Review: How UBA Emerged Best Performing Banking Stock
**What Analysts Say
United Bank for Africa (UBA) Plc is on the top list of companies with well-rounded performance. UBA’s top-of-the-chart performance at the stock market combines with considerable growth in all key fundamental indicators to make the bank the best performing banking stock in recent period. Capital Market Editor, Taofik Salako, in this report, reviews the interplay of fundamental earnings and share price appreciation
United Bank for Africa (UBA) Plc outperformed all banking stocks in the first quarter of 2017 with a share price appreciation of 28.22 percent. It had recorded the second highest price gain of 33.1 percent in 2016, just slightly under three points behind Guaranty Trust Bank (GTB), which led the sector with 35.9 percent.
Altogether, UBA’s share price had grown by more than 60 percent in the past 15 months, the highest by any bank and one of the few bright spots in the long-running depression at the stock market. Average return at the Nigerian Stock Exchange (NSE) in the first quarter of 2017 was negative at -5.05 percent.
The NSE Banking Index was down by 0.03 percent while the NSE 30 Index, which tracks large-cap stocks, was almost on the average with a three-month return of -4.93 percent.
In 2016, the stock market had recorded a full-year average return of -6.17 percent, equivalent to net capital loss of N604 billion.
Only 19 companies, including three banks, recorded a capital gain of 20 percent and above in 2016, underlining the general downtrend that marked price changes during the period. A long-running depression had seen quoted equities losing N4 trillion in the past three years, including N1.75 trillion and N1.63 trillion in 2014 and 2015 respectively.
UBA’s share price appears to be riding on the crest of positive analysts’ reviews. There is almost analysts’ consensus on the attractiveness of the UBA.
Investment research and rating firms such as Renaissance Capital, CSL Stockbrokers, Fitch and Augusto among others had maintained that UBA has strong fundamentals to support substantial price appreciation. UBA Group’s audited report and accounts for the year ended December 31, 2016 supported the positive view of its earnings potential, in spite of the Nigerian economic recession.
Key extracts of the Group’s audited report showed impressive growths in the top-line and the bottom-line as it continued to expand its assets base. Group’s gross earnings rose by 21.9 percent from N314.84 billion in 2015 to N383.65 billion in 2016. Interest income had grown by 15 percent from N229.63 billion in 2015 to N263.97 billion.
With 2.9 percent increase in interest expense from N96.03 billion to N98.77 billion, net interest income rose by 23.7 percent to N165.2 billion in 2016 compared with N133.6 billion in 2015. This underlined the profitability of the group’s core banking business.
Group profit before tax grew by 32.4 percent to N90.64 billion in 2016 as against N68.45 billion in 2015. After taxes, net profit rose by 21.1 percent from N59.65 billion to N72.26 billion. With these, earnings per share increased from N1.79 in 2015 to N2.04 in 2016.
UBA Group’s balance sheet also emerged stronger with total assets rising by 27.3 percent from N2.75 trillion in 2015 to N3.5 trillion in 2016. Customers’ deposit rose by 19.7 percent from N2.08 trillion to N2.49 trillion. Loans and advances recorded above average growth of 44.2 percent to N1.50 trillion in 2016 as against N1.04 trillion in 2015, underlining the bank’s commitment to economic development. Shareholders’ funds also increased by 33.5 percent from N325.83 billion in 2015 to N434.85 billion in 2016.
Key underlying ratios showed that the growth in 2016 was driven by improvements in the intrinsic operational performance and management. Net interest margin, which underlines the profitability of the core banking business, improved to 62.6 percent in 2016 as against 58.2 percent in 2015.
This corroborated the reduction in cost of fund. Pre-tax profit margin, which measures the underlining profitability of the group’s businesses, also improved from 21.7 percent in 2015 to 23.6 percent in 2016.
On the back of improved earnings, the bank increased dividend payout to shareholders by 25 percent, further enhancing the total real return on investment built up significantly by capital appreciation.
Shareholders received final dividend payment of N19.9 billion for the 2016 business year, in addition to N7.3 billion interim dividend paid after the audit of its 2016 half-year results.
With this, shareholders received a final dividend per share of 55 kobo in addition to interim dividend of 20 kobo, bringing total dividend for the 2016 business year to 75 kobo as against 60 kobo paid for the 2015 business year.
A dividend yield of more than 14 percent further placed UBA within the top yields at the stock market. This surpassed the 13.01 percent coupon on the two-year tenored Federal Government National Savings Bonds.
