UBA: Bumper harvest in winter

By Okechukwu Onyenweaku

With slightly over thirty per cent of its 2016 earnings coming from its various non-Nigerian branches across the continent, UBA Plc is set to take on a pan-African dominance that would edge it past a few other banks with similar ambitions. Coming from a relatively weak financial position in 2010 the bank has gathered its wits about it and strategically grown its gross earnings and net incomes across the African business board.
The banks 2016 audited accounts show that the bank was able to plumb an impressive 50 per cent growth in dividends from its African affiliates. The dividend growth was the result of strong operating performances in these economies (East and Central African Gross National Product growth rates trumped those of West Africa over the period) and foreign exchange translation gains from a fall in the value of the naira relative to the United States dollar. Over the last fiscal year UBA grew its gross earnings across Africa by a stunning 69 per cent and pushed non -interest income up by a further 17 per cent while its interest income across the continent doubled.
A first quarter buzz
Analysts see the bank doing a double take on its 2016 earnings feat as first quarter 2017 gross earnings bounced up 37 per cent from N73.7 billion in 2016 to N101.2 billion in 2017. Profit before tax rose 40.9 per cent year on year from N18 billion to N25.5 billion, suggesting a flat ironing of operating expenses as the banks earnings pushed forward. Th banks strong first quarter figures underly a strategy of diluting the adverse impact of fiscal policy on banking operations. The continental diversification of assets and liabilities should provide the bank an operational cushion to absorb the potential shocks from the local Nigerian market. There is a strong likelihood that continental earnings in 2017 would constitute 35 per cent of group income.
This success story has pushed other Nigerian financial institutions to channel their energy to grab a share of the offshore market. How UBA did this remains an incomprehensible magic which its peers are still studying. In fact, the banks subsidiaries have shown promise to offer greater assistance to the bottom line of the group in the future.
UBA has carefully cultivated its strategies to increase its market share in most of those countries.
Tony Elumelu, the then managing Director of Standard Trust Bank, brazenly acquired UBA, a conservative and, according to analysts, traditional bank, thaw it away from a frozen disposition to a high flying financial services provider with the ambition to spread into every nook and crannies of Africa and beyond.
Ever since, UBA has not looked back. The pan African Bank has proved that determination and focus pays. Today UBA is one of the dominant financial service provider in the African continent.
With a culture of aggressive marketing, the new UBA finetuned and brought in a culture of modern banking trend which was entirely new to Nigerian but turned out to be effective and made many financially literate.
Young handsome men and beautiful well -dressed girls besieged Nigerians both in offices and homes and brought them to bring out the monies they kept under pillows to the banks for safety purposes. On the other hand, these youths also taught some Nigerians that bank loans can enhance their businesses. From June 2005, when the combination between STB and UBA was consummated to 2010, the current Chairman of the Bank, Elumelu held sway and built solid foundation for the bank.
Phillips Oduoza, the immediate past helmsman of the bank, strategically explored the opportunities that offered themselves in neighbouring countries.
Today Kennedy Uzoka is pushing the operations of the bank to higher levels.
The UBA group has not only thrived under Uzoka’s leadership, but it is already recording strategic milestones. The results of the visionary management team of the bank is becoming stronger by the day.
Uzoka still glitters quarter 1 2017
With recession banging hard on their doors, Nigerian banks have seen corporate performance dip a notch. Rising impairments and weaker asset quality attest to a brutish credit environment. But countering this narrative, the United Bank for Africa, has displayed unusual strength and vigour, having pushed past analyst’s expectation to post a sterling first quarter 2017 and year end 2016 performance.
UBA recorded N25.5 billion in profit before tax in the first quarter, ending March 31st 2017, compared to N18.1 billion achieved in the first quarter of 2016. The Group also recorded a profit after tax of N22.4 billion in the first quarter, an impressive 32 percent year-on-year growth compared to N17.0 billion achieved in the corresponding period of 2016. The group sustained its strong profitability recording an annualized 19.4% Return on Average equity(RoAE).
Driven by an unprecedented 43% year-on-year growth in interest income, the bank group recorded a 38% percent year-on-year growth in gross earnings to close at N101.2 billion for the three months period ending March 2017, compared to N73.7 billion recorded in the first three months of the year 2016.

