Fitch International, one of the foremost global rating agencies has
affirmed United Bank for Africa (UBA) Plc’s viability rating at “B”, as the
pan-African banking group continue to sustain its benchmark asset quality and
strong profitability amidst industry and macroeconomic challenges.
UBA is one of the few banks with strong risk management framework, which
has helped keep non-performing loans ratio at a moderate level of 1.74% as at
the end-March 2016, as against industry average of over 6%, as reported by
Fitch in its recent report on Nigerian banks.
Fitch also upgraded UBA’s outlook to stable from Negative, thus
reinforcing the strong outlook on the Bank, especially as its diversified
network across eighteen other African countries make it relatively immune
against the potential cyclical volatilities in any of its country of
operations.
Also, the foremost local rating agency in Nigeria, Agusto & Co,
at its rating review of UBA Plc, upgraded the Bank’s rating from “A+” to “Aa-“,
with a stable outlook. According to Agusto & Co, “the rating of United Bank
for Africa Plc (UBA) is upheld by the Bank’s improved capitalization, good
liquidity and large pool of stable deposits, strong domestic presence supported
by the Bank’s extensive branch network and growing alternative banking
channels.
“We note improvement in profitability and the Bank’s good asset quality.
The Rating takes into cognizance the weak macroeconomic climate on the banking
industry’s asset quality, which we do not expect UBA to be excluded.
Nonetheless, we note positively its diversified geographical reach, which will
cushion to an extent the impact of the weak Nigerian economic climate,” Agusto
& Co stated in its credit rating report.
Just as the credit rating agencies are strong on the fundamentals of UBA
Plc, equity analysts have also affirmed the asset quality, profitability and
broad investment case of the Bank, particularly as UBA has maintained an
average return on equity of over 20% in the past three years, bucking the
challenging economic environment and dwarfing peer performance track.
Following the strong financial performance of UBA in the first quarter
of 2016, improved transparency and disclosure, which is now seen as benchmark
for Nigerian banks, analysts at Renaissance Capital and CSL Stockbrokers (a
part of the FCMB Group) upgraded the rating on UBA stock to “Buy,” with target
prices of N9.40 and N7.21 respectively.
Reflecting investors’ conviction in the strong fundamentals of the Bank
and the appetite for the stock, the share price has gained 39% thus far in 2016
to rank as the best performing banking stock on the Nigerian Stock Exchange.
Closing at N4.70 on Wednesday, 13 July, 2016, UBA still trades at significant
discount to analysts’ consensus valuation of the shares, which is put at N8.50
for the 2016 calendar year.
The Bank paid N0.20 interim and N0.40 final dividend in 2015 financial
year and should currently be auditing its 2016 half year results in line with
the Group’s governance culture of auditing results twice in a year. UBA is
audited by PricewaterhouseCoopers, one of the global big-4 audit firms, which subjects
clients to a rigorous international best audit practice.
United Bank for Africa Plc (UBA) is the third largest lender in Nigeria
and a leading provider of financial services across 19 African countries, and
with presence in New York, London and Paris. The Bank serves almost 11 million
customers across expansive brick and mortal branches as well as diversified
alternative electronic banking channels.
UBA has a diversified shareholder base of over 270,000, with some of the
greatest global fund managers as well as multilateral institutions like the
International Finance Corporation (IFC) and African Development Bank (AfDB)
being shareholders of the Bank.
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