The latest audit report confirmed UBA Group’s steady performance over the years. A five-year medium term review showed that total assets have grown steadily from N2.27 trillion in 2012 to N3.50 trillion in 2016. Net loans and advances more than doubled from N658.9 billion in 2012 to N1.50 trillion in 2016.
Customers’ deposits also followed the uptrend, jumping from N1.72 trillion in 2012 to N2.49 trillion in 2016.
Shareholders’ funds rose consecutively from N189.11 billion in 2012 to N434.85 billion in 2016. Profit before tax, which stood at N52.01 billion in 2012, had defied recession to rise to N90.64 billion in 2016 while profit after tax rose from N54.77 billion in 2012 to N72.26 billion in 2016.
Most analysts have rated UBA Group high on its fundamentals. “We note improvement in profitability and the bank’s good asset quality.
“The rating takes into cognizance the weak macroeconomic climate on the banking industry’s asset quality, in which we do not expect UBA to be excluded.
“Nonetheless, we note positively its diversified geographical reach, which will cushion to an extent the impact of the weak Nigerian economic climate,” Agusto & Co stated in its recent credit rating report.
Nigeria’s foremost local rating agency, Agusto & Co, had upgraded UBA’s rating from “A+” to “Aa-”, with a stable outlook, citing the bank’s improved capitalisation, good liquidity and large pool of stable deposits, strong domestic presence supported by the bank’s extensive branch network and growing alternative banking channels.
Also, Fitch International, one of the foremost global rating agencies, in its latest report affirmed and upgraded its ratings for the bank citing strong earnings and asset quality.
Fitch affirmed UBA’s viability rating at “B” as the pan-African banking group continues to sustain its benchmark asset quality and strong profitability amidst industry and macroeconomic challenges. UBA is one of the few banks with strong risk management framework, which has helped kept non-performing loans ratio at a moderate level of 1.74 percent as at the end of March 2016.
Strength in diversity
Other African subsidiaries contributed about one third of the group’s profit in 2016, reflecting the increasing market share of the group outside its Nigerian home.
UBA operates in 18 other African countries including Ghana, Republic of Benin, Liberia, Cote d’Ivoire, Burkina Faso, Guinea, Senegal, Sierra Leone, Mozambique, Zambia, Uganda, Tanzania, Kenya, Congo DR, Congo Brazzaville, Cameroon, Chad and Gabon. UBA also has presence in United Kingdom, United States and France.
Geographical segment analysis showed the group performance was buoyed by above average growths in its foreign subsidiaries. The other 18 African subsidiaries recorded pre and post-tax profit of N31.4 billion and N24.32 billion respectively on total earnings of N121.9 billion in 2016, considerable growths on pre-tax profit of N18.8 billion and post-tax profit of N14.14 billion recorded on total incomes of N67.72 billion in 2015.
Other non-African global operations also improved in 2016 with total income of N9.8 billion and pre and post-tax profits of N3.4 billion and N3.37 billion respectively. Other non-African global subsidiaries had recorded gross earnings of N6.01 billion and pre and post-tax profit of N1.95 billion each in 2015.
Operating segment analysis also showed that the overall performance rested on evenly spread improvements across the key business segments.
Corporate banking recorded gross earnings of N116.63 billion, profit before tax of N43.46 billion and profit after tax of N37.69 billion in 2016 compared with N101.07 billion, N29.04 billion and N25.31 billion recorded respectively in 2015.
Retail and commercial banking segment, the largest segment, grew top-line to N227.57 billion in 2016 with profits before and after tax of N29.44 billion and N20.05 billion respectively.
Total revenue in the segment had stood at N185.19 billion in 2015 with profit before tax of N26.52 billion and profit after tax of N23.11 billion.
The board and management of UBA said the banking group is well-positioned for sustainable long-term growth that will continue to ensure commensurate returns to shareholders.
Chairman, United Bank for Africa (UBA) Plc, Mr Tony Elumelu, noted that most African countries were implementing policy measures that should help stimulate inclusive economic growth, ease macro pressures and lower the cost of doing business.
According to him, while Africa has experienced a difficult period; the UBA group welcomed 2017 with renewed optimism as it truly believes that “Africa is Rising.”
“Our pan- Africa operations have delivered on the promises we made at the outset of our growth strategy and we are beginning to reap the benefits of one the largest network in Africa.
“As we navigate the fast changing market place, we are increasingly digitalising our core business, as we explore new markets and means of embracing customers experience, gain increased share of customers’ wallet and offer new services.
