Last Update18 Jun 25
Subject: Analysts Turn Bullish on UBA Plc as Q2 2025 Expectations Soar Amid Strong Fundamentals and Expansion Drive
A wave of optimism is sweeping through Broadstreet as a growing number of equity analysts revise earnings and price expectations upward for United Bank for Africa (UBA) Plc, positioning the stock as one of the most promising in the Nigerian equities space ahead of its Q2 2025 financial results.
Key Highlights:
- Market Valuation Hits N1.5 Trillion Investor appetite surged last week, pushing UBA’s market capitalization to approximately N1.5 trillion, buoyed by rising confidence in the bank’s Pan-African strategy and earnings resilience.
- Strong Upside Potential At a market price of N36.15, analysts see significant headroom for price appreciation:
- Cordros Securities: Raised its price target to N58.28/share (from N57.42), maintaining a “Buy” rating.
- Afrinvest: Forecasts a 47.5% upside with a target price of N53.09/share.
- Dividend Outlook for FY 2025 Cordros also projects a final dividend of N5.10, reinforcing investor expectations for improved shareholder returns.
- Pan-African and Global Expansion Fuel Optimism UBA’s international ambitions continue to gain traction, with plans to:
- Launch a Saudi Arabian subsidiary.
- Secure regulatory approval for its France operations in 2025, deepening its global banking footprint.
- Q1-2025 Performance Bolsters Confidence UBA posted 37.3% YoY growth in gross earnings, reflecting strong momentum in both core and non-core banking operations.
- Earnings and Revenue Forecasts Revised Upward
- Pre-tax profit expected to rise 23% to N988.8 billion.
- Gross earnings forecast revised up by Cordros to +26.7% (from +23.4%).
- EPS forecast adjusted to N21.80, with modest growth (+0.3%) impacted by an increase in share count.
- Key Drivers of Growth
- 28.2% projected growth in earning assets, supported by high interest rates.
- Expansion in non-interest income, led by fees and commissions (+26.7%).
- Lower loan forbearance (5% in 2024 vs. 20% in 2023) to drive reduced provisioning and improve cost of risk (3.0% vs. 3.2%).
- Operational Efficiency Set to Improve
- Operating income expected to grow by 25.3%, outpacing operating expenses growth of 14.8%.
- This results in an improved cost-to-income ratio of 51.1%, down from 55.7% in 2024.
Outlook
UBA’s robust fundamentals, aggressive capital deployment, and disciplined cost management have made the bank a clear favorite among equity analysts. With diversified revenue streams, an expanding international presence, and digital innovation underpinning its operations, the bank appears well-positioned for sustained growth in 2025 and beyond.
The stock remains deeply undervalued relative to its projected earnings and intrinsic worth, offering a compelling case for long-term investors seeking growth and income.
United Bank for Africa (UBA) kicked off 2025 with a 30.65% jump in pre-tax profit to ₦204.27 billion and a 33.15% rise in net profit to ₦189.84 billion, underlining the strength of its core banking operations and resilient income streams despite intensifying cost pressures.
🔑 Key Highlights (Q1 2025 vs. Q1 2024):
- Pre-tax Profit: ₦204.27 billion (+30.65%)
- Net Profit: ₦189.84 billion (+33.15%)
- EPS: ₦5.35 (+35.10%)
- Interest Income: ₦599.83 billion (+36.09%)
- Interest Expense: ₦247.96 billion (+77.00%)
- Net Interest Income: ₦351.88 billion (+17.03%)
- Non-Interest Income: ₦112.36 billion (+44.21%)
- Total Assets: ₦31.71 trillion (+4.58%)
- Customer Deposits: ₦22.86 trillion (+4.43%)
- Cash and Equivalents: ₦9.54 trillion (+16.89%)
- Share Price (April 23): ₦34.95 (+2.79% YTD)
📊 Profit Drivers: Core Banking Operations Hold Strong
UBA’s interest income surged by 36% YoY, reflecting sustained growth in its loan book and strong returns from investment securities. Notably:
- Investment Securities income rose 45% YoY to ₦291.86 billion, becoming the largest contributor (48.7%) to interest income.
- Loans and advances contributed ₦260.56 billion (+31% YoY), or 43.4% of total interest income.
- Income from cash balances also grew by 17% to ₦47.42 billion.
However, interest expenses jumped 77%, driven by higher deposit mobilization costs, with over 89% of those costs linked to customer and institutional funds. This compressed the net interest margin, though net interest income still posted a solid ₦351.88 billion, up 17% YoY.
🏦 Rising Provisioning, But Within Range
UBA increased its provision for credit losses by 160% to ₦18.61 billion, signaling a cautious stance amidst evolving credit risks. Though elevated, this remains manageable within the context of the bank's strong earnings capacity and asset base.
💳 Non-Interest Income: Diversification in Action
UBA continued to diversify revenue through growing fee-based income:
- Electronic banking income hit ₦47.84 billion (+7.86%), though offset by nearly ₦42 billion in associated costs.
- Account maintenance fees climbed 11.1% to ₦10.39 billion.
- Commissions on transactions dipped slightly by 2% to ₦29.67 billion.
The net result was a 44.2% boost in total non-interest income, helping cushion the impact of rising interest expenses and provisioning.
📘 Balance Sheet Insights: Leaning Into Fixed Income
UBA’s total assets rose to ₦31.71 trillion, a 4.6% increase, largely fueled by growing customer deposits (₦22.86 trillion, +4.43%) and a significant investment shift into fixed income:
- Over ₦1.2 trillion was added to securities classified under FVOCI, signaling a strategic move to capture high yields while maintaining liquidity.
Loan growth, however, contracted slightly by 1.83%, possibly reflecting cautious lending or balance sheet optimization.
📈 Market Performance & Valuation
UBA’s stock price has gained 2.79% YTD, closing at ₦34.95 on April 23, building on its 32.55% rally in 2024. Despite strong fundamentals and rising earnings per share, the share price has not fully captured the Q1 earnings momentum, indicating possible upside potential.
⚠️ Key Considerations:
Strengths:
- Solid growth in both interest and non-interest income
- Well-diversified income streams
- Prudent credit provisioning
- Strong liquidity and deposit base
- Strategic asset reallocation toward high-yield instruments
Challenges:
- Margin pressure from surging interest expenses
- Rising cost of electronic transactions
- Slight contraction in loan book could weigh on future growth
- Elevated provisioning hints at macro uncertainties.
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