Business
Recapitalisation: UBA set to strike gold ahead of deadline
United Bank for Africa Plc (UBA), is counting on extensive national and continental operational spread to meet the Central Bank of Nigeria (CBN’s) new capital requirement of N500 billion even before the March 2026 deadline.
The lender is confident that with many shareholders, who want to reinvest their dividends, and customers, who want to become its shareholders, meeting the required minimum capital for its international license will not be a difficult task.
With the endorsement of shareholders at the last Annual General Meeting (AGM), the pan-African lender plans to undertake three-step capital raising, including rights issue, public offer and private placement to raise additional equity capital.
The CBN had in its circular on review of minimum capital requirement for commercial, merchant and non-interest banks, increased the new minimum capital for commercial banks with international affiliations, otherwise known as tier 1 banks, to N500 billion; commercial banks with national authorisation, N200 billion and commercial banks with regional license, N50 billion.
Others included merchant banks, N50 billion; non-interest banks with national licence, N20 billion and non-interest banks with regional licence will now have N10 billion minimum capital.
While UBA Group’s shareholders’ funds had risen by 120 per cent from N922 billion in 2022 to N2.0 trillion 2023, the bank, like other banks, will need to raise additional equity capital, because of the CBN’s definition of the new minimum capital base as addition of share capital and share premium. UBA’s share capital and share premium stands at N115.815 billion.
Shareholders at the AGM of the bank in Abuja approved a multi-tranche, multi-instrument capital raising programme that allows UBA to substantially raise more than necessary to surpass the new minimum capital base.
They approved increase in the bank’s share capital from N17.1 billion of 34.2 billion ordinary shares of 50 kobo each to N22.5 billion of 45 billion shares through the creation of 10.8 billion new ordinary shares of 50 kobo each.
The broad mandate by the shareholders empowered the board to create additional shares, determine appropriate combination of instruments and markets, underwrite the offers and waive the rights of shareholders in offering un-allotted shares to new investors, the lender disclosed.
Unwavering optimism
From the Chairman, to the Group Managing Director, and to the Executive Director, Finance and Risk Management, the leadership of the banking group is united in optimism that the pan-African lender will surpass the new capital base ahead of the recapitalisation deadline.
Chairman of the bank, Mr. Tony Elumelu, said the bank was confident of meeting the required minimum capital for its international license. Speaking to journalists at the end of the bank’s AGM in Abuja recently, Elumelu stated: “Recapitalization is something UBA will accomplish before the stipulated timeframe, the reason being that we have shareholders, who want to re-invest in the bank and we have customers, who want to become shareholders of the bank.
“Remember that UBA operates not just in Nigeria but in 19 other African countries and they have been yearning to become shareholders of the bank.
“We, the board approved and today shareholders supported it that we do private placement and this private placement will give opportunity to our customers and friends across Africa to invest in United Bank for Africa. When all of these investments come in from the rights (issuance) and re-investments by these shareholders, it will be an easy accomplishment”.
The Executive Director, Finance and Risk Management, Ugo Nwaghodoh, acknowledged the challenging economic conditions but highlighted UBA’s prudent risk management and conservative approach to safeguarding its assets.
He said UBA aims to maintain sustainable growth and adhere to robust compliance and risk management practices as it navigates through the next phase of its expansion.
Speaking on the value proposition of UBA to investors, at the 75th International Global Media Conference held at the bank’s headquarters in Lagos, the Group Managing Director/Chief Executive Officer, Oliver Alawuba, noted, “UBA is that bank that investors can look into. In 2023, our capital appreciation was one of the highest on the exchange. For the past two years, our dividend yield has been above 12 per cent and when you look at the bank present in 24 countries, that shows a diversification of income stream and also highlights the unique investment proposition we offer.
“When you invest in UBA shares, you are essentially gaining exposure to the economic potential of 24 different markets. Therefore, it is crucial for us to communicate to Nigerian investors that UBA’s current share price is undervalued, presenting a substantial opportunity for those looking to invest in a bank with a truly global footprint.”
Impressive numbers
Incidentally, the audited scorecard of UBA for the year ended December 31, 2023 showed significant growths across all key performance indicators, with both actual figures and underlying ratios recording significant leaps.
Gross earnings rose by 143 per cent from N853.2 billion in 2022 to N2.08 trillion in 2023. Profit before tax jumped by 277 per cent to N758 billion in 2023 as against N201 billion in 2022. Profit after tax grew by 257 per cent from N170 billion in 2022 to N608 billion in 2023. Earnings per share thus rose by 262 per cent from N4.84 in 2022 to N17.49 in 2023.
The top-line performance was driven by three-digit growths across the interest and non-interest incomes as well as growths in the Nigerian and other markets where the bank operates. Interest income rose by 93 per cent while non-interest income grew by 314 per cent.
The results showed a banking group with diverse and supportive market growths, thus its resilience to specific market shocks. While the Nigerian business grew by 149 per cent, the “rest of Africa” rose by 135 per cent and contributions from the “rest of the world” jumped by 234 per cent. All the business segments also reported significant improvements in profitability.
Beyond the surface, the bank’s ratio were stronger. Group cost-to-income ratio dropped from 59.2 per cent in 2022 to 37.2 per cent in 2023, underlining improvement in overall corporate efficiency. Capital adequacy ratio (CAR) improved from 29.6 per cent to 32.6 per cent, more than a double of the regulatory limit of 15 per cent. Investors’ returns were also remarkable.
Return on assets doubled from 1.8 per cent to 3.9 per cent. Return on equity also doubled from 19.7 per cent to 41.2 per cent. The dividend yield is above 10 per cent, within the top bracket for high-yielding stocks.
The Group also started off the current business year on a strong footing with three-digit growths across all major performance indicators. The results for the three-month period ended March 31, 2024 showed that gross earnings rose by 110 per cent while pre and post profits grew by 155 per cent and 165 per cent respectively.
Gross earnings doubled from N271.1 billion in first quarter 2023 to N570.2 billion in first quarter 2024. The top-line performance was driven by strong growth in the core banking operations with interest income rising by 130 per cent to N440.7 billion.
Operating income doubled by 115 per cent from N175.7 billion to N378.59 billion. Profit before tax jumped by 155 per cent from N61.7 billion in first quarter 2023 to N156.34 billion in first quarter 2024. Profit after tax leapt by 165 per cent from N53.5 billion to N142.5 billion.
The balance sheet of the bank further expanded within the three months. Total assets grew by 23 per cent to N25.4 trillion in March 2024. Customer deposits also rose by 23 per cent to close the period at N18.4 trillion.
