Quarterly profits at United Bank for Africa (UBA) gained 33.1 per cent speed more than a year ago, helped by a notable improvement in the income it generated from lending and from its investments in financial assets.
The lender’s earnings report for the three months to March issued on Wednesday showed investment securities like bonds, treasury bills and promissory notes added 48.7 per cent to the interest income pool, compared to 45.7 per cent a year earlier.
It is a shift away from the general expectation that the contribution of interest revenue from lending, being the primary business of banks, to the top line will reasonably outweigh those of other income sources.
That could mean the lender is relying less on loans and advances, which have taken a bashing from payment defaults from customers hard hit by high borrowing rates, and more on fixed-income securities
Net interest income, the difference between the interest banks charge on loans and what they pay out to depositors and other lenders, was up by 17 per cent at N351.9 billion.
Nigeria’s reference rate stood at 27.5 per cent in the period under review, compared to 24.8 per cent a year earlier, giving more room to lenders to charge higher interest rates on loans.
That has created more burden for borrowers, triggering a series of industry-wide payment defaults which, in turn, is forcing banks to commit more of their revenue to cover past due obligations on problem loans.
