UBA reports N401.5 billion in half year pre-tax profits, declares record N2 dividend

United Bank for Africa has released its 2024 half-year earnings, declaring a pre-tax profit of N401.5 billion, compared to the N403.6 billion reported a year earlier.

The bank’s impressive profit position was underpinned by a robust N614.4 billion in net interest income after impairments.

This represents a 395% increase compared to the N124.1 billion reported in the same period in 2023, indicating that the quality of its half-year profit was driven by core business fundamentals and not forex gains.

UBA also impressed investors with a record interim dividend of N2 per share.

Second Quarter

Net Interest income for the second quarter was N317 billion representing a 2,640% increase from the same period a year earlier.

However, pre-tax profits in the second quarter of the year printed N245.2 billion down 28% when compared to the same period in 2023.

The drop in pre-tax profits is tied to forex gains earned a year earlier. When adjusted for the forex gains, this represents one of the bank’s best second-quarter earnings.

Key highlights (2024 Q2 vs 2023 Q2)

• Net Interest Income: N317 billion, +2640%
• Net fees and commission: N82.9 billion, +68%
• Operating income: N496.7 billion, +8%
• Operating Expenses: N251.5 billion, +111%
• Pre-tax profits: N245.2 billion, -28%
• EPS (Q2), N5.08
• Loans and advances: N6.9 trillion, +49%
• Borrowings: N1.2 trillion, +110%
• Total deposits: N23.2 trillion, +84%
• Total Assets: N28.3 trillion, +84%
• Net Assets: N2.9 trillion, +74%

Commentary (half year)

UBA’s Half-Year Performance Analysis

UBA’s half-year pre-tax profit of N401 billion for 2024 represents a slight decline of 0.5% compared to the N403 billion reported during the same period in 2023.

• Despite this decline, the bank’s 2024 half-year profits were primarily driven by an improvement in the quality of earnings.
• In contrast, a significant portion of the 2023 profits stemmed from trading income and foreign exchange (FX) gains, which amounted to N418.2 billion.
• This figure stands in stark contrast to the N98 billion reported in 2024, indicating a shift in the bank’s revenue sources.

One of the major contributors to the bank’s profitability this year was a robust increase in net interest income, which more than tripled to N674.6 billion.

• A breakdown of the bank’s interest income reveals that over half of this amount—N510.7 billion—was derived from loans extended to individuals and corporations, with the latter contributing N310 billion.
• The remaining income came from investments in fixed income assets, such as treasury bills and bonds.
• In addition to higher interest income, UBA benefited from a reduced impairment charge, recording N58.5 billion this period, a significant drop from the N143.9 billion reported in the same period of 2023.

On the fee and commission side, UBA also reported N250.6 billion, marking a 100% increase from the N125.9 billion recorded a year earlier.

• A substantial portion of these fees—N106.1 billion—came from electronic banking income, while another N32.9 billion was generated from credit-related fees and commissions.
• However, the bank also incurred N83.1 billion in electronic banking expenses.

Foreign Exchange Gains Reversed

In 2023, UBA’s profits were heavily driven by forex-related gains, some of which the government is currently considering for taxation.

• However, in 2024, UBA’s gross trading and FX income stood at N409.7 billion, down from N418.2 billion in 2023.
• The bank also reported a significant “net fair value loss on derivatives” of N311.6 billion, compared to a fair value gain of N348.4 billion reported in the first half of 2023.
• These losses were primarily related to derivative transactions during the period.

Dividend Payment

UBA declared an interim dividend of N2 per share for 2024, compared to the 50 kobo declared a year earlier.

• This is the highest interim dividend ever declared by the bank. In total, the bank paid N2.8 per share as dividends from its 2023 earnings.
• The dividend will be paid to shareholders whose names appear in the Register of Members as of the close of business on Monday, October 14, 2024.
• The announcement of this dividend has already caused the bank’s stock price to surge by 10%.