Two leading investment firm, Renaissance Capital and CSL Stockbrokers have placed a “Buy” rating on United Bank for Africa (UBA) Plc, describing the bank as very attractive with a strong potential to generate returns of more than 100 per cent in the next 12-month period.
The “buy” rating on UBA, underlines its attractiveness despite the general downward trend at the stock market. Renaissance Capital, in its recommendation, was bullish on UBA stocks forecasting that the bank’s share price could rise to N9.40 per while CSL Stockbrokers, a member of FCMB Group, said UBA could trade at N7.21 per share in the next 12 months.
The stock closed at N4.60 on Monday. However, on the average, analysts’ consensus target price is N8.50 per share for UBA for the 2016 business year.
Some market operators said the strong investment case for UBA followed the recent affirmation of its credit rating by Fitch as well as an upgrade by Agusto & Co. Fitch International, one of the foremost global rating agencies affirmed the bank’s viability rating at “B” an affirmation of its strong risk management framework, which has helped keep non-performing loans ratio at a moderate level of 1.74% as at the end-March 2016, as against industry average of over 6%, as reported by Fitch in its recent report on Nigerian banks.
Fitch also upgraded UBA’s outlook to stable from Negative, thus reinforcing the strong outlook on the Bank, especially as its diversified network across eighteen other African countries make it relatively immune against the potential cyclical volatilities in any of its country of operations.
Also, Agusto & Co, upgraded the bank’s rating from “A+” to “Aa-“, with a stable outlook. According to Agusto & Co, “the rating of UBA is upheld by the bank’s improved capitalsation, good liquidity and large pool of stable deposits, strong domestic presence supported by the Bank’s extensive branch network and growing alternative banking channels.
“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, 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 credit rating report.
UBA is the third largest lender in Nigeria and a provider of financial services across 19 African countries, and with presence in New York, London and Paris. The bank serves almost 11 million customers across expansive brick and mortal branches as well as diversified alternative electronic banking channels.