UBA rated ‘buy’, beats estimates on improved assets yields
by BALA AUGIE
October 18, 2017 | 2:28 am| | | Start Conversation
United Bank for Africa Plc (UBA) has posted third-quarter earnings that beat analysts’ estimates, fuelled by improved yield on loan book and money market instruments.
For the first nine months through September 2017, UBA’s net income spiked by 23.04 percent to N60.92 billion, ahead of the N54 billion estimate of 8 analysts surveyed by BusinessDay.
Interest income surged by 30.11 percent to N238.82 billion in the period under review, from N182.98 billion as at September 2016.
As a result of improved earnings, net interest margins moved to 7.30 percent in the period under review, from 6.70 percent as at December 2016.
Analysis of UBA’s third quarter results showed that interest income from loans and advances and term bonds was up 48.71 percent to N113.20 billion while treasury bills (under investment securities) surged by 114.36 percent to N47.19 billion.
Nigerian lenders have seen income spike on the back of asset re-pricing and high interest rate environment.
The banks have dollar-denominated loans and, as a result of the devaluation of the Naira, interest income increased year-on-year despite zero loan growth, Ayodeji Ebo, managing director, Afriinvest Securities Limited, to0ld BusinessDay.
“There is an alternative investment: Treasury bills (T-bills), which is at an attractive rate. T-bill yields have been on double digit since the beginning of the year. It’s only rational for investors to key into this attractive investment,” Ebo said.
The result of the country’s treasury bills for October 4 showed that the discount rates on 182- day and 364 day T-Bills stood at 15.50 percent and 15.72 per cent, although these fell by 130 and 127 basis points respectively.
UBA’s non-interest income increased by 18.83 percent to N84.60 billion, thanks to 81.15 percent surge in fixed income trading securities to N28.94 billion as the lender continues to make a giant stride in the electronic trading space.
“Our investment in digital channels is being rewarded, as our market share of digital banking continues to grow and we have also seen strong momentum in the trade and remittance businesses, where we have doubled the monthly run-rate in fee income, a testament to an increasingly optimistic business and currency environment,” Kennedy Uzoka, group managing director/CEO of the bank said.
UBA has been maintaining a steady growth in earnings in the past two years amid a volatile and tough operating environment.
Little wonder investment house CSL Research Limited has place a ‘Buy’ ratings on the lender’s stock, with a target price of N10.19 from a current price of N9.23.
UBA’s shares have gained 104.89 percent since the start of the year, while market capitalization stood at N318.05 billion as at October 16.
“We continue to benefit from the strategic diversification of our business, with non-Nigerian business now contributing more than a third of revenues this quarter. These positive developments reinforce our constructive outlook on earnings and balance sheet growth for the last quarter of the year,” Uzoka affirmed. “To this end, we will progressively deliver superior return to our shareholders, as we extract new growth opportunities in our unique Pan-African franchise.”
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