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Published On: Sun, Mar 25th, 2018

UBA strikes gold as Gross Earnings grows 20%

…pays 85 kobo final dividend

…PBT rises 15%

 

BY TESLIM SHITTA-BEY

UBA, one of Africa’s largest financial conglomerates, has declared a profit before tax of N105 billion for the financial year ended 31st, December, 2017 representing a 15 per cent rise above the N 90.6 billion it posted in the contemporary period of 2016. Indeed coming off the back of a lingering recession that lasted roughly two years from the middle of 2015 to the middle of 2017, analysts agree that the banks recent performance is stunning. According to Capstone Asset Management’s head of portfolio investment, Gabriel Aimiuwa, ‘the bank seems to have pulled a rabbit out of a magician’s hat. With most of its other rivals showing signs of severe strain in the last three quarters of 2017, UBA’s results are all the more impressive.’ he insists.

The banks gross earnings, a measure of its ability to generate added revenues, rose from N314billion in 2016 to N462billion in 2017, a 20 per cent hop-step-and jump. Notes Aimiuwa, ‘the bank may have been able to grow revenues by adopting new and innovative service delivery channels and perhaps new products as its closest service competitors show slower growth in their gross earnings, even a giant like GT Bank, for example was only able to grow gross earnings by 1.11 per cent’.

According to the results released on the floor of the Nigerian Stock Exchange (NSE) on Friday last week, the bank tallied up a profit after tax of N78.6 billion or what amounted to an 8.8 per cent increase in the after tax profit of N72.3 billion recorded in 2016. Continental subsidiaries of the bank contributed a third of the groups top line profit while making up 45 per cent of the profit for the year. This contrasts with the 31 per cent contribution to profit of the continental subsidiaries in 2016. Analysts point out that the current earnings diversification reduces the banks country risk exposure and is likely to provide a sound countervailing equity exposure as stocks get dragged down by what behavioual psychologists have called the ‘fear of regret’ when stock prices tumble later in the year as investors become increasingly concerned about the 2019 elections. The bank targets a continental subsidiaries profit contribution of 50 per cent of total bank pre-tax earnings by 2020, a target analysts say looks well in sight.

The Pan-African giants Operating Income grew by 20.6 percent to N326.6 billion from N270.9 billion posted in 2016. A few analysts have noted that the banking group has managed to push against strong economic headwinds, especially in 2017. The groups audited results show that the bank’s Total Assets peaked at N4.07 trillion, resulting in a 16.1 percent year-on-year growth from the N3.50 trillion recorded as at 2016 financial year. In the 2017 financial year, the bank’s Net loans achieved a prudent 9.7 percent growth at N1.65 trillion, while the customer deposits grew to N2.73 trillion, representing a 10 percent year-on-year growth on N2.49 trillion recorded in 2016 financial year. Reflecting a strong internal capital generation, the Bank’s
shareholders’ fund also soared 18.2 percent to N529.4 billion in the 2017 financial year.

Commenting on the result, Kennedy Uzoka, the banks Group Managing Director/CEO, said: “the results, underlines the success of our strategy of expanding across Africa, diversifying revenues and capturing the broader business opportunities inherent in Africa’s growth. The results reinforce the sustainability of our business model and the capacity to deliver superior long-term return to shareholders, as the economic and business environment improves.”

He further noted that in 2017 the group, “made strong progress in our strategic initiative of dominating transaction banking across all our countries of operation, gaining market share in all lines of our business. Even as the non-oil sectors of our largest country of operation, Nigeria, remained relatively weak, we still grew earnings by 20% to N462 billion, a third of which is attributable to non-funded income”.

Rounding off the analysis of the banks 2017 performance, its Chief Financial Officer (CFO),  Ugo Nwaghodoh, observed that in a period of high interest rates, the bank achieved, ‘ a relatively low 3.7% cost of funds. This operational efficiency reflects the benefit of our rich pool of stable savings and current account deposits. The net interest margin stabilized at 7%, even as yields on treasury assets dropped in the last quarter of 2017. Our core transaction banking offerings gained strong momentum, with income from these business lines growing by double digits.”   

UBA has emerged as a pan-African provider of banking and other financial services, to 10 million customers globally, through one of the most diverse service channels in sub-Sahara Africa; 632 business offices, 1,750 ATMs, some 13,500 PoS, and a robust online and mobile banking platform.  UBA was the first Nigerian bank to make an Initial Public Offering (IPO), following its listing on the NSE in1970. It was also the first Nigerian bank to issue Global Depository Receipts (GDRs). The shares of UBA are publicly traded on the Nigerian Stock
Exchange (NSE) and the Bank has a well-diversified shareholder base, including foreign
and local institutional investors as well as individual shareholders.

The bank currently trades at a market price of N11.50 and a price earnings multiple (P/E) of 5.17 making it one of the most attractive equities in its market segment. The banks contemporary dividend yield of 6.52 per cent is one of the industry’s highest, slightly above GT Bank’s 5.76 per cent.

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