UBA audited results for H1 2025 reveals earnings growth of 17.3%

UBA audited results for H1 2025 reveals earnings growth of 17.3% to N1.61trn. Interest income rose 32.9% y/y to N1.33trn (H1 2024: N1.00trn), reflecting growth in both the loan book (+15.0% year to date) and investment securities (9.8% year to date). Interest expense, however, jumped 70.4% y/y to N560.6bn due to higher cost of funds (up 104bps y/y to 4.1%) and expansion in interest-bearing liabilities (+8.7% year to date). Consequently, net interest income grew 14.6% y/y to N773.0bn, with net interest margin narrowing by 66bps to 5.2%. Non-interest revenue declined by 36.0% y/y to N167.8bn, largely due to trading losses of N10.0bn compared with a N98.2bn gain in H1 2024, reflecting reduced FX revaluation gains amid currency stability. Fees and commissions inched up 1.3% y/y to N147.0bn, while other income rose strongly (+64.7% y/y) to N30.8bn. Overall, weaker NIR limited top-line expansion, underscoring the bank’s reliance on funded income during the period.

We see scope for the Company to sustain its earnings momentum through balance sheet growth and increased customer activity. Stronger loan volumes and rising transaction income are expected to compensate for the softer yield environment and declines in trading gains, leading to projected gross earnings of N3.34trn in FY 2025.

Operating expenses rose 10.6% y/y to N520.4bn, driven by higher personnel expenses (+28.6% y/y) and regulatory charges (+32.1% y/y). As a result, the cost-to-income ratio deteriorated by 450bps y/y to 54.7%. On a positive note, impairment charges declined by 46.9% y/y to N32.0bn, compared to Zenith Bank’s provisioning of N700.0bn, reflecting improved asset quality and lower risk provisions. Accordingly, cost of risk fell to 0.7% (H1 2024: 1.8%). Pre-provision operating profit fell 9.8% y/y to N420.4bn, while pre-tax profit declined 4.3% y/y to N388.4bn. However, lower tax expenses (-37.9% y/y to N52.9bn) helped lift bottom-line performance, with net profit rising 4.0% y/y to N320.9bn. ROAE fell 765bps y/y to 17.6%, while ROAA dipped 47bps to 2.1%.

We expect the Group to post modest earnings growth in the near term. Lower impairment charges should continue to support profitability, reflecting improved asset quality, but rising operating expenses and weaker margins are likely to keep returns under pressure. Overall, we see steady bottom-line expansion and forecast profit aftertax in the range of N796.8bn to N880.7bn by year end.

UBA Balance Sheet & Liquidity

UBA maintained a good balance sheet position, with total assets expanding 9.7% year to date to N33.3trn. Growth was supported by a 15.0% rise in gross loans to N9.28trn and a 9.8% increase in securities holdings to N13.76trn. Customer deposits grew 10.5% year to date to N24.19trn. However, long-term funding declined by 48.9% year to date to N712.6bn, likely due to FX translation effects and debt repayments. Asset quality improved in H1 2025, with cost of risk declining to 0.7% from 1.8% in H1 2024, reflecting lower provisioning and stronger loan recoveries. Also, the reduced impairment charges suggest a healthier loan book in terms of NPLs compared to the prior year.

UBA Dividend

The Group declared an interim dividend of N0.25 per share (vs. N2.00 in H1 2024), translating to a dividend yield of 0.57% based on the closing price of N44.20 as of September 19, 2025. The sharp reduction reflects a more conservative payout policy as management is likely prioritising balance sheet strengthening at this juncture especially as it has not finished its capital raising activities to meet the new CBN directives.

Recommendation

We have revised our fair value estimate for UBA upward to N55.58 (previously N45.36), following adjustments to our blended valuation (FCFE, DDM, and Relative Valuation). This revision implies an upside potential of 25.0% from the stock’s closing price of N44.20 as of 19 September 2025, and we maintain a BUY rating on the stock. SOURCE: Coronation Asset Management