United Bank for Africa (UBA) Plc outperformed all banking stocks in the
first quarter of 2017 with a share price appreciation of 28.22 per cent. It had
recorded the second highest price gain of 33.1 per cent in 2016, just slightly
under three points behind Guaranty Trust Bank (GTB), which led the sector with
35.9 per cent.
Altogether,
UBA’s share price had grown by more than 60 per cent in the
past 15 months, the highest by any bank and one of the few bright spots in the
long-running depression at the stock market. Average return at the Nigerian
Stock Exchange (NSE) in the first quarter of 2017 was negative at -5.05 per
cent.
The NSE Banking Index was down by 0.03 per cent while the NSE 30 Index,
which tracks large-cap stocks, was almost on the average with a three-month
return of -4.93 per cent. In 2016, the stock market had recorded a
full-year average return of -6.17 per cent, equivalent to net capital loss of
N604 billion.
Only 19 companies, including three banks, recorded a capital gain of 20
per cent and above in 2016, underlining the general downtrend that marked price
changes during the period. A long-running depression had seen quoted equities
losing N4 trillion in the past three years, including N1.75 trillion and N1.63
trillion in 2014 and 2015 respectively.
UBA’s share price appears to be riding on the crest of positive
analysts’ reviews. There is almost analysts’ consensus on the attractiveness of
the UBA. Investment research and rating firms such as Renaissance Capital, CSL
Stockbrokers, Fitch and Augusto among others had maintained that UBA has strong
fundamentals to support substantial price appreciation. UBA Group’s audited
report and accounts for the year ended December 31, 2016 supported the positive
view of its earnings potential, in spite of the Nigerian economic recession.
Improving earnings
Key extracts of the Group’s audited report showed impressive growths in
the top-line and the bottom-line as it continued to expand its assets base.
Group;s gross earnings rose by 21.9 per cent from N314.84 billion in 2015 to
N383.65 billion in 2016. Interest income had grown by 15 per cent from N229.63
billion in 2015 to N263.97 billion.
With 2.9 per cent increase in interest expense from N96.03 billion to
N98.77 billion, net interest income rose by 23.7 per cent to N165.2 billion in
2016 compared with N133.6 billion in 2015. This underlined the profitability of
the group’s core banking business. Group profit before tax grew by 32.4 per
cent to N90.64 billion in 2016 as against N68.45 billion in 2015. After taxes,
net profit rose by 21.1 per cent from N59.65 billion to N72.26 billion. With
these, earnings per share increased from N1.79 in 2015 to N2.04 in 2016.
UBA Group’s balance sheet also emerged stronger with total assets rising
by 27.3 per cent from N2.75 trillion in 2015 to N3.5 trillion in 2016.
Customers’ deposit rose by 19.7 per cent from N2.08 trillion to N2.49 trillion.
Loans and advances recorded above average growth of 44.2 per cent to N1.50
trillion in 2016 as against N1.04 trillion in 2015, underlining the
bank’s commitment to economic development. Shareholders’ funds also increased
by 33.5 per cent from N325.83 billion in 2015 to N434.85 billion in 2016.
Key underlying ratios showed that the growth in 2016 was driven by
improvements in the intrinsic operational performance and management. Net
interest margin, which underlines the profitability of the core banking
business, improved to 62.6 per cent in 2016 as against 58.2 per cent in 2015.
This corroborated the reduction in cost of fund. Pre-tax profit margin, which
measures the underlining profitability of the group’s businesses, also improved
from 21.7 per cent in 2015 to 23.6 per cent in 2016.
On the back of improved earnings, the bank increased dividend payout to
shareholders by 25 per cent, further enhancing the total real return on
investment built up significantly by capital appreciation. Shareholders
received final dividend payment of N19.9 billion for the 2016 business year, in
addition to N7.3 billion interim dividend paid after the audit of its 2016
half-year results. With this, shareholders received a final dividend per share
of 55 kobo in addition to interim dividend of 20 kobo, bringing total dividend
for the 2016 business year to 75 kobo as against 60 kobo paid for the 2015
business year. A dividend yield of more than 14 per cent further placed UBA
within the top yields at the stock market. This surpassed the 13.01 per cent
coupon on the two-year tenored Federal Government National Savings Bonds.
Sustained growth
The latest audit report confirmed UBA Group’s steady performance over
the years. A five-year medium term review showed that total assets have grown
steadily from N2.27 trillion in 2012 to N3.50 trillion in 2016. Net loans and
advances more than doubled from N658.9 billion in 2012 to N1.50 trillion in
2016. Customers’ deposits also followed the uptrend, jumping from N1.72
trillion in 2012 to N2.49 trillion in 2016. Shareholders’ funds rose
consecutively from N189.11 billion in 2012 to N434.85 billion in 2016. Profit
before tax, which stood at N52.01 billion in 2012, had defied recession to rise
to N90.64 billion in 2016 while profit after tax rose from N54.77 billion in
2012 to N72.26 billion in 2016.
