September 17, (THEWILL) – The 2023 interim half-year financial statement of Africa’s Global Bank, United Bank for Africa (UBA) Plc, shows strong key metrics that would launch the Tier-1 lender on the fast track to N20 trillion assets mark this year. And this will consolidate its grips on the industry’s leadership.
The group recorded double and triple-digit growth across its major income lines at the end of the first two quarters of the year, despite the tough global macroeconomic backdrop and geo-political challenges that impacted negatively on businesses
Profit before tax (PBT) rose to N404 billion, representing an extraordinary increase of 371 percent, when compared to N85.75 billion recorded in the first half of 2022. This translates to an annualised Return on Average Equity of 57.7 percent as against 17.1 percent a year earlier. The results also showed a profit after tax (PAT) of N378.24 billion, representing a leap of 437.8 percent over H1 2022.
This phenomenal growth triggered the group’s robust assets performance with a quantum leap of N4.52 trillion in six month ended June 30, 2023, representing a 41.8 percent jump to N15.38 trillion from N10.85 trillion as of December 31, 2022.
This extraordinary jump in assets performance dwarfed the trend in the past years when the half-year results reflected a 9 percent growth on the average.
Checks showed that the institution’s assets performance for the 2022 half-year was a 9 percent growth from N8.54 trillion as of December 31, 2021 to N8.99 trillion at June 30, 2022. The Tier-1 lender’s assets performance for the 2021 half-year also revealed a lean growth of 8 percent to N8.31 trillion as of June 30, 2021 from N7.69 trillion posted at December 31, 2020.
Assets growth of 41.8 percent in the 2023 half year was more than four times the trend in the past years, suggesting that UBA Plc recorded in one year what it achieved in over four-years balance sheet growth. This indicates the group’s launch on the expressway to N20 trillion assets mark given the robust performance in key metrics.
Commenting on the significance of strong assets quality, Professor of Finance and Accounts at the Nasarawa State University, Keffi, Muhammad Mainoma, had told THEWILL that strong assets base is strategic to the development of any business because an enterprise is handicapped if it trades with a lean balance sheet.
“Strong assets base signifies that a business is strategically positioned to take advantage of its environment. For a bank, there is no time that people will not need money. Once a business is focused and invests in areas that people always need, it will not lose. This explains the continuous growth (in assets) despite the difficult operating environment,” Mainoma, former President, Association of National Accountants of Nigeria (ANAN), had told this newspaper in a note.
A stockbroker and head of securities trading at Planet Capital, Dr Paul Uzum, observed that the strong assets base being recorded by Nigerian banks is a way of consolidating their position against the uncertainties that define the operating environment.
He emphasised that strong assets base help the financial institutions now embracing the holding company (holdc) structure to go into diversification and spread their operations outside the shores of the country.
“Diversifying from an economically unstable country like Nigeria, will give the banks a pan-African outlook, with a more robust balance sheet which reflects in the banks’ EPS (earning per share) and DPS (dividend per share),” Uzum noted.
Specifically, the cost-to-income ratio (CIR), capital adequacy ratio (CAR), cost of risk ratio (CoR), and other key indicators of strong management quality reflected in UBA Plc’s impressive 2023 half-year performance. The components will build on the robust assets size to shoot the financial institution into a more prominent global spotlight.
The balance sheet showed that the lender grew its loan book by 43.8 percent to N4.50 trillion during the review period from N3.13 trillion as of December 31, 2022. It built on the expanding customers’ deposit which jumped to N11.13 trillion in the first six months of 2023 from N7.84 trillion at December 31, 2022, showing a 42 percent increase. This puts the lender in a comfortable position in complying with the prudential requirement of 65 percent Loan-to-Deposit ratio.
“When a bank is in a comfortable assets position it is at liberty to invest in areas that would facilitate its quest for excellence and helps it to stay ahead of the peers,” said Ben Daramola, a financial analyst. According to Daramola, UBA has started reaping from the gains of a strong balance sheet. He said it provides it the leeway to engage in massive investments that would further expand its assets base by the end of the year.
The financial institution recorded N51.07 billion from electronic banking income in the review period compared to N36.32 billion, representing a 40.7 percent growth year-on-year. Fund transfer income rose by 46 percent to N9.63 billion as of June 30, 2023, against N6.59 billion year-on-year. Transactional fees yielded a N17.82 billion income against N5.96 billion year-on-year which is an increase of 199 percent.
These reflect on the lender’s stock performance during the period.
The current share price of UBA is NGN 16.40. The stock closed its trading day of Thursday, September 14, 2023, at 16.40 NGN per share on the Nigerian Exchange (NGX), recording an 8.3% gain over its previous closing price of N15.15.
Checks showed that UBA began the year with a share price of N7.60 and has since gained 116% on that price valuation, ranking it 29th on the NGX in terms of year-to-date performance. Analysts believe that shareholders can be optimistic about UBA knowing the stock has accrued 18% over the past four-week period—17th best on NGX.
Checks further revealed that UBA is the second most traded stock on the Nigerian Exchange over the past three months (Jun 16 – Sep 14, 2023). The stock has traded a total volume of 4.01 billion shares—in 29,761 deals—valued at NGN 55.6 billion over the period, with an average of 63.7 million traded shares per session. A volume high of 962 million was achieved on July 20th, and a low.
UBA’s Group Managing Director/Chief Executive Officer, Mr. Oliver Alawuba commenting on the results said the exceptional performance underscored the Group’s commitment to consistently deliver value to its shareholders. He added that the Group made progress in digital payments, retail penetration and also benefited from the effect of revaluation gains, arising from the harmonisation of foreign exchange rates at the different access windows in Nigeria
He said, “The Group recorded strong double-digit growth in revenues and profits from its operations, the result also reflects the effect of sizeable revaluation gains, arising from the harmonization of currency exchange rates in Nigeria. Our reporting currency found a new exchange level at about N756 to 1US$ as of 30 June 2023, compared to N465 at the beginning of the year. The results again demonstrate the benefits of our long-held diversification strategy across Africa and globally. The growth of our international business, most recently in the UAE, only reinforces this earnings quality.”
Continuing he added, “Our business is on a steady growth trajectory, as we further strengthen our risk management traditions and practices necessary in technology investments to deliver premium service to our customers. We have also continued to finance landmark projects in critical sectors of the economies across Africa, facilitating intra-Africa trade with our valuable offerings and providing a versatile last-mile distribution network for Africa-bound donor and multilateral agency funds.”
“The three core geographical pillars of our business (Nigeria, Rest of Africa and Rest of the World) are making strong contributions to the Group profit, further justifying our global strategy and business positioning across Africa, UAE, France, UK and USA, and demonstrating the benefits of positioning UBA as the financial intermediary for Africa and the rest of the world.” Alawuba said.
On the plans for the rest of the year, Alawuba said, “As we approach the last quarter of the year, the Group remains strategically positioned to sustain the strong performance, consolidating on H1 2023 results, to deliver superior returns to our esteemed shareholders.”