“I am very optimistic that we will sustain the strong growth trajectory, as we continue to gain market share, leveraging our core values of enterprise, excellence and execution,” Mr Elumelu outlined.
Group managing director, United Bank for Africa (UBA) Plc, Mr Kennedy Uzoka also assured that the bank is optimistic of continuing growth in the years ahead.
“The 2017 outlook remains positive in most of our markets. We are not aware unaware of the macro challenges, competition and constantly changing customer preferences.
“We will further sweat our unique Pan Africa platform to improve productivity, extract efficiency gains and grow our share of customers’ wallet across all business lines and markets,” Mr Uzoka said.
According to him, as the banking group continues with its customer first philosophy, shareholders can look forward to better performance, especially with the outlook remaining positive in most of the group’s markets.
“We will build on our strong governance culture, zero-tolerance for infractions and transparency in furthering our frontiers of leadership in the African market,” Mr Uzoka said.
Zenith Bank Retains Award for Adherence to Global Best Practices
By Modupe Gbadeyanka
For adhering to global best practices and institutionalising corporate governance, Zenith Bank Plc against been announced as the Best Corporate Governance Financial Services in Africa.
This is the fourth consecutive year the financial institution is running away with the award, setting an industry-wide example of best practices in corporate governance on the continent.
The lender was bestowed with this recognition by the Ethical Boardroom in the Spring 2023 edition of its magazine.
Ethical Boardroom is a trailblazing and leading international magazine that delivers in-depth coverage and critically-astute analysis of global corporate governance issues to help boards stay ahead of the governance curve.
The chief executive of Zenith Bank, Mr Ebenezer Onyeagwu, dedicated the award to the company’s founder and Chairman, Mr Jim Ovia, for providing the template for an enduring and very successful institution.
He also dedicated it to the board for their vision and outstanding leadership, the staff for their dedication and commitment, and the bank’s customers for their unwavering loyalty to the brand.
“I am extremely pleased that Zenith Bank has been awarded the Ethical Boardroom Corporate Governance Award as a regional governance champion for the fourth year.
“No doubt, the bank’s board has pioneered the exemplary governance culture for which we are now renowned. Indeed, this recognition reflects our steadfast commitment, discipline and high ethos in the conduct of our business and dedication to the principles of good corporate governance.
“This award will motivate us to strengthen this culture internally and advocate for good governance at every forum,” Mr Onyeagwu said.
Zenith Bank has been generally adjudged a Corporate Governance compliant bank by the Nigerian Exchange (NGX) hence its listing on the Premium Board of the Exchange.
The firm continues to sustain this reputation and reappraise its processes to ensure that its business always conforms to the highest global standards.
Its track record of excellent performances has continued to earn it numerous awards, including being recognised as the Number One Bank in Nigeria by Tier-1 Capital, for the 13th consecutive year, in the 2022 Top 1000 World Banks Ranking published by The Banker Magazine; Bank of the Year (Nigeria) in The Banker’s Bank of the Year Awards 2020 and 2022; Best Bank in Nigeria, for three consecutive years from 2020 to 2022, in the Global Finance World’s Best Banks Awards; Best Commercial Bank, Nigeria 2021 and 2022 in the World Finance Banking Awards; Best Corporate Governance Bank, Nigeria in the World Finance Corporate Governance Awards 2022; Best Commercial Bank, Nigeria and Best Innovation In Retail Banking, Nigeria in the International Banker 2022 Banking Awards. Also, the bank emerged as the Most Valuable Banking Brand in Nigeria in the Banker Magazine Top 500 Banking Brands 2020 and 2021, and Retail Bank of the year, for three consecutive years from 2020 to 2022, at the BusinessDay Banks and Other Financial Institutions (BAFI) Awards. Similarly, Zenith Bank was named as Bank of the Decade (People’s Choice) at the ThisDay Awards 2020, Bank of the Year 2021 by Champion Newspaper, Bank of the Year 2022 by New Telegraph Newspaper, and Most Responsible Organisation in Africa 2021 by SERAS Awards.
Small Business Owners in Edo Hail Wema Bank for Support
By Dipo Olowookere
Wema Bank Plc has been praised by small business owners in Edo State for equipping them with the skills needed to scale up their operations.
Between May 22 and 26, 2023, the financial institution trained 250 participants on business management skills, entrepreneurial knowledge, and financial and marketing management skills to boost the success of Small and Medium Enterprises (SMEs) in the South-South region of the country.
