United Bank for Africa Q2 2025 – Short-Term Margin Strain, Long-Term Value Intact

Event

UBA Group posted a mixed performance in Q2 2025, with slow growth in gross earnings and heavy strain from rising funding costs. Gross earnings inched up by 5% year-on-year to N843.66bn from N800.89bn in Q2 2024, as gains in interest income were largely offset by a sharp decline in non-interest revenue.

Interest income rose by 30% to N773.80bn, driven by higher yields across core assets. Income from loans to customers improved to N265.58bn from N246.54bn, while income from investment securities recorded strong growth of about 30%. The momentum reflected the relative elevated yield environment and the 28% year-on-year expansion in average interest-earning assets, mainly from growth in investment securities. Notably, investment securities sustained its 55% contribution to overall interest income, while loans and advances account for 36%, down from 44% in Q2 2024. Contributions from cash and cash equivalents also climbed to 9% from 1%. Overall, asset yield improved to 5.19% in H1 2025 from 4.99% in H1 2024.

Outlook

Overall, we raise our fair value estimate to N50.52 from N47.54 in our previous report. This implies a forward price-to-earnings (P/E) multiple of 1.94x, below the seven-year average of 2.42x, suggesting attractive valuation relative to historical levels. On this basis, we maintain our BUY recommendation.

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