United Bank for Africa Plc will soon roll out an upwardly reviewed lending rate as plans are ongoing to raise the interest chargeable on loans by up to 400 basis points to keep its operational cost in Nigeria below profit level.
With inflation reaching a record high of 19.6 percent in the company’s home market in July, the firm saw costs spiraling up, raising its cost-to-income ratio. The bank’s move to raise the lending rate is to protect against the erosion of its profit margins.
According to the CEO, Oliver Alawuba the revising of loan prices will affect all corporate, commercial, and personal banking credits and will continue as long as the economic headwinds are still strong and the cost of funds is increasing.
While this new rate may mount more pressure on corporate borrowers and other customers, it is important to note that the CBN has raised the benchmark rate twice in the second quarter of this year to 14 percent as it works towards containing inflation in the country.
Citing the CEO’s statement, Bloomberg, in a post stated that measures will be taken to defend the margin–the bank’s costs as a proportion of income rose to 63.2% in the first half from 62.3% a year ago, while lending margins shrunk to 5.7% in June, below its set target of 6% for this year.
What you need to know about the bank
Earlier this year, UBA Bank released its Full-year financial result, which revealed a profit of N118.68 billion in 2021. This reflects an 8.72% increase year on year.
UBA Plc has almost doubled its profits in 6 years since hitting N60 billion in 2015 with the profit now touching roughly N119 billion.
The bank also reported earnings per share of N3.39, a 9.35% growth from the N3.10 reported a year earlier in 2020.
The bank has better utilized the e-banking channels in the delivery of financial services to its customers as its e-banking income alone raked in N64.60 billion in 2021, representing a 46% spike from N44.25 billion in 2020.