Tuesday, 16 October 2012

Dear Afrinvestor,

Please find below our Research Note expressing our initial thoughts on the recently released Q3 2012 results by UBA Plc.

UBA recently announced its unaudited Q3 2012 results; the lender recorded a 21.4% (y-o-y) growth in Gross   Earnings to N168.2bn from N138.5bn in Q3 2011, while pre and post tax profits accelerated by 376.1% and 429.7% from N9.4bn and N7.4bn in Q3 2011 to N44.9bn and N39.1bn respectively. A further breakdown of the results on a quarterly basis, show that Q3 2012 contributed 34.0% to Gross Earnings, marginally better than the 33.9% grossed in Q2 and 6.2% more than the N53.9bn in Q1 2012.

The growth in non-interest income (driven primarily by income from trading, fees and commission) was largely responsible for the improvement in UBA’s top line (21.9% y-on-y growth), while the drop in margins can be credited to a 19.0% increase in operating expenses (driven by other operating expenses) between Q3 2012 and Q3 2011 compared to the 13.9% rise in operating income over the same period.

UBA now trades at a P/BV of 0.9x, a 37.2% discount to its peer average of 1.4x with an ROAE 27.1%. We reiterate our BUY recommendation on the stock with a 12month price target of N7.67, representing a 35.8% upside on the current market price of N5.65. 

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