UBA Shows Resilience

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Despite the challenging operating environment, United Bank for Africa Plc ended 2017 with a better performance, translating to higher dividends for its shareholders, writes Goddy Egene

United Bank for Africa Plc recently showed resilience in its performance for the year ended December 31, 2017. Although expectations have been mixed about what the performances of banks would be in 2017, stakeholders remained bullish that UBA would deliver improved results. And when the financial institution unveiled its audited results last week, it showed positive trends in the performance. Growth in the contribution and market share from its pan-African subsidiaries was significant.
The pan-African financial institution gross earnings of N462 billion, indicating a growth of 20 per cent from N314 billion recorded in 2016.

Interest income stood at N325.66 billion, up by 23.3 per cent from N263.97 billion, while net interest income improved by 25.6 per cent to N207.63 billion from N165.2 billion in 2016.
Loan impairment charges also rose by 18.8 per cent from N27.6 billion to N32.9 billion, bringing the net interest after impairment charges to N174.74 billion, from N137.5 billion in 2016. Net operating income increased by 20.8 per cent from N257.2 billion to N310.84 billion.

UBA ended the year with profit before tax (PBT) of N105.26 billion, indicating a growth of 16.1 per cent, while profit after tax (PAT) stood at N78.59 billion, showing an increase of 8.7 per cent from N72.26 billion in 2016.
The bank’s subsidiaries outside Nigeria contributed a third of the Group’s top-line and 45 per cent of the profit for the year, a remarkable improvement from 31 per cent contribution made by the ex-Nigeria offices in 2016. This, market analysts said is the success of the bank’s expansion strategy, with target of 50 percent contributions by 2020.

The bank’s contributions to support the economy in terms of loans and advances also increased. Specifically, loans and advances rose by 9.6 per cent from N1.505 trillion to N1.651 trillion. Customers’ confidence in the bank equally improved, leading to an increase of 9.9 per cent in deposits from customers to N2.733 trillion, up from N2.486 trillion.
The bank’s total assets peaked at N4.07 trillion, translating into 16.1 percent year-on-year growth from the figure of N3.50 trillion recorded as at 2016 financial year.

Reflecting a strong internal capital generation, the bank’s shareholders’ fund also soared 18.2 per cent to N529.4 billion in the 2017 financial year.
Based on the performance, the Board of UBA Plc proposed a final dividend of 65 kobo per every share of 50 kobo each. This final dividend proposal is in addition to the 20 kobo per share interim dividend paid after the audit of the 2017 half year financial statements, thus putting the total dividend for 2017 financial year at 85 kobo per share.

Bank Explains Performance
Speaking on the results, the Group Managing Director/CEO, UBA Plc, Kennedy Uzoka, said: “The results, underlines the success of our strategy of expanding across Africa, diversifying revenues and capturing the broader business opportunities inherent in Africa’s growth. The results reinforce the sustainability of our business model and the capacity to deliver superior long-term return to shareholders, as the economic and business environment improve.”

“In 2017, we made strong progress in our strategic initiative of dominating transaction banking across all our countries of operation, gaining market share in all lines of our business. Even as the non-oil sectors of our largest country of operation, Nigeria, remained relatively weak, we still grew earnings by 20 per cent to N462 billion, a third of which is attributable to non-funded income,” he further noted.

Speaking in similar vein, the Group Chief Finance Office, Ugo Nwaghodoh said: “In a period of high interest rates, we achieved a relatively low 3.7 per cent cost of funds. This operational efficiency reflects the benefit of our rich pool of stable savings and current account deposits. The net interest margin stabilised at seven per cent, even as yields on treasury assets dropped in the last quarter of 2017. Our core transaction banking offerings gained strong momentum, with income from these business lines growing by double digits.”
He said the bank remain committed to its responsible approach to balance sheet management, with focus on growing risk asset and broader balance sheet in a profitable and prudent manner.

“Amidst a subdued Nigerian credit market, we grew our loan portfolio by 10 per cent, leveraging our robust liquidity and capitalisation to support good businesses through this challenging economic cycle. We closed the year with a Basel II capital adequacy ratio of 19 per cent and a liquidity ratio of 50 per cent, well ahead of 15 per cent and 30 per cent regulatory requirement respectively. Our disciplined approach to lending and broader risk management continues to uphold our asset quality.”

Apart from the strong financial performance in 2017, UBA Group proved its leadership on the continent as the Banker Magazine crowned the Group, “African Bank of the Year 2017”. To further demonstrate the group’s strength and dominance in the financial sector on the continent, four of UBA Group’s operations in Africa also led contenders in their respective countries to emerge the Best Bank of the Year 2017 in their respective markets. UBA Congo, UBA Tchad, UBA Gabon and UBA Senegal emerged the Best Bank of the Year in Congo, Tchad, Gabon and Senegal, reinforcing the strong franchise of the Group across its chosen markets in Africa.

Analysts’ comments
Assessing the results for the fourth quarter (Q4), analysts at FBN Quest, said the results were better-than-expected. According to them, while PBT beat their forecast by 64 per cent , the surprise in PAT was greater at 108 per cent.
“The positive surprise in earnings was mainly driven by a better-than-expected performance in non-interest income which came in around 49 per cent higher than our forecast. Relative to consensus, Q4 PBT also came in around 28 per cent higher. However, in terms of y/y trends, PBT declined by 15 per cent year-on-year(y/y) mainly because provisions and opex increased by eight per cent and 15 per cent respectively, and base effects (Q4 2016 non-income was also strong for similar reasons to Q4 2017). In contrast, PAT grew by 19 per cent y/y to N27.6 billion, thanks to a positive result of N13.2 billion in other comprehensive income (OCI),” they said.

According to FBN Quest, sequentially, PBT and PAT grew by 30 per cent q/q and 35 per cent q/q respectively, because of a healthy growth of 42 per cent q/q in non-interest income.
“On a full year basis, PBT expanded by 16 per cent y/y to N105.2bn. However, PAT fell by 24 per cent y/y because of a higher income tax rate of 25.3 per cent (vs. 20.3 per cent 2016) and a 58 per cent y/y decline in OCI. The 2017 PAT translates to an ROAE of 21.1 – this is amongst the highest in our coverage universe,” they said.