UBA Plc Q1 2022-Positive Outing Buoyed by Interest and Non-Interest Income Growth
- Gross earnings grew 18.3% YoY to ₦184.3bn on the back of interest and non-interest income growth, slightly exceeding our Q122 estimates. Interest income grew 15.2% to ₦125.1bn in Q1, driven majorly by a 73% surge in income from bonds to ₦33.1bn from ₦19.1bn. This correlates with the improved (101.9%) investment in bonds to N1.5tn from N718.5tn. Similarly, the firm grew Income on customer loans by 5.4% to ₦70bn, an offshoot of the expansion (5.0% YoY) in loans made to customers.
- Interest expense advanced (17.5% YoY) to ₦40.2bn on the back of a 61.5% increase in interest on customer deposits to ₦30bn from ₦19bn. This aligns with the increase (4.5%) in total deposits despite an increase in the proportion of CASA deposits from 82.6% to 85.5%. Thus, annualized cost of funds inched higher by 8bps to 2.1% in Q122. Net Interest Income, therefore, increased by 14.1% to ₦84.9bn.
- UBA recorded improved profitability with Profit before Tax up 9.6% to ₦44.5bn and Profit after Tax up 8.8% to ₦41.5bn. In this light, annualized Return on Equity inched marginally higher to 20.1% from 20.0% in Q121 while Return on Assets remained at 1.9% in Q122 (same as in Q121).
- For FY 2022, we expect this performance to be sustained upon higher loan growth relative to 2021 and expectations of higher yields in the Fixed Income market. Non-Interest Revenue should also reverberate the lender's digital banking drive which is important in its bid to capture a big demography of young people. We see a target price of ₦10.80 for UBA, representing a 34.1% upside compared to its close price of ₦8.05 and hence, we rate UBA a STRONG BUY
ARM Securities Limited is a full-service brokerage house that offers best-in-class brokerage services to local as well as foreign private and institutional investors. Formerly known as Hamilton Hammer, the Company commenced operation in 1994 and was acquired by ARM Investment Managers in 2008--an acquisition which has successfully re-positioned the company as a recognized brokerage firm in Nigeria. The Company is a dealing member of the Nigerian Stock Exchange (NSE) and is regulated by Securities and Exchange Commission (SEC). ARM Securities research team provides insightful commentaries on the Nigerian economy and its equity and debt markets using an approach which incorporates a thorough understanding of the fundamentals of the industries and companies under coverage. The research therefore adopts an integrated methodology of top-down analysis and bottom-up stock selection, which focuses on publicly quoted companies on the Nigerian Stock Exchange that are judged to offer the highest potential for earnings growth. In addition, its analysts provide periodic commentaries on a range of topical global and local issues which provide investing clients with a holistic view of the opportunities and risks in today’s financial market landscape.
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