Event: United Bank for Africa (UBA) reports Q4 2017 results
Implications: Likely upward revisions to consensus 2018 PBT forecasts and a positive reaction
Positives: Non-interest income was up 42% q/q, surprised positively
Negatives: Loan loss provisions surprised negatively
UBA’s Q4 2017 results which were published this afternoon surprised positively. While PBT beat our forecast by 64%, the surprise in PAT was greater at 108%.
The positive surprise in earnings was mainly driven by a better-than-expected performance in non-interest income which came in around 49% higher than our forecast. Relative to consensus, Q4 PBT also came in around 28% higher. However, in terms of y/y trends, PBT declined by -15% y/y mainly because provisions and opex increased by 8% and 15% respectively, and base effects (Q4 2016 non-income was also strong for similar reasons as Q4 2017).
In contrast, PAT grew by 19% y/y to N27.6bn, thanks to a positive result of N13.2bn in other comprehensive income (OCI). Sequentially, PBT and PAT grew by 30% q/q and 35% q/q respectively, because of a healthy growth of 42% q/q in non-interest income.
On a full year basis, PBT expanded by 16% y/y to N105.2bn. However, PAT fell by -24% y/y because of a higher income tax rate of 25.3% (vs. 20.3% 2016) and a -58% y/y decline in OCI. The 2017 PAT translates to an ROAE of 21.1% – this is amongst the highest in our coverage universe. Management’s final dividend proposal of N0.65 brings the total dividend for 2017 to N0.85 per share. The final dividend is around 20% higher than our forecast of N0.54 and implies a yield of 5.7%.
Given the strong set of results, we expect to see upward revisions to consensus 2018E PBT forecast and a positive reaction from the market. The reaction is likely to be slightly tempered by concerns surrounding the provisions line and clarity on the sustainability of the non-interest income line, which continues to feature strong FX trading.
We rate UBA Neutral. Our estimates are under review.
Conference call details
Date: Tuesday, March 27, 2018