April 24 (Lagos) - UBA
Plc ( UBA
) released its Q1’18 results, posting modest top and bottom line performances. Notably, Gross Earnings rose 18% y/y to N 119 billion 2% ahead of analyst's N 117 billion estimate, albeit 6% weaker than the N 128 billion reported in Q4’17.
Although Non-Interest Income came in 24% lower than we had expected and 30% weaker q/q, the strong Gross Earnings growth was supported by an 18% y/y rise in Interest Income to N 90.3 billion 5% better than our estimate and 3% higher q/q.
However, despite the relatively lower interest rate environment and amid a modest 4% q/q rise in Customer Deposits, Interest Expense rose 14% q/q to N 36.8 billion, outpacing our N 30.4 billion estimate. With this, Net Interest Income rose 4% y/y to N 53.6 billion - 3% lower than our N 55.3 billion estimate.
In line with the trend observed across the industry with Q1’18 numbers so far, Loan loss provision moderated 53% y/y to N 1.5 billion – significantly lower than our N 6.6 billion estimate and the N 20.0 billion recorded in Q4’17.
Analysts at Vetiva Capital Management Ltd in Victoria Island note that in accordance with the implementation of IFRS 9, UBA
took a one-time charge of N 34 billion against its equity through Other Comprehensive Income.
Overall, with Operating Expense coming just in line with our estimate at N 50 billion, albeit up 13% y/y, PAT rose 6% y/y to N 23.7 billion – 5% ahead of our N 22.6 billion estimate.
TP revised to N14.42 (Previous: N14.21)
Analyst's at Vetiva Capital Management Ltd in Victoria Island revise their estimates across a few line items to account for the deviations in Q1’18 numbers. Particularly, they cut the loan growth forecast to a modest 4% y/y growth for FY’18 (Previous: 10%; Q1’18: -2%). Supported by a stronger than expected yield on assets, they raise our Interest Income forecast higher to N 359 billion (Previous: N 337 billion).
Also, in line with the weaker Q1’18 run rate, we cut our Non-Interest Income estimate lower to N 106 billion (Previous: N 125 billion). Consequently,top line estimate is revised to N 465 billion (Previous: N 470 billion). More importantly, we cut our loan loss provision estimate to N 11.8 billion (Previous: N 20.4 billion) due to our more optimistic asset quality outlook following the N 34 billion one-time charge taken after the implementation of IFRS 9.
Analyst estimates an Operating Expense of N 192 billion for FY’18 (Previous: N 204 billion) – resulting in a Cost to Income ratio of 59%. Overall, analyst forecasts a PAT of N 94.0 billion for FY’18 – translating to an EPS of N 2.75 and an RoE of 17.3%. With a dividend payout ratio estimate of 33%, analyst forecasts a dividend per share of N 0.90 for FY’18.
UBA continues to trade at a discount to peers priced at an FY’18 P/E and P/B of 4.1x and 0.7x vs. tier I averages of 4.8x and 1.0x respectively.