PBT growth of +65.53%, while H1 2020 witnessed the highest percentage decline (see chart 3 below).

In US dollar terms, PBT had a lower percentage growth of +17.37% to US$185.75m from US$158.25m in H1 2020.


Chart 3: UBA's Profit Before Tax H1 2017 - H1 2021 (N'bn)

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Source: UBA's Financial Statement, Proshare Research


Impairment Charges-Cranking up loan quality

The Pan-African bank's impairment charges significantly slipped a few notches Y-o-Y by -47.01% to N4.14bn from N7.81bn in H1 2020. The outcome was after the bank saw a +150.22% growth in impairment charges in H1 2020 (see chart 4 below).

The decline in impairment charges resulted from a -61.17% fall in impaired loans and advances to customers; this does not reflect the +20.50% rise in loans and advances.

Chart 4: UBA's Impairment Charges H1 2017 - H1 2021 (N'bn)

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Source: UBA's Financial Statement, Proshare Research

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The Core Business-Rising Glides and Busy Rides

The retail lender's core business of deposits and loans has been on an upward glide recently. However, growth in customer deposit has outpaced growth in loans and advances to customers.

In H1 2021, loans and advances to customers were up Y-o-Y by +20.50% to N2.63trn, while deposits from customers increased by +26.98% to N6.09trn from N4.8trn in H1 2020 (see chart 5 below).

Chart 5: Growth Rate of Net Deposits and Loans & Advances H1 2017 - H1 2021

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Source: UBA's Financial Statement, Proshare Research


Asset Quality- Better by the Metre

The bank has kept its non-performing loan (NPL) ratio below CBN's threshold for the second consecutive year. NPL ratio improved in the period, from 4.1% in H1 2020 to 3.5% in H1 2021 (see chart 6 below).

The oil and gas sector accounted for 37% of NPL by sector, indicating the bank's highest exposure by NPL.


Chart 6: UBA's Non-Performing Loans Ratio H1 2017 - H1 2021

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Source: UBA's Financial Statement, Proshare Research

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Total Assets

The growth rate in total assets dipped in H1 2021 after an upward surge between H1 2017 and H1 2020.

Total assets grew Y-o-Y by +22.73% to N8.32trn from N6.78trn in H1 2020. Significant drivers of the growth in total assets were investment securities at amortized cost and loans and advances to customers; both were up Y-o-Y by +93.37% and +20.50% (see chart 7 below).

Chart 7: Growth Rate of Total Assets H1 2017 - H1 2021

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Source: UBA's Financial Statement, Proshare Research

Sliding Costs

As stated earlier, earnings of UBA was majorly on the back of reduced expenses, both interest and operating expense. Cost-to-income (CIR) fell significantly in H1 2021, from 67.1% in H1 2020 to 62.30%. H1 2020 had the highest CIR of 67.1%, while H1 2017 records the lowest CIR during the period under review (see chart 8 below).

Chart 8: UBA's cost-to-income Ratio H1 2017 - H1 2021

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Source: UBA's Financial Statement, Proshare Research


UBA's H1 2021 audited result showed top-line and bottom-line earnings; asset size also grew but not to pre-pandemic levels.

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