In the same vein, the pan-African institution ended 2016 with an impressive 22 per cent growth in gross earnings and profits attesting to its corporate resilience.
The bank recorded 22 percent growth in gross earnings to N384 billion as at December 2016 from a comparative figure of N315 billion recorded at the end of the 2015 financial year, dousing concerns about the possible negative impact of the relatively low economic activity in Nigeria on the bank. In addition to the opportunities in the high yield government securities, rising adoption of electronic banking channels and strong franchise, UBA was able to leverage its expansive geographical footprint in recording this impressive earnings growth.
From January to December 2016, the Group witnessed a significant 32 percent growth in profit before tax to N91 billion compared to N68 billion profit recorded over the same period of 2015.
It’s profit after tax grew by 21 percent to N72 billion, from N60 billion recorded the previous year. The bank noted that its impressive performance was buoyed by considerable growth in both interest and non-interest income.
The bank paid a final dividend of 55kobo, having earlier paid an interim dividend of 20k to shareholders, bringing the total dividend for the 2016 financial year to N0.75. This represented a yield of 13.9%, based on the stock’s unit price of N5.40 on March 23, 2017 on the floor of the NSE.
The results, Kennedy Uzoka, the Group Managing Director and Chief Executive Officer of the bank said its resilience was reflected in the outstanding performance in an economy in depression, “Considering the challenging operating environment, I am pleased with our profitability in the year; an impressive 32% growth in profit before tax to N91 billion. We improved on our cost-to-income ratio, closing the year at 63%, in line with our target. Notably, the N72 billion post-tax profit translates to 19% return on average equity, which is broadly in line with our guidance for the 2016 financial year”, Uzoka said.
UBA’s Rear view mirror
The pioneer chief executive of the new UBA, Mr. Tony Elumelu, laid the foundation upon which subsequent managers of the bank have taken a cue. Elumelu opened the flood gate of achievements. During his tenure which lasted five and half years, from 2005 to August 2010, Elumelu grew the banks total assets by 456 per cent from N251.6 billion to N1.400 trillion in 2010. Similarly, gross earnings rose by 745 per cent as profit after tax advanced 162 per cent over the period.
UBA under the leadership of Phillips Oduoza grew profit by a mammoth 2,518 per cent to N47.9 billion in 2014 from a negative N1.944billion reported in 2010. Its balance sheet grew by 73 per cent from 1.5trillion in 2010 to N2.7 trillion in2014.
Market observers have already noted that Kennedy Uzoka is strategically building on Oduoza’s legacy, taking the bank’s gross earnings and net income higher.
He is already showing the determination to see the bank flesh out its growth. Re-enforcing corporate stability, analysts have noted that bank assets have grown by 27 per cent year on year from N2.752 trillion in 2015 to N3.504 trillion.

UBA has not only thrived under Uzoka’s brief leadership, but it has also attained major milestones.
According to analysts, the bank succesfully pushed back against unexpected macroeconomic headwinds. For example at a time of shrinking revenues, foreign exchange uncertainty, and a liquidity drought spurred by governments Treasury Single Account (TSA) policy, the bank was still able to pay a final dividend of 55 kobo per share which brought total dividend to 75 kobo for the 2016 financial year. UBA had earlier paid an interim dividend of 20 kobo per share, following the audit of its 2016 Half Year Results, leading to an indicated divdnend yield of 13.9 per cent.
Shareholders have been impressed by its payout, but have urged that the bank match payouts of peers such G T Bank and Zenith Bank. While G T Bank paid 200 kobo, Zenith Bank paid 220 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. The bank repeated that with a bolder step, increasing its subsidiary contribution to the bottomline to 30 per cent in 2016. In a depressed economy with very tight regulatory and fiscal regulatory authorities, the group’s foresight helped to cushion the sad effect.
Five years on the profit march
A critical assessment of the bank’s performance since August 2010 reveals that its profit grew by stunning 3,234 per cent from N2.167 billion to N72,264billion in 2016. Other relevant indicators also show that gross Earnings grew by 144 per cent from N157billion in 2010 to N383.6billion in 2016. Similarly, total assets grew 144 per cent from N1.432trillion in 2010 to N3.504 trillion in 2016. Loans and advances to customers also grew 144 per cent from N569.3billion in 2010 to N1.505 trillion in 2016.

At a glance, UBA has performed brilliantly in the last 7 years. However, the bank needs to channel efforts at customer flow management and 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 lower than that of its rivals.
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 out-perform 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.
Unfortunately, UBA ‘s loan impairment is higher than the growth in its loans and advances, suggesting a softening of asset quality. Indeed, the bank’s loan impairment grew from N5billion in 2015 to N27.7billion in 2016.
UBA has become a grooming ground for banking skills acquisition and most of the persons whose skills were honed in the bank ended up being poached.
Market observers recall that Reginald Ihiejiahi, former Managing Director of Fidelity Bank came from UBA, Nnamdi Okonkwo who heads Fidelity currently also came from UBA. Also, the current Emir of Kano Mohammed Sanusi 11 left UBA to head First Bank and subsequently became Central Bank of Nigeria (CBN) governor.
UBA has shown strengthover many performance indices, however, former staff confided in Business Hallmark that working in UBA was harsher than what obtains amongst peers.
In the banks recent 2016 audited accounts the Mananging Director noted that, “as we build on our Customer First Philosophy, we are approaching the year [2017] with stronger optimism, especially as the outlook remains positive in most of our markets. We are not unaware of the macro challenges, competition and constantly changing customer preferences. But, we believe we are well equipped to win in the market”.
UBA is clearly running an intriguing race for a Nigerian bank, the spectacle is less in its uniqueness as it is in the banks comittment to make a success of it continental gambit.