Most analysts have rated UBA Group high on its fundamentals. “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, in 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 recent credit rating report.
Nigeria’s foremost local rating agency, Agusto & Co, had
upgraded UBA’s rating from “A+” to “Aa-”, with a stable outlook, citing the
bank’s improved capitalisation, good liquidity and large pool of stable deposits,
strong domestic presence supported by the bank’s extensive branch network and
growing alternative banking channels.
Also, Fitch International, one of the foremost global rating agencies,
in its latest report affirmed and upgraded its ratings for the bank citing
strong earnings and asset quality. Fitch affirmed UBA’s viability rating at “B”
as the pan-African banking group continues 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 kept non-performing loans ratio at a moderate level of 1.74 per cent as
at the end of March 2016.
Strength in diversity
Other African subsidiaries contributed about one hird of the group’s
profit in 2016, reflecting the increasing market share of the group outside its
Nigerian home. UBA operates in 18 other African countries including Ghana,
Republic of Benin, Liberia, Cote d’Ivoire, Burkina Faso, Guinea, Senegal,
Sierra Leone, Mozambique, Zambia, Uganda, Tanzania, Kenya, Congo DR, Congo
Brazzaville, Cameroon, Chad and Gabon. UBA also has presence in United Kingdom,
United States and France.
Geographical segment analysis showed the group performance was buoyed by
above average growths in its foreign subsidiaries. The other 18 African
subsidiaries recorded pre and post tax profit of N31.4 billion and N24.32
billion respectively on total earnings of N121.9 billion in 2016, considerable
growths on pre-tax profit of N18.8 billion and post-tax profit of N14.14
billion recorded on total incomes of N67.72 billion in 2015. Other non-African
global operations also improved in 2016 with total income of N9.8 billion and
pre and post tax profits of N3.4 billion and N3.37 billion respectively. Other
non-African global subsidiaries had recorded gross earnings of N6.01 billion
and pre and post tax profit of N1.95 billion each in 2015.
Operating segment analysis also showed that the overall performance
rested on evenly spread improvements across the key business segments.
Corporate banking recorded gross earnings of N116.63 billion, profit before tax
of N43.46 billion and profit after tax of N37.69 billion in 2016 compared with
N101.07 billion, N29.04 billion and N25.31 billion recorded respectively in
2015. Retail and commercial banking segment, the largest segment, grew top-line
to N227.57 billion in 2016 with profits before and after tax of N29.44
billion and N20.05 billion respectively. Total revenue in the segment had stood
at N185.19 billion in 2015 with profit before tax of N26.52 billion and profit
after tax of N23.11 billion.
Outlook
The board and management of UBA said the banking group is
well-positioned for sustainable long-term growth that will continue to ensure
commensurate returns to shareholders. Chairman, United Bank for Africa (UBA)
Plc, Mr. Tony Elumelu, noted that most African countries were implementing
policy measures that should help stimulate inclusive economic growth, ease
macro pressures and lower the cost of doing business. According to him, while
Africa has experienced a difficult period; the UBA group welcomed 2017 with
renewed optimism as it truly believes that “Africa is Rising”.
“Our pan- Africa operations have delivered on the promises we made at
the outset of our growth strategy and we are beginning to reap the benefits of
one the largest network in Africa. As we navigate the fast changing market
place, we are increasingly digitalising our core business, as we explore new
markets and means of embracing customers experience, gain increased share of
customers’ wallet and offer new services. I am very optimistic that we will
sustain the strong growth trajectory, as we continue to gain market share,
leveraging our core values of enterprise, excellence and execution,” Elumelu
outlined.
Group managing director, United Bank for Africa (UBA) Plc, Mr. Kennedy
Uzoka also assured that the bank is optimistic of continuing growth in the
years ahead.
“The 2017 outlook remains positive in most of our markets. We are not
aware unaware of the macro challenges, competition and constantly changing
customer preferences. We will further sweat our unique Pan Africa
platform to improve productivity, extract efficiency gains and grow our share
of customers’ wallet across all business lines and markets,” Uzoka said.
According to him, as the banking group continues with its customer first
philosophy, shareholders can look forward to better performance, especially
with the outlook remaining positive in most of the group’s markets.
“We will build on our strong governance culture, zero-tolerance for
infractions and transparency in furthering our frontiers of leadership in the
African market,” Uzoka said.
No comments:
Post a Comment