UBA'S THIN ICE WITHOUT PAPER PROFITS

United Bank For Africa (UBA) PLC is walking on a rather thin ice without paper profits, according to three months figures to September released today, October 16 2017.

This is because with whooping drops in exchange differences on foreign transactions and fair value gains, the Bank's comprehensive income dropped by 36.2% to N75,501m from N118349m at the same time last year.

It is also because operating profit before tax grew by 22.4% to N60920m behind 25.8% rise in gross earnings to N333905m mainly as impairment provisions rose by 41.9% to N12909m making a mess of fairly comfortable double digit growths in most revenue streams  and just 10.1% rise in employee cost to N51296m.

Net interest income ended 35.9% up at N152297m as interest income growth outdistanced interest expense increase; net trading and forex income rose by 41.3% to N34475m; other operating income stood at N3453m, up 74% and even net fee and commission grew by 4.03% to N46675m as associated expense dropped by 1.21% to N11210m.

In the end, net operating income increased by 30% to N236,900m but this was rubbished by the 41.9% rise in impairment charges driven more significantly by 198.9% growth in provision for bad loans and advances and by 39.5% increase in other operating expenses to N86985m.

Hence, with profit growth short of gross earnings increase, UBA settled for profit margin of 18.2% compared to 18.6% previously.

It is this that 80.1% drop in exchange differences on foreign operations to N9402m and 75.2% decline in fair value gains to N5345m, made a lot thinner resulting in 36.2% drop in comprehensive income from 25.8% rise in operating gross earnings.

From the look of things, UBA may earn more from consolidating its exposure to Treasury bills; fixed income trading securities; dividend income sources and interest receivable from inter bank loans and advances.

But it will also have to do something about its interest expense on borrowings and leap in provisions for loans and advances to customers.

If not, the ice may get thinner by the end of the year, all things being equal.

UBA PLC: Nine months, Nm
                               2017.             2016
Gross earnings 333905.       265527
Interest income 238092.      182989
Interest expense 85795.        70916
Net interest inc. 152297.      112073
Fee& Comm.        57885.        56215
". " Expense.         11210.        11347
Net fee& comm.  46675.        44868
Net trading etc.    34475.        24398
Other Op. Income  3453.          1925
Net op income    236900.      182264
Impairment            12909.         9098
Employee cost.     51,296.       46609
Other Op. Cost       86985.        62355
Total op. Cost.    145699.       115297
Share of profit             33.             (71)
Profit before tax.  60920.         49512
Profit margin %.       18.2.            18.6


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