UPDATED: UBA declares N316.4 billion half-year profit

The net profit for United Bank for Africa (UBA) for the six months to June dropped 16 per cent to N316.4 billion, the audited report of the pan-African lender showed on Monday after release.

Post-tax profit for Nigeria’s second-biggest lender took a battering after it incurred 235.3 per cent more in income tax expense compared to a year earlier.

It also recorded a N311.7 billion net fair value loss on derivatives, a shift from a gain of as much as N348.4 billion a year earlier, setting it up for a 76.5 per cent in net trading and foreign exchange gain.

The income the top-tier bank generated from trading in financial assets and foreign exchange dwindled to N98.2 billion from N418.3 billion during the period.

UBA’s share price had quickened by 9.9 per cent as early as 10:58 West Africa Time in Lagos, only a breath away from the maximum upper daily limit permitted by the Nigerian Exchange, as investors’ cash poured into the stock after the announcement that shareholders would receive four times what they earned as interim dividend a year ago.

This means the company will pay shareholders a total cash reward of N68.4 billion for the period, which is equal to N2 per share.

Interest income was N1 trillion, up from N428.3 billion a year prior. Interest earned from fixed-income investments contributed more than the interest earned from loans and advances, which are often banks’ primary income sources.

The reasonable improvement by those two main contributors to the lender’s interest income pool suggests banks are clinging steadily to the winning end of the Central Bank of Nigeria’s long cycle of upward rate adjustments reaching back to May 2022.

While that policy stance has created a honeypot for lenders in allowing them to book loans at high interest rates, it is a pain point for borrowers for whom repayment obligations have become much more burdensome.

Unlike most other lenders, UBA, which is the last of the Big 5 banks to release its earnings results, slashed the amount it put aside to cover problem loans by as much as 59.3 per cent. The feat helped lift the remainder of its interest income after impairment charges had been accounted for to N614.4 billion, which surged almost fivefold.

Profit before tax declined marginally by 0.5 per cent.

The lender saw a big leap in the value of the earnings from its foreign subsidiaries after conversion into naira, its reporting currency, causing exchange differences on translation to rise by 63.8 per cent.

That in turn helped the total comprehensive income for the period to jump to N1 trillion from N821 billion.

UBA operates in 20 markets in Africa, which account for more than half of its balance sheet, according to the bank.