As UBA Crosses New Threshold

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With gross earnings crossing the N500 billion, total assets going beyond N5 trillion mark, customers’ deposits growing by 14.4 per cent and profit after tax rising by 13.3 per cent, the ongoing business transformation drive of United Bank for Africa Plc is yielding fruits, writes Goddy Egene

“We are on a new cost optimisation journey and I believe that the comprehensive strategy being diligently executed by our Assurance teams, with the support of everyone, will yield positive results. More importantly, these cost-efficient initiatives will complement our revenue growth drive in moderating our cost-to-income ratio towards our desired target. Overall, we are set to deliver stronger performance in 2019.”

The above were the words of the Group Managing Director, United Bank for Africa (UBA) Plc to shareholders of the bank last year. Based on the promise to deliver to deliver better performance in 2019, the bank worked very hard to fulfil that promise as shown by the results released last Friday. Pan-African financial institution, ended 2019 with impressive growth across top and bottom lines.

Financial performance
Gross earnings grew by 13.3 per cent to N559.8 billion, compared to N494.0 billion recorded in 2018, while total assets also grew significantly by 15.1 per cent to an unprecedented N5.6 trillion for the year under review. This is the first time UBA’s gross earnings and assets will cross the N500billion and N5 trillion marks respectively.

Despite the challenging business environment in Nigeria, the bank’s profit before tax (PBT) was impressive at N111.3 billion, compared to N106.8 billion in 2018 financial year. Furthermore, the profit after tax rose by 13.3 percent to N89.1 billion, up from N78.6 billion n recorded in 2018. On the cost side, operating expenses grew by 10.1 per cent to N217.2 billion, as against N197.3 billion in 2018, well below average inflation rate within the period, a reflection of cost efficiency gains.

The growth in the contribution of its 19 African subsidiaries to the group’s net earnings and total assets showing that the bank is deepening its pan-African strategy. Ex-Nigeria Operations’ contributed 46 per cent to the Group’s PBT in the year under review.
Also, UBA has been deploying innovative lifestyle products to expand its market share across Sub-Saharan Africa, leveraging its presence in the United Kingdom, United States of America and France, to build a true Africa’s Global Bank, facilitating trade and capital flows between Africa and the rest of the world.

UBA recorded a remarkable 20.2 percent growth (to N2.1 trillion) in loans to customers, whilst customer deposits increased by 14.4 per cent to N3.8 trillion, compared to N3.3 trillion recorded in the corresponding period of 2018. This, according to analysts, reflects increased customer confidence, enhanced customer experience, early wins from the ongoing business transformation programme and the deepening of its retail banking franchise.

Following the improved performance, the bank has proposed a final dividend of 80 kobo for every ordinary share of 50 kobo for the financial year ended December 31, 2019. The final dividend, which is subject to the approval of the shareholders at its annual general meeting (AGM)will bring the total dividend for the year to N1.00, as the bank had paid an interim dividend of 20 kobo earlier in the year.

GMD/CEO explains performance
Commenting on the result, the Group Managing Director/CEO, Kennedy Uzoka noted that the year 2019 was important for UBA Group, as it gained further market share in most of its countries of operation.

“The year 2019 was a very remarkable one for UBA given the adverse market developments. Nonetheless, we achieved sizable growth in balance sheet and earnings, even as we reposition the Bank for the future. Gross earnings crossed the N500 billion threshold to N559 billion, whilst total assets also crossed the N5 trillion mark for the first time to N5.6trillion. Our strategy remains centred around unparalleled service to our esteemed customers. Accordingly, we are making significant investments in a technology-driven transformation journey. We have recorded early gains as shown in the 39 per cent growth in electronic banking income to N38.8bn in 2019 from N27.9bn in 2018. Our businesses are gaining commendable share in their markets across regions in Africa, as we deepen the scale and scope of our operations.”

Uzoka said he was indeed excited about the synergy they have built within the UBA Group and the significant progress they have made in their transformation drive.
“We have positioned the Bank as a truly pan-African banking franchise, leveraging our operations in France, the United Kingdom and the United State of America (USA), to deepen intra-African trade, and facilitate capital flows between Africa and the rest of the world. In 2020, we will pursue aggressive deepening of market share in all our subsidiaries, leveraging technology, rich human resources and our customer-first strategy to win in all the markets we operate, notwithstanding the challenges of our operating environment,” he added.

Speaking in the same vein, the Group Chief Financial Officer, Ugo Nwaghodoh said the bank is well positioned to sustain impressive performance across key financial indices, adding that some of its previous investment in digital and technological transformation is already paying off significantly.

“We navigated the fragile yield environment in our largest market, to deliver an eight growth in net interest income to N221.9 billion. This was bolstered by a 7.8 per cent and 13.9 per cent growth in interest income from corporate loans and investment securities respectively, as well as a 4.0 per cent cost of funds driven by our stable retail deposits. Resulting from cost efficiency gains within the year, cost-to-income ratio moderated to 62.7 per cent (64 per cent in 2018), whilst profit for the year grew 13.3 per cent, to N89.1billion, translating to 16.2 per cent return on average equity (RoAE),” Nwaghodoh said.

Analysts’ assessment
Assessing the results, analysts at Cordros Capital said the UBA’s performance is in line with expectations for FY-19, although there was a slowdown in the momentum witnessed over the first three quarters of the year.

“While this was partly due to the increased credit impairment charges, it is signal of what we expect in the coming year as contracting margins weigh on profitability in the highly regulated environment,” they said.

According to analysts, interest income increased by 11.5 per cent to N404.83 billion supported by the growth across all major contributors to the line, with the largest contributions coming from loans and advances to customers (51.4 per cent) and investment securities (44 per cent). Interest expense was also up, increasing by 16.3 per cent to N182.96 billion, driven by a combination of increased expenses on deposits from customers (+18 per cent to N125.05 billion) and borrowings (+17.8 per cent to N41.41 billion). Net interest income settled 7.9 per cent higher year-on-year at N221.88 billion.

Non-interest income grew by 21.2 per cent to N124.83 billion, and was driven by the growth in fees and commissions income (+22.2 per cent to N80.00 billion). Also, the bank recorded growth in income from investment securities trading (+58.7 per cent N10.64 billion). Consequent on the growth in funded and non-funded income, the bank recorded an 8.0 per cent growth in operating income to N328.45 billion.

“Operating expenses settled 10 per cent higher, driven primarily by increased regulatory costs – AMCON levy (+20.2 per cent to N19.99 billion) and NDIC premium (+32.4 per cent to N9.74 billion). Nonetheless, the bank’s cost-to-income ratio settled lower at 66.1 per cent relative to 64.9 per cent in the prior year, while profit-before tax improved significantly by 4.2 per cent to N111.29 billion,” they said.