As Q2 Results Countdown Begins, UBA Faces Questions On Margins, Loan Growth
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As United Bank for Africa (UBA) prepares to release its second-quarter financial results, anticipation is high among investors, customers, and market watchers. The bank delivered a strong performance in the first quarter of 2025, recording a profit after tax of ₦189.84 billion, representing a 33 percent increase compared to the same period last year. Profit before tax stood at ₦204.26 billion, reinforcing UBA’s reputation as one of Africa’s leading financial institutions.
However, behind the impressive numbers, concerns have been raised about certain underlying trends that could shape the bank’s outlook for the rest of the year. Speaking with Readership NG, an expert noted, “UBA had a very solid Q1 result on the surface, but when you look closely at the fundamentals, there are issues that need careful monitoring going forward.”
One of the major talking points is the sharp rise in interest expenses, which jumped to ₦247.96 billion from ₦140.09 billion in Q1 2024, an increase of more than 77 percent. This surge in funding costs outpaced the growth in interest income, raising concerns that the bank’s net interest margin could come under pressure in the coming quarters if interest rates remain elevated.
Another issue is the decline in the loan book, which dropped by 1.8 percent to ₦6.83 trillion, suggesting either a cautious approach to lending or weak credit demand despite higher interest rates. Analysts also noted a significant spike in impairment charges, which rose to ₦14.18 billion compared to ₦3.28 billion in the same period last year, signaling possible credit risk provisioning as a safeguard against economic headwinds.
Non-interest income, particularly from foreign exchange and trading gains, was a big boost to the bottom line, surging to ₦37.04 billion from ₦11.90 billion in the previous year. However, experts warn that such gains are market-driven and may not be sustainable if currency volatility eases. While UBA improved its cost-to-income ratio to 52.9 percent, operating expenses still grew by 12 percent to ₦245.79 billion, with e-banking costs almost wiping out the income generated from that segment.
Capitalization is another area of interest, as UBA is currently executing a multi-tranche rights issue to meet new regulatory requirements. While this strengthens the bank’s capital base, it may lead to equity dilution and potential pressure on return on equity in the near term. Another point raising eyebrows is the unusually low effective tax rate of about 7 percent, far below the statutory 30 percent, which analysts believe could normalize in subsequent quarters and impact net earnings.
Despite these concerns, UBA remains fundamentally strong with total assets of ₦31.71 trillion, customer deposits of ₦22.86 trillion, and an annualized return on equity of over 21 percent. Still, as the second-quarter numbers approach, the big questions remain: Can UBA sustain this level of profitability without relying heavily on FX windfalls? Will loan growth pick up despite high borrowing costs? And how will operating expenses and recapitalization shape future earnings?
For now, all eyes are on the Q2 report, which may provide clarity on whether UBA can maintain its growth momentum or if these red flags will become more pronounced in the second half of the year.
