UBA Powers Q1 performance With Net Profit Growth of 154.7%

United Bank for Africa (UBA) released its Q1 24 results during trading hours on Friday, delivering Pre-tax profits and Net
profits growth of 154.7%y/y and 144.3%y/y, respectively.

On balance, Q1 24 earnings were driven primarily by significant improvements in Interest income following improved
yields on customer loans; and Non-interest income, particularly Fees and commission income. The stock price is up 1.4% y-t-d, following improvements in sentiment towards banking tickers after weeks of continued sell-offs. We expect the results to drive positive sentiment towards the ticker.

Financial Performance
UBA’s EPS grew by 168.9% y/y, driven by Net interest income (+151.3% y/y) and Non-interest income (+38.9% y/y). The
former was supported by solid loan growth (+33.0% y-t-d) and increased investment securities yields (+289bps y/y), while
a surge in Fees and commission income (+114.6% y/y) – e-banking income and commissions on transactional services –
drove the latter. Elsewhere, interest expense rose by 93.9% y/y owing to higher interest paid on customer deposits,
borrowings, and interbank funding. Despite the rise in interest expense, the Cost of Funds declined by 17bps y/y to 2.8%
as the group benefitted from cheap funding costs on customer deposits. Consequently, the Net Interest Margin
expanded by 103bps y/y to 4.3%, according to our estimate.

Operating expenses grew 104.1% y/y, primarily on personnel costs, fueling, and maintenance costs. However, operating
efficiency improved as the group’s Cost-to-Income ratio declined by 323bps to 57.8% y/y. Following the larger growth in
net revenue than costs, Pre-provision operating profits rose by 133.4% y/y. Further down the profit/loss account, Loan
Loss Provisions were lower by 53.4% y/y (the Cost ofrisk declined by 58bps y/y in Q1 24) despite solid loan growth.

AssetQuality
UBA has historically maintained a very prudent risk management framework. Despite challenging macroeconomic
conditions across its operational regions, the group has managed to reduce its cost ofrisk, declining by 58bps to 0.2% y/y.

Conclusion
Overall, we consider the results modest, with earnings growth comparable to that of peers except for Non-interest
revenues. We anticipate that both net interest income and non-interest revenue will continue to propel earnings growth
in FY 24.