United Bank for Africa (UBA)’s Quarterly profits gained 33.1 per cent speed more than a year ago, helped by a notable improvement in the income it generated from lending and from its investments in financial assets.
The lender’s earnings report for the three months to March issued on Wednesday showed investment securities like bonds, treasury bills and promissory notes added 48.7 per cent to the interest income pool, compared to 45.7 per cent a year earlier.
It is a shift away from the general expectation that the contribution of interest revenue from lending, being the primary business of banks, to the top line will reasonably outweigh those of other income sources.
That could mean the lender is relying less on loans and advances, which have taken a bashing from payment defaults from customers hard hit by high borrowing rates, and more on fixed-income securities.
Net interest income, the difference between the interest banks charge on loans and what they pay out to depositors and other lenders, was up by 17 per cent at N351.9 billion.
Nigeria’s reference rate stood at 27.5 per cent in the period under review, compared to 24.8 per cent a year earlier, giving more room to lenders to charge higher interest rates on loans.
That has created more burden for borrowers, triggering a series of industry-wide payment defaults which, in turn, is forcing banks to commit more of their revenue to cover past due obligations on problem loans.
In the review period, UBA set aside nearly seven times the amount it allocated for that purpose in the corresponding period of 2024.
Net trading and foreign exchange income climbed 211.2 per cent higher as the group cut its fair value loss on derivatives by as much as 82.4 per cent. Pre-tax profit improved by 30.7 per cent, while after-tax profit increased to N189.8 billion from N142.6 billion.
Return on equity stood at 5.2 per cent, up from 4.2 per cent.