How FX Windfalls and Forebeance Cover-Ups Backfired with 47% Profit Drop
After its long stay on the treadmill for many years, the balance sheets of the United Bank for Africa, UBA, looked mpregnable at the end of the 2023 and 2024 financial years .But for those with the skill of interpreting financial figures, the unusual turnaround was a ruse They knew when earnings are built on devaluation windfalls, regulatory waivers, and sovereign paper instead of lending and customer cash flow, the gains are not sustainable; the structure only holds while external props remain in place. The illusion lasts as long as policy shields bad loans from recognition and currency moves turn treasury positions into profits. For them, those are not business models — they are bets on macro events that cannot repeat.
However, for those that are ignorant or the gullible, the belief was that the bank had staged a dramatic turnaround. They struggled to buy the UBA’s share in high volume and its share price that had been bedridden for year due to its poor fundamentals skyrocketed. . But the fact about a bank like UBA is not usually known until the weather changes. Now , the reality stares them in the face , causing a deep-seated shockwaves in their camp .
United Bank for Africa is currently a victim of the above uneevianle scenario and the gullible are currently at the receiving end .The moment forbearance expires and exchange rates stabilize, the scaffolding disappears. Impairments surface, margins compress, and dividends vanish overnight. It isn’t mismanagement in the traditional sense. It’s misclassification: confusing cyclical luck with structural strength. And when the reckoning comes, it doesn’t erode gradually. It collapses like a house of cards, because there was never a foundation, only a stack of favorable conditions pretending to be one
Its 47% profit crash in 2025 is not just a bad year. It is a stress test result that exposes how quickly paper profits evaporate when regulatory shelter ends and risk mispricing meets currency reality.Pre-tax profit halved to ₦423 billion from ₦804 billion, while earnings per share cratered 55.55% to ₦9.66. The culprits are not mysteries: ₦331 billion in loan loss provisions, up 52.59% year-on-year, and ₦278 billion in net fair value losses on derivatives, including ₦227 billion from exchange rate hits.
The misfortune that hit UBA hard may not be farfetched. First, the return of UBA in 2023 financial year from the treadmill to the reckoning among Tier 1 banks was a ruse .
The Quality of UBA’s 2023 Earnings: A Sugar Rush, Not a Staple Diet
UBA’s ₦607bn 2023 profit was high-calorie but low-nutrition earnings, and that distinction matters more than the headline. Quality of earnings asks one question: can it repeat? For UBA, 87% of pre-tax profit came from a single line — ₦659bn in trading and FX gains — triggered by a once-in-a-decade naira devaluation. Another ₦435bn flowed through OCI from translating foreign subsidiaries. That’s ₦1.09 trillion of currency windfall in one year. The implication is brutal: UBA didn’t out-lend or out-serve peers in 2023; it out-positioned them. When the CBN unified FX windows, the bank’s net long dollar exposure and offshore assets repriced instantly, turning balance sheet into P&L. The problem is durability. Devaluation is not a business model. Core banking told a different story: loan impairments surged 632%, net interest income after impairment grew just 48%, and at the Bank level it actually fell 8.5%. Fee income rose, but couldn’t move the needle. So the 2023 “phenomenal profit” built capital and bought time to absorb 2025’s forbearance write-offs, yet it masked underlying credit stress and anemic loan growth. For investors, regulators, and depositors, the quality gap is a warning: windfall earnings inflate ROE and capital today but set a trap for tomorrow. If FX stabilizes and the ₦659bn disappears, UBA must replace it with lending, fees, and subsidiary dividends — the hard, recurring stuff. If it can’t, 2023 becomes the year the bank looked rich while getting weaker. Good earnings don’t just print money; they predict it. UBA’s didn’t.
The immediate cause of the crash could be associated to the costs of the CBN’s forbearance expiry and UBA’s own balance sheet tilt. For years, the bank leaned on regulatory grace to keep bad loans classified as performing. That grace expired, and the impairments came due.
UBA’s forbearance exposure of roughly $282 million — over ₦400 billion at prevailing rates — was less a liquidity cushion than a deferred reckoning that flattered earnings and masked asset quality rot. Born out of CBN’s COVID-19 concessions, the forbearance let UBA and peers keep impaired credits classified as performing, artificially propping up interest income while postponing the inevitable impairment hit. For a bank that grew loans to customers by barely 1% in 2025 but watched impairments surge 52.59% to ₦331 billion, the numbers suggest much of that forbearance pool was already distressed, not just temporarily illiquid.
The fact that UBA had to take write-offs “before H1 2025” and only finalized the exit by September 2025 means the ₦423 billion profit drop was the price of cleaning house — a necessary purge that finally aligned reported capital with economic reality.
Critically, the episode exposes a deeper strategy flaw: reliance on regulatory grace instead of aggressive provisioning allowed management to delay pain, but it also misallocated capital away from fresh lending and into T-bills, turning UBA into a bond fund with a banking license. That the CBN only approved dividends after exit underscores how fragile the capital base looked with forbearance still embedded. UBA is now cleaner, but the lesson is stark: forbearance bought time, not strength, and the market will remember that 2025’s earnings collapse was not an accident — it was the bill coming due. Shareholders felt it instantly: no final dividend, with total payout collapsing from ₦5.00 to ₦0.25. Prudence, management calls it. Investors will call it pain.
