United Bank for Africa (UBA) closed the 2020 financial year with a balance sheet size of N7.7 trillion. This represents an addition of over N2 trillion to the asset base or an increase of 37 percent in the year. That sets the bank apart as one of the most aggressive increases in the size of the balance sheet in the Nigerian banking space in 2020.
The bank’s audited report for the financial year shows a customer credit portfolio of about N2.6 trillion, which represents a growth of 24 percent. This is the most rapid increase in customer loans and advances for the bank in four years. The high growth is defiant of the coronavirus-induced economic decline and the associated operating difficulties faced by people and businesses in the year.
The bank also registered a top record growth of over 64 percent in investment securities to close at N2.6 trillion for the year. This marks the highest growth rate in the investment portfolio for the bank in several years, turning around from a 4 percent decline in 2019.
Another major increase in the balance sheet came from cash and bank balances, which rose by 34 percent to almost N1.9 trillion to represent close to a quarter of the balance sheet.
The spur for the asset build up in the year came from a big injection of customer deposits on the liabilities side of the balance sheet. Customer deposits expanded by nearly one-half in one year to close at N5.7 trillion at the end of 2020. This is the strongest growth in customer deposits that UBA has recorded in many years.
Depositors’ claim amounted to 74 percent of the bank’s balance sheet at the end of 2020, rising from 68 percent in 2019.
The general operating difficulties faced by users of bank credit last year hindered the ability of the bank to convert the assets into earnings. This indicates a drop in the yield per naira of assets in the year. The main income line of the bank — interest earnings increased by less than 6 percent to about N428 billion.
This represents the slowest increase in interest earnings for UBA in many years. It contrasts with the highest increases in key earning assets — loans and advances and investment portfolios recorded in the year.
The bank generated gross earnings of over N620 billion at the end of the 2020 financial year. This represents an increase of roughly 11 percent for the year.
Net trading and foreign exchange income led the improvement in revenue with a major growth of 60 percent to over N59 billion. Fee and commission income also grew by roughly 15 percent to N127 billion during the year.
The bank’s management achieved a lot of cost saving from interest expenses, which followed a downward direction through the year. Interest expenses went down by 8 percent to close at about N168 billion. It is the first decline in interest expenses the bank has seen in many years.
The drop in cost of funds helped to extend the increase in interest income during the year. The favourable combination enabled an increase of 17 percent in net interest income — which amounted to over N259 billion at the end of 2020.
A major challenge in the year was a rapid growth in credit losses and this happened for the second year. Loan impairment expenses rose by 48 percent to N27 billion in the year and claimed part of the cost saved from the drop in interest expenses.
Another challenge also came from rising operating cost, which grew ahead of gross earnings and claimed an increased proportion of revenue. Total operating cost grew by 15 percent to N250 billion compared to 11 percent increase in gross income. It claimed an increased share of gross earnings in the year at 40 percent.
The bank’s management was able to balance the cost increases with revenue as well as cost savings to produce an elevated performance in profit. The cost saving from interest expenses provided the strength to counter the increases in loan impairment and operating expenses in the year.
The bank was able to achieve a substantial improvement in profit margin in the year. Its profit margin improved from 15.4 percent in 2019 to 18.3 percent at the end of 2020. This is the highest profit margin for the bank since 2016.
UBA closed the 2020 financial year with an after tax profit in the region of N114 billion, which is an increase of almost 28 percent. This is an accelerated growth from the 13.3 percent profit improvement in 2019 – when the bank posted an after tax profit of N89 billion.
The bank has announced a final cash dividend of 35 kobo per share, up on an interim cash dividend of 17 kobo per share.