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United Bank for Africa Plc, non Interest Income is driving growth as the just released Full-Year financial statement of the pan African lender showed.
United Bank for Africa Plc, the pan African lender with branches across the continent and Europe just released its Full-Year financial statement that showed remarkable improvement in key ratios even amid a myriad of challenges that undermines sector players.
The lender’s risk management strategies and efficient portfolio allocation validates good asset quality, while earnings have been living up to the billing of the group’s motto “African Global Bank’’ as earnings are being decentralised.
Overview of financial performance
For the year ended December 2021, UBA’s gross earnings was up 6.90 percent to N658.29 billion from N615.77 billion as at December 2020.
The growth in gross earnings was largely driven by an uptick in interest income and fees and commission income.
Despite a low yield environment brought on by the central bank’s dovish stance, interest income on loans and advances increased by 12.12 percent to N473.90 billion from 422.65 billion the previous year.
Interest income for the period was buoyed by earnings from term loans to individuals, corporate overdrafts and bonds investments.
Interest from loans to corporate customers now accounts for 36.68 percent of the total interest income. Interestingly, it increased year on year (YoY) 4.22 percent the prevailing low-rate environment in our largest market, Nigeria.
Interest income on treasury bills reduced by 4.24 percent to N129.13 billion in the period under review from N134.86 billion the previous year.
Net interest income-which reflects the difference between the revenue generated from a bank’s interest-bearing assets and the expenses associated with paying its interest-bearing liabilities- increased by 22.06 percent to N316.71 billion in December N259.46 billion the previous year.
The lender’s fees and commission income spiked by 24.94 percent to  N158.64 billion in December 2021 from N126.94 billion the previous year.
The growth in fees and commission was largely driven by a 46 percent increase in electronic banking income to N64.95 billion in the period under review from N44.24 billion the previous year.
Profit before tax (PBT) grew by 20.21 percent to N153.07 billion in December 2021 from N127.57 billion the previous year. Net income was up 8.71 percent to N118.67 billion in the period under review from N109.16 billion the previous year.
The growth at the bottom line (profit) was largely driven by advances in earnings quality, even as operational efficiency got enhanced group-wide.
Total operating expenses were up 11.68 percent to N278.98 billion in December 2021 from N249.98 billion the previous year. The uptick in expenses were brought on by inflationary pressures, regulatory induced costs such as the Asset Management Corporation of Nigeria (AMCON) charge and huge energy costs.
Strong balance sheet and capital position
Impairment charge on financial assets dipped by 56.10 percent to N9.85 billion in the period under review from N22.44 billion the previous year, thanks to the reopening of the economy and relaxation of social distancing measures that buoyed business activities as customers were able to pay interest on loans borrowed from banks.
Total assets grew 9.75 percent to N8.54 billion as at December 2021 from N7.69 billion, driven largely by growth in investment securities, customer loans and placements.
United Bank for Africa capital base and liquidity are strong and well above regulatory minimum. This creates a strong position for value-yielding expansion and impressive returns.
The Group maintains a well-diversified balance sheet, with over 50% of the assets in liquid, low-moderate risk instruments.
Total loans and advances were up 7.60 percent to N2.83 trillion as at December 2021 from N2.63 trillion the previous year.
Total customer deposit increased by 15.68 percent to N7.02 trillion in December 2021 from N6.08 trillion as at December 2020
Customer deposits continue to dominate the Bank’s funding mix (80%), even as CASA grew by 10.7% YTD as at June’21 driven by an uptick in the bank’s corporate and retail customers’ transactions.
United Bank for Africa uses digital banking to deepen financial inclusion
It is worthy to note that UBA ensures that banking services reach consumers in remote areas, especially farmers in the rural area as it is at the forefront of bolstering financial inclusion.
The pan African lender has a simplified channel that enables small and medium enterprise (SMEs) to receive online payment from customers.
It offers money transfer and remittances that enhance international money transfers while the insurance technology (Insutech) paves the way for companies selling insurance digitally, partnerships to scale and offer services on platforms.
It offers marketplace lending, microlending & alternative lending platforms.
United Bank for Africa Mobile Banking App is currently the highest rated Nigerian banking app on Google play store. Interestingly, USSD subscribers hit the 4 million mark. The implementation of  the Auto-suggest service for NIP transactions on USSD  led to reduced timeouts and increased transactions.
Banks face immense challenges from Fintech firms who are poised to cannibalize on sales using latest technology and user-friendly products to attract young customers who are underserved.
Between 2014 and 2019, Nigeria’s bustling fintech scene raised more than $600 million in funding, attracting 25 percent ($122 million) of the $491.6 million raised by African tech startups in 2019 alone—second only to Kenya, which attracted $149 million, according to a report by McKinsey.
There are untapped opportunities as the country’s digital space is still in the embryonic stage.