UBA maintaining a winning edge in hard times
As markets strain against a gagging recession local banks have devised ingenious ways of staying in business. While a number of domestic money centre institutions have resorted to a variety of internal cost containment measures such as increasing the use of automated service provision, Pan African Banking Group, UBA, has opted to throw its sights afar from the Nigerian borders by wrapping up big ticket transactions with international business partners in a variety of African countries. A recent move in this direction was its tie-up with Attijariwafa Bank of Morroco.
Attijariwafa and UBA recently signed a Memorandum of Understanding (MoU) to strengthen their collaborative efforts in correspondent banking, investment funding, trade finance and project finance on the African continent.
The Chairmen of both banks Mr. Tony Elumelu, Group Chairman UBA and Mr. Mohamed El Kettani, Chairman and CEO of Attijariwafa Bank Group had carefully crafted and outlined key areas of cooperation between the two institutions.
The MOU states that both banks will organise business –to- business (B2B) missions to identify and develop business and investment opportunities, not only between Nigeria and Morocco, but across respective African networks.
Elumelu pointed out that the collaborative effort was,’… a historic milestone. As two groups with considerable footprints in Africa, we see huge potential in bringing our collective expertise in banking to provide Africa-led solutions to the needs of Africans.”
“Nigeria is the largest African economy and a leading commercial and financial hub in West Africa. It goes without saying that our group should collaborate with outstanding players, such as UBA Plc, to provide customized assistance to African and international companies to grow trade and investment flows, between not only Morocco and Nigeria, but also in all countries where our two groups are established’’, Chairman and CEO of Attijariwafa had said
” The MOU we just signed is a first but major milestone in a long-term partnership. It also heralds promising perspectives for African and international investors worldwide.
While this offers UBA the opportunity to remain and maintain its leadership position in Africa and beyond its unaudited third quarter financial results defied trend recording a 7 per cent year-on-year growth in profit before tax to N62 billion. The bank achieved this feat despite the challenging macro-economic environment.
This represents an impressive 18.2 per cent annualized return on average equity. The Bank recorded an appreciable growth in both funding and fee income lines. “I am pleased with our performance in the first nine months of the year. Notwithstanding the negative economic growth in Nigeria, we maintained growth in earnings and sustained our asset quality. Increasingly, we are leveraging our unique pan-African platform to drive new customer acquisition and grow market share across our African subsidiaries” said Kennedy Uzoka, Group Managing Director and CEO of UBA Plc.
Furthermore, the Bank’s level of impairment in its overall loan book was moderate. The Non-Performing Loan (NPL) ratio of 2.5 per cent and 0.9 per cent cost of risk remain one of the best in the industry.
UBA Plc’s third quarter results also revealed increasing skill and efficiency in gains with appreciable growth in operating income by 11 per cent to N183 billion while profit after tax rose by 8 per cent to N52 billion within the period.
Whereas this was partly driven by the depreciation in the value of the naira, UBA also recorded a significant 21 per cent year-to-date growth in deposits and a similar 26 per cent growth in total assets. The bank was able to achieve flat cost-to-income ratio year-on-year at 65 per cent in the midst of external cost pressures.
The Bank maintained 43% liquidity ratio and 17.6 per cent BASEL II capital adequacy ratio, well ahead of regulatory requirement.
UBA proved its leadership in the industry, by showcasing another impressive performance for the year ended December 31, 2015. Its audited results for the period shows that the bank recorded a 10% growth in gross earnings, closing at N315 billion and a 25% growth in profit-after-tax which rose to N60 billion; translating to a 20% return on average equity. It also grew operating income by 10% to a record N205 billion in December 2015; from N186 billion in December 2014.
According to market analysts, this was no mean feat at a period when other banks were issuing profit warnings to signal troubled times. In the midst of shrinking revenues, foreign exchange crisis, Treasury Single Account (TSA), initial high CRR at 50% among other tough and tight macro-economic environment, UBA paid a final dividend of 40 kobo per share which brought to 60 kobo the total dividend for the 2015 financial year. UBA had earlier paid an interim dividend of 20 kobo per share, following the audit of its 2015 Half Year Results.
Apart from building a sound and strong institution, Oduoza’s leadership ensured that shareholders received decent returns on their investment, in terms, of dividend payouts. The bank has paid dividends consistently over the last six years except in 2011 when it posted a loss of N7.9billion, thanks to industry-wide huge toxic assets.
Its dividend history shows that the bank paid 10 kobo in 2010, 5 kobo in 2011, 50 kobo in 2013, 50 kobo in 2014 and 60 kobo in 2015.
Shareholders were impressed by the dividend payout, but prodded the bank tomatch payouts by peers such G T Bank and Zenith Bank. While G T Bank paid 177 kobo, Zenith Bank paid 180 kobo to their shareholders. Challenging as the operating environment may be, UBA has not looked back in expanding it’s off shore businesses.
The bank’s 19 subsidiaries, reportedly has contributed more than 28 per cent to the groups bottom line in 2015. In a depressed economy with very tight regulatory and fiscal regulatory authorities, the group’s foresight helped to cushion the sad effect.
FIVE YEAR PERFORMANCE
A critical assessment of the bank’s performance since August 2010 reveals that its profit grew by 2098 per cent from N2.167 billion to N47.475billion in 2015. Other relevant indicators also show that gross Earnings also grew by 57 per cent from N157billion in 2010 to N247.3billion in 2015. Similarly, its total assets grew 55 per cent from N1.432trillion in 2010 to N2.216 trillion in 2015. Loans and advances to customers also grew by 82 per cent from N569.3billion in 2010 to N1.036 trillion in 2015.
At a glance, UBA has performed impressively in the last 6 years. However, the bank must channel its efforts to tackle the challenge of huge crowd in the banking halls.
Whereas UBA has achieved some strategic ground with its subsidiaries after the initial challenges, when it retained most of its earnings to support them, stakeholders believe that its dividend package should compete with that of G T Bank and Zenith Bank. The banks dividend pay-out was much less than that of its peers.
United Bank for Africa Plc (UBA) is one of Africa’s leading financial institutions, with operations in 19 African countries and 3 global financial centres: London, Paris and New York.
From a single country operation founded in 1949 in Nigeria, Africa’s largest economy, UBA has emerged as a pan-African provider of banking and other financial services, to more than 8 million customers, through diverse channels globally.
‘’As of Dec 03, 2016, the consensus forecast amongst 13 polled investment analysts covering United Bank for Africa advises that the company will outperform the market. This has been the consensus forecast since the sentiment of investment analysts improved on May 19, 2015. The previous consensus forecast advised investors to hold their position in United Bank for Africa.’’ Reckons financial Times