Margins Squeezed, Asset Quality Bites, Returns Under Pressure
UBA’s profitability metrics in 2025 tell a story of a bank hit hard by credit costs and FX volatility, even as its core business held up. With gross earnings at ₦3.09 trillion and pre-tax profit crashing 47% to ₦423 billion, the pre-tax profit margin compressed sharply to about 13.7% from roughly 28% in 2024. Net profit margin followed, dropping to 13.1% on PAT of ₦404.696 billion. The bank’s net interest margin faced pressure despite net interest income rising 4.24% to ₦1.618 trillion, because interest expense grew 19.97% to ₦1.031 trillion, outpacing interest income growth of 9.48%. That spread compression, combined with a ₦331.071 billion impairment charge — up 52.59% YoY — signals deteriorating asset quality. While UBA didn’t disclose its non-performing loan ratio, the spike in provisions after CBN’s forbearance expiry points to a material rise in bad loans, with management now relying on an aggressive recovery push to claw back value in 2026.
The hit to earnings flowed straight to shareholders. Return on average shareholders’ funds plunged, with PAT of ₦404.696 billion against average equity of about ₦3.77 trillion, implying an ROE of roughly 10.7%, down from over 23% in 2024. Retained earnings also fell 11.19% to ₦1.266 trillion, reflecting the dividend freeze and profit drop, though overall shareholders’ funds still grew 24.4% to ₦4.253 trillion thanks to the rights issue. The paradox is clear: UBA’s balance sheet got bigger and stronger, with deposits up 11.02% to ₦23.949 trillion and CAR at 23.2%, but margins and returns collapsed under one-off credit and derivative losses. If recoveries materialize and FX stabilizes, 2026 margins and ROE should rebound fast. If not, the bank risks being a well-capitalized, low-return treasury play.
The deeper weakness is structural. UBA is behaving less like a bank and more like a treasury bill warehouse. Loans to customers grew a meager 0.98% to ₦7.022 trillion, while investment in securities jumped 15.1% to ₦14.427 trillion — double the loan book. When 56% of your ₦2.649 trillion interest income comes from T-bills and bonds, you’re not financing Africa’s real economy; you’re financing Abuja. That strategy juices income when rates are high, but it hollows out the bank’s core franchise and leaves margins hostage to sovereign yields and CBN policy. It also explains why interest expense grew 19.97% while interest income grew only 9.48%. Deposits are up, but they cost more, and the bank isn’t deploying them into higher-yielding risk assets. Add flat net fee income, down 0.25% to ₦332.5 billion, and you see a bank treading water on non-interest revenue just as credit costs spike. The threat is clear: if sovereign yields compress before loan growth recovers, UBA’s earnings engine stalls.
Yet to call 2025 a disaster misses the counter-narrative buried in the numbers. The damage is largely non-recurring. Those ₦331 billion provisions and ₦227 billion FX losses won’t repeat annually if management’s recovery push works and the naira stabilizes. UBA says its recovery team is strengthened, with all collections to flow straight to P&L in 2026. If even 40% is clawed back, that’s ₦130 billion+ of easy profit. The core remains intact: net interest income still rose 4.24% to ₦1.618 trillion, and net interest income after impairment is still above ₦1.289 trillion. That’s the sign of a franchise that bleeds but doesn’t break. The balance sheet actually strengthened. Total assets hit ₦33.173 trillion, +9.4%, powered by customer deposits up 11.02% to ₦23.949 trillion. That deposit base is 72% of the balance sheet — cheap, sticky, and the envy of peers. Capital is fortress-level: shareholders’ funds jumped 24.4% to ₦4.253 trillion, CAR sits at 23.2%, and a rights issue lifted share capital to ₦504 billion. This is not a bank in distress; it’s a bank that took its medicine.
The opportunity lies in UBA’s geography and timing. While Nigeria stumbled, foreign operations printed ₦312 billion profit, up from ₦223 billion. West Africa grew profit 53%, East and Central Africa 61%. That pan-African diversification is no longer a slide-deck bullet; it’s a real earnings cushion. With 23.2% CAR and a ₦2.38 trillion deposit haul in 2025, UBA has headroom to rotate back into risk assets when credit conditions improve, or to keep clipping high T-bill coupons if rates stay elevated. The market sees it: the stock is up 32.1% YTD to ₦55 despite the earnings collapse, betting that 2025 was the kitchen-sink year. The critical test for 2026 is execution. Recover the bad loans, stabilize FX hedges, and restart responsible lending. If UBA does that, the 47% profit drop becomes a footnote before a rebound. If it doesn’t, the “treasury bill bank” label will stick, and the next regulatory or FX shock will hurt worse. For now, UBA has bought itself time with capital and deposits. Monday morning starts with collections.
