As Nigerian banks approach the capital market to shore up their share capital to meet the revised capitalisation guidelines for deposit money banks, United Bank for Africa Plc’s commanding performance in the top-tier category places it as a choice option for investors seeking value and growth stocks.
The bank has demonstrated resilience and strong management, which has delivered consistent growth in gross earnings, profitability, dividends, and balance sheet size. Analysts predict this will drive the stock price upwards by up to 37 percent by year-end.
UBA’s entrenchment of solid corporate governance, customer-centric focus, innovation and adoption of cutting-edge technologies, cost-cutting measures, robust risk management, and vast pan-African footprint in addition to operations in key United States, European, and Asian financial centres have combined to scale-up operational efficiency and hedge against country-specific risks to deliver superior results across its business segments.
FINANCIALS
The company’s financials are a testament to the success of this strategic outlook. The bank has started the year strongly to consolidate previous gains with impressive earnings in the first quarter.
For example, gross earnings rose by 110 percent, from N271.1 billion to N570.2 billion while interest income grew by 130 percent to N440.7 billion compared with the same period a year ago. Similarly, operating Income increased by 115 percent, from N175.7 billion in 2023 to N378.59 billion.
Profitability soared with profit before tax rising by 155 percent to a record N156.34 billion in Q1 2024, up from N61.7 billion in Q1 2023 while profit after tax jumped from N53.5 billion to N142.5 billion, representing an impressive 165 percent year-on-year gain. UBA is currently a top 3 bank by profitability.
The Group’s balance sheet grew steadily with total assets increasing by 23 percent to N25.4 trillion. Customer deposits closed at N18.4 trillion, recording a 23 percent increase year-on-year, largely attributed to growth in current accounts and savings accounts.
Earnings per share rose to N3.96 in the first quarter, up from N1.47 in 1Q 2023. Profit margin rose by 36 percent up from 30 percent in the year ago period. The increase in margin was driven by higher revenue. Over the last three years, UBA Plc earnings per share (EPS) has increased by 70 percent per year on average though the company’s share price has only increased by 53 percent per year, which means it is significantly lagging in earnings growth, a signal of value in the shares.
This first quarter results indicate an extension of the gains recorded for the full year ended 2023 where the bank recorded impressive results across performance metrics.
At the end of the 2023 financial year, UBA’s gross earnings grew 143 percent to N2.07 trillion, up from N853.2 billion recorded at the end of 2022. Total assets also rose remarkably by 90.22 percent, to close at N20.65 trillion up from N10.86 trillion in 2022.
Profit before tax, also grew exponentially by 277 percent, to close at N758 billion, up from N200.88 billion recorded in 2022; while profit after tax (PAT) grew by 257 percent from N170.2 billion in 2022, to N607 billion.
The group’s cost-to income ratio dropped to 37.2 percent in 2023, making it the second most efficient lender in the industry.
The impressive performance recorded over the past years, especially in 2023, culminated in the payout of N78.7 billion as final dividends for the 2023 financial year.
STOCK PERFORMANCE
UBA was the best-performing bank stock with a 237 percent rally in 2023 and offers good value based on its price-to-earnings (PE) ratio (1.2x) compared to the African banking industry average (4.8x).
Return on Equity (ROE) was one of the highest in the industry and closed 2023 FY at 41.20 percent up from 19.70 percent reported in 2022. UBA exceeded the NG Banks industry, which returned 31.3 percent over the past year distinguishing it as an efficient profit-generating machine. A dividend yield of 11.67 percent, one of the highest among bank peers, signposts the stock’s attractiveness and ability to reward investors.
With earnings growing by 286.3 percent over the past year, the stock is trading at a good value compared to peers and the industry. UBA stock traded at N23.95 (on Tuesday, September 17, 2024) and a price-to-book ratio 0.32 times. This means a valuation closer to book value will see the shares trading at N75 per share. The average 1-year target price by six analysts that follow UBA Stock is N32.84 per share, more than 37 percent higher than the current share price.
CORPORATE STRATEGY
UBA’s Group Managing Director, Oliver Alawuba, has attributed the group’s consolidation of its strong 2023 performance as reflected in the Q1 2024 results to the ongoing execution of its long-held strategy of customer focus, geographic diversification, and effective risk management and governance.
He said, “Our record Q1 profit before tax was delivered with triple-digit gross earnings growth, supported by very strong interest and non-interest incomes. Fees and Commissions rose by 118 percent year-on-year on the back of improved efficiencies and continued digital adoption. This has helped drive improvement in efficiency and customer satisfaction, with the Group’s cost-to-income ratio held at 57.8 percent.
He also highlighted the bank’s unwavering commitment to sound governance, robust risk management, and financial strength that positions it for continued growth, while contributing meaningfully to inclusive economic development across its network.
In the same vein, UBA’s Executive Director, Finance and Risk, Ugo Nwaghodoh, said the Group’s operating results for the quarter showed the actions taken to enhance the Group’s performance continued to deliver.
These include relentless customer focus, geographic and product diversification to drive good performance across all regions; and differentiation across all key financial metrics, with a keen focus on high-quality risk-adjusted revenues and cost discipline, while maintaining very sound asset quality.
Analysts at Chapel Hill Denham Limited say plans to roll out a special financing initiative through the company’s three-year partnership programme with Africa Continental Free Trade Area (AfCFTA) is business accretive.
MULTINATIONAL OPERATIONS
Part of UBA’s strengths come from its diversified holdings and businesses. It is the leading pan-African bank with a presence in 20 African countries and global nerve centres such as New York, London, Dubai and Shanghai offering banking services to more than 35 million customers with 25,000 staff across over 1,000 business offices and customer touch points. This positions it to facilitate people and business connections across Africa and beyond through retail, commercial, and corporate banking services; innovative cross-border payments and remittances; trade finance and ancillary banking services.
MANY FIRSTS
UBA was the first bank to offer an IPO in Nigeria in 1970. It is the first to be listed on Nigeria Stock Exchange (NGX) and the only bank in sub-Saharan Africa with a deposit-taking license in the United States.
It was the first bank in Nigeria to install an ATM, the first to open a campus branch, the first to open a subsidiary in Africa, and the first bank to have a female Chairperson in Nigeria. About 33 percent of CEOs in UBA’s 20 African countries of operation are also women. In 2023, females in the total workforce increased to 46 percent, with females in senior management positions at 31 percent, according to the Bank’s sustainability report on the NGX website.
UBA was also the first to introduce Mobile Banking in Nigeria, it also deployed the first chatbot in the country.
CUSTOMER ENGAGEMENT
UBA has invested significantly in customer engagement and improved services through adoption of technology aimed at facilitating seamless transactions, reduction of waiting times in banking halls and self-service options for routine teller services. Its internet banking and mobile app are among the best-designed and most robust in the industry while customer complaints resolution mechanisms are embedded across telephony, email, SMS, and social media platforms for speedy results.
In line with its usual custom of rewarding loyalty, UBA Plc launched the “UBA Legacy Promo” as part of activities to mark its 75th year anniversary. The UBA Legacy Promo runs for a period of six months beginning from July 2024, and will see the bank doling out of N200m in cash prizes as well as other consolidation prizes to its teeming customers from various categories.
This promo is open to several categories of Account holders including Bumper Account holders, Savings accounts, Kiddies & Teens Account holders as well as Nextgen account holders.
