UBA Plc’s gross earnings grew by 18% year-on-year to N188.15bn in Q2 2022, primarily driven by 16% YoY growth in interest income to N132.29bn. Non-interest income also grew by 22% YoY to N55.86bn.

Operating income grew by 21% YoY to N125.63bn. Despite a 100 basis points increase in cost-to-income ratio to 67% in Q2 2022, net profit grew by 29% YoY to N28.84bn.

Repricing of Asset Yields: Interest-bearing assets grew by 6% YoY to an average of N6.83trn, with most of the increase from investment securities (+37% YoY to N1.53trn). Meanwhile, a 16% YoY interest income growth indicates an asset pricing during the period. Net interest income (after impairment) advanced even higher by 24% YoY to N88.45bn in Q2 2022 due to a decline in interest expense (-2% YoY to N39.69bn). The decline in interest expense was primarily due to an improvement in the Group’s CASA ratio (i.e., proportion of low-cost deposits).

Strong Momentum in Digital Banking: Fee and commission income grew by 39% YoY to N54.29bn in Q2 2022, and it accounted for the entire non-interest income growth in Q2 2022. E-banking income remained the largest contributor of fee and commission income, which reflected the Group’s broadened and deepened payment solutions across its markets.

Inflationary Pressures Weighs on Profitability: Operating expenses grew by 23% YoY, relative to a 21% YoY operating income growth. The cost drivers were increased AMCON charges (which was based on balance sheet size), repair & maintenance expenses, and personnel expenses. Although profit before tax grew in absolute terms by 16% YoY to N41.27bn, the net margin was flat at 22% in Q2 2022 (Q2 2021: 22%). Owing to a lower effective tax charge in Q2 2022, profit after tax grew by 29% YoY. We attribute the lower effective tax rate (30% in Q2 2022 vs 37% in Q2 2021) to the Group’s increased exposure in tax-exempt financial assets.


We maintain our earnings projections (revised EPS N4.01 vs previous EPS: N4.04), as we do not see a material deviation from our initial expectations. The rising interest-rate environment is expected to positively drive interest income. However, the gains are expected to be capped by a simultaneous increase in operating costs.

We think that the stock is currently undervalued. At its current 0.28x price-to-book, it pales in comparison to the historical 0.41x. While we understand that growth expectations are bleak due to macroeconomic headwinds and regulatory risks, we yet posit that the stock trades at a steep discount. We further emphasise our position based on the stock’s 54% earnings yield, which we consider very attractive.

Please follow the link “United Bank for Africa Plc Q2 2022 – Asset Repricing Buoys Earnings Growth”  to view the whole report.

Thank you.

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