UNITED BANK FOR AFRICA PLC H1'22 Earnings Release - Earnings meet expectations amid NIR improvement

Earnings meet expectations amid NIR improvement                    
UBA’s recently released H1’22 earnings were broadly in line with our expectations, with the bank posting an 18% y/y growth in Gross Earnings to ₦372 billion, 2% above our estimate of ₦365 billion. This came about due to a 16% y/y increase in Interest Income to ₦257 billion, as the bank recorded improvements across all the interest income lines. Interest Expense was only 7% higher y/y at ₦80 billion, in line with our estimate, as interest paid on customer deposits rose 30% y/y. This meant that Net Interest Income came in 20% higher y/y at ₦177 billion, 3% higher than our expectation.

Meanwhile, Non-Interest Revenue (NIR) also showed signs of improvement, coming in 21% higher y/y at ₦78 billion; this was driven by a 30% improvement in income from fees and commissions. 
Cost-wise, Impairment charges doubled y/y to ₦8 billion, while Opex grew 22% y/y to ₦162 billion, on the back of a 12% y/y increase in AMCON charges. Overall, PBT grew by 13% y/y to c.₦86 billion, while PAT grew 16% y/y to ₦70 billion, slightly above our estimate of ₦69 billion. Furthermore, the bank announced an interim dividend of ₦0.20/share as expected.                

NPLs decline amid q/q balance-sheet shrinkage
Interestingly, the bank reported a 4% q/q drop in Loans and Advances to ₦2.75 trillion. Furthermore, the bank had an NPL ratio of 3.3%, down from 3.7% in H1’21 and FY’21. The bank’s Capital Adequacy Ratio (CAR) also improved to 25.1% from 23.9% in H1’21 and 24.9% in FY’21. For the full year, we still expect the bank’s risk-weighted assets to increase, thus we predict a slight moderation in CAR, but we note that the bank’s capital position is still well above the regulatory benchmark of 15%.