UBA posts N401.5bn profit as interest income soars, forex gains dip

United Bank for Africa (UBA) has reported a pre-tax profit of N401.5 billion for the first half of 2024, a slight decline from the N403.6 billion recorded a year earlier.

The bank’s performance was driven by a remarkable increase in net interest income, which surged by 395 per cent to N614.4 billion, up from N124.1 billion in 2023, underscoring a shift towards core business fundamentals rather than forex gains.

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.

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Despite the strong growth in interest income, UBA’s pre-tax profit for the second quarter fell by 28 per cent to N245.2 billion, largely due to the absence of significant forex gains that boosted the prior year’s earnings.

Analysts highlight that, when adjusted for these one-time gains, UBA’s second-quarter performance remains one of its best, reflecting solid fundamentals.

Financial analyst Dr. Muda Yusuf commented, “The sharp rise in net interest income, particularly from loans and fixed-income investments, indicates that UBA is navigating the current high-interest-rate environment effectively, though the drop in forex gains highlights the volatility of trading income.”

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.

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.

In addition to the profit report, UBA impressed investors with a record interim dividend of N2 per share, a significant jump from the 50 kobo declared last year.

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.

This announcement, alongside the bank’s improved core earnings, has boosted investor confidence, driving a 10 per cent rise in UBA’s stock price.