The workshop, organised under the Wema Bank SME Business School, was the fifth edition held at the Uyi Grand Event Centre, Benin City, the state capital, and comprised SME customers and non-customers.
One of the beneficiaries, Ms Edith Igabali, commended Wema Bank for the knowledge-laden seminar which has broadened her perspective on SME management.
“Wema Bank is trying for me; they have made me what I am today. The session was power packed, fun, and educative,” she said.
Another participant and SME owner, Ms Love Onobrakpor, expressed gratitude to the bank for the highly impactful programme, adding that she had no regrets about taking time off work to attend the one-week session. “It was interesting and highly interactive, well worth it,” she stated.
For Ms Precious Izedonmi, she said, “I have been greatly impacted, and I am grateful for the privilege; it can never be trivialized.”
The Head of SME Banking at Wema Bank, Mr Arthur Nkemeh, after the session, expressed his appreciation to “our partners and every facilitator for the session and most importantly our customers who trust us to give them excellent financial services.”
“We will continue to offer superior customer service to our customers with business facilities and advisory services that will help scale up their business; this is one of the many offers to come from Wema Bank,” he said.
The Wema Bank SME Business School was launched in Lagos in 2021 to boost the capacity and skills of SMEs to help them achieve their business objectives.
The second edition took place virtually, while the third and fourth editions happened in Abuja and Port Harcourt, respectively.
The Edo State edition had a very rich and relevant curriculum that directly addressed the issues within the Nigerian SME sector.
The faculty and facilitators also comprised experienced and highly knowledgeable experts in various fields who made the training not only worth the while but beneficial in terms of knowledge gained and new insights revealed about SME management.
The curriculum included a macroeconomic review of the Nigerian economy, business strategy formulation and execution, sales and marketing, customer experience value management, financial management, sustainability, leadership, communication and people management.
NAMB Directs MFBs to Update Recapitalisation Status
By Adedapo Adesanya
The National Association of Microfinance Banks (NAMB) has directed all licensed Microfinance Banks (MFBs) nationwide to update it on their recapitalisation status for assessment and follow-up actions with the regulatory authorities.
This was disclosed by the Executive Secretary of the association, Mr Shikir Caleb, after the Central Bank of Nigeria (CBN) revoked the licences of 179 banks for not adhering to regulations.
The central bank had said that it revoked the MFBs licences due to failure to fulfil or comply with the conditions subject to which their licences were granted.
The apex bank said the banks were sanctioned because they failed to comply with the obligations imposed upon them by the apex bank in accordance with the provisions of Banks.
Now, NAMB said that the latest decision was taken in Abuja at an emergency meeting of the leaders of the NAMB after vigorous deliberations on the latest licence revocation action of many MFBs by the CBN.
According to NAMB, the meeting had in attendance the Board of Trustees, the Past Presidents, and members of the National Working Committee.
The association said that the meeting had its main agenda the revocation of the licences of the affected MFBs and how to proactively forestall future negative occurrences in the MFB sub-sector of the financial system.
“Following the review and deliberations on the licence revocation matter, the top leaders of the NAMB directed that the various state chapters should categorize the affected micro lenders into MFBs that have fully re-capitalised but yet to be approved by CBN.
“MFBs that have not been fully re-capitalised but had ongoing discussions for funding; MFBs that were yet to re-capitalise; and MFBs that have long closed shop,” it said.
According to the statement, the leaders further advised any MFB that had fully re-capitalised but yet to be approved by CBN to present its submissions to the Secretariat with a summary of its recapitalization status as of date.
It was also disclosed that leaders also agreed that the association would review the submissions and have a meeting with all MFBs this Thursday (June 1) in Abuja “with a view to collating all submissions for engagement with the management of CBN.”
Commenting on the licence revocation, the NAMB National President, Mr Joshua Ukute, rued the ugly development and promised that the “leadership of the association would continue to intensify its self-regulation activities in all MfBs nationwide to forestall this type of occurrence.
“We have also mandated the Secretariat of the NAMB to do more by enlightening the public, especially all stakeholders in the association’s financial inclusion drive value-chain with the aim of building confidence in the microfinance Bank sub-sector of the financial system.
“As you all know, the MFBs have, over the years, remained at the forefront of the financial inclusion strategy agenda’s implementation.
“And, they will continue to do their best to deepen financial services, especially in remote communities that the big players are not ready to go,” he added.
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