While most of its competitors recorded flat growth in the first quarter of 2020, United Bank for Africa posted a positive results indicating bright future prospects for investors, writes Goddy Egene
The COVID-19 has caused so much apprehension among Nigerians as no one is able to measure the level of impact it will have on human lives and businesses. Economically, there are fears that its impact would be massive with some indications already showing through financial performance of companies at the end of first quarter (Q1) to March 30, 2020.
The financial results of many businesses have shown decline in Q1, while some ended with marginal growth. Yet some posted higher growth, showing significant level of resilience. United Bank for Africa (UBA), which is pan- African financial institution, is among those that started 2020 on strong note as its profit before tax (PBT) and profit after tax (PAT) witnessed appreciation.
Apart from ending the Q1 with stronger bottom-line, UBA has assured stakeholders that all the investments made by bank over the years in the area of would enable it to has continue to meet the needs of customers in terms of digital patronage in the period of COVID-19 pandemic and beyond.
2020 Q1 performance
UBA recorded gross earnings of N147.2 billion, up from N131.7 billion posted in the corresponding Q1 of 2019. Net interest income rose to N65.417 billion, compared with N58.075 billion in 2019. The bank leveraged on modest growth in both interest and non-interest income as well as increased efficiency to deliver an impressive 8.5 per cent growth in profit before tax (PBT) to N32.7 billion compared with N30.2 billion recorded in 2019. Profit after tax (PAT) grew from N28.665 billion to N30.101 billion in 2020.
The financial institution sustained its strong profitability recording an annualised 20 per cent return on average equity (RoAE). Loans and advances to customs rose from N2.061 trillion to N2.256 trillion, while customers’ deposits improved from N3.832 trillion to N4.272 trillion, showing the confidence reposed in the brand. The bank’s total assets also rose by 13.4 per cent to N6.4 trillion in the period under review, compared to N5.6 trillion recorded at the end of the 2019 financial, while shareholders’ funds grew to N612.6 billion from N597.9 billion in the same period.
UBA explains performance
Speaking to the Q1 2020 numbers, the Group Managing Director/CEO of the United Bank for Africa (UBA) Plc, Mr. Kennedy Uzoka, expressed satisfaction, saying the performance remained encouraging despite the challenging business environment.
He said: “We are pleased with our top and bottom lines in the first quarter of 2020, delivering N147.2 billion in gross earnings and PBT of N32.7billion. The double-digit growth in the top-line testifies to the resilience of our business model as a group, even as the 17 per cent growth in our fees and commission income underscores our diversified business model, enabling us to deliver best value to our stakeholders, even in tough macroeconomic scenarios.”
Uzoka said he is very excited about recent successes they have recorded in all their business segments, especially their retail and electronic banking businesses within the period, with retail deposits accounting for 72 per cent of customer deposits even as cost-of-funds moderated to 3.3 per cent.
“We will continue to grow market share in all our markets, whilst maintaining cost discipline across our businesses, driving efficiency in our processes using best-rated technology,” he said.
Speaking on customers’ growing concerns on banking services during the lockdown due to the coronavirus pandemic, Uzoka explained that the bank has put in place various strategic channels to ensure that customers’ transactions are effectively carried out with ease.
He said: “In response to the spread of COVID-19 several national governments have announced a partial or total lock down in a number of our markets, post Q1 2020. Fortunately, we have built robust electronic channel platforms to enable us effectively serve our customers from the convenience of their homes. Despite the lock down, our banking channels have remained open to our customers 24/7, even as we continue to align and adapt our operating model to ensure we service our customers excellently and safely.”
He noted that as economies and businesses adjust to the headwinds occasioned by the novel Covid-19 pandemic, the bank has been identifying emerging strategic opportunities arising from this and positioning to take full advantage of this to delight customers and create value for stakeholders. “We also remain committed to our prudent risk management practices, as profitable growth and good asset quality remain our priority in 2020,” he stated.
Also speaking, the Group Chief Finance Officer, UBA, Ugo Nwaghodoh, said: “Our profitability ratios are upbeat and indicative of our good earnings quality and cost efficiencies. We recorded a return on average equity (ROAE) of 20 per cent for the period, bolstered by a net interest margin of six per cent and 11.6 per cent growth in net fee and commission income. Amidst the volatile operating environment, the bank recorded a net loan growth of 9.5 per cent whilst maintaining our low to moderate risk appetite.
Remarkably, our operating income grew 12.2 per cent, giving credence to improved operational efficiency across the group, and the increasing contribution of subsidiaries to our earnings base. We are exploring and taking advantage of all opportunities to improve our operational and balance sheet efficiencies, given the prevailing market conditions.”
Given the impressive performance and the dividend paid in 2019, the 2020 Q1 results and the role UBA is playing in helping to lessen the negative effects of the coronavirus pandemic across the African continent, shareholders of the bank showered encomiums on the board and management. For instance, President of Association for the Advancement of the Rights of Nigeria Shareholders, Dr Faruk Umar applauded the group for the contribution of N5 billion ($14 million) to the fight against Covid19, saying that the move was unprecedented and will substantially support governments, as they work to tame the scourge.
Umar hailed the 20 per cent increase in dividend that the bank paid to shareholders. He said: “I am also happy that you fulfilled the promise you made at the AGM last year to pay dividend in Naira and not kobo, by paying N1 per 50 kobo shares to shareholders, in this difficult time. We have seen the first quarter results, and we are particularly happy about the performance of our subsidiaries across Africa.”
Speaking on future outlook, Uzoka said while they hope that a vaccine would be found for the coronavirus, he disclosed that UBA would continually do business in a way to ensure that customers do not have to physically be in the bank.
“We are set to take our business to the customers wherever they are and however they want it. As our Q1 results indicate, we can produce robust results, despite the challenges. We are buoyed by our significant geographic diversification, our historic investment in efficiency and the dedication of our staff. Our commitment to our loyal shareholders is amply demonstrated in our progressive dividend policy.”
According to him, while they made considerable advances in 2019, they do not intend to rest on their oars.
“We will continue to focus on implementing the strategies we have developed for which the execution is at different stages of implementation. We will continue to explore opportunities and devote attention to the execution of the several initiatives that emanate from the on-going transformation agenda. We will always strive to deliver our services in a sustainable way and ultimately be able to predict our customers’ preferences. Our execution plan will continuously leverage technology to simplify and streamline our processes to delight our customers,” Uzoka said.
The GMD said he is proud to say that UBA is blessed with talented employees and best among equals in the industry.
“We have best-in-class strategy, a solid foundation, the right vision, and, above all, employees with the right skillset and attitude to enable us to keep growing the bank for the next 70 years and beyond,” he said.
Also looking ahead, the Group Chairman, UBA, Mr. Tony Elumelu said 2020 is set to be a year of growth in the operating economies as well as for the bank.
“As the trade and financial flows across African countries receive a massive boost from the take-off of AfCFTA, UBA is uniquely positioned to leverage on this to propel growth. In Nigeria, we are also set for an impressive year with a record signing of the national budget before the beginning of the year, creating much better economic prospects for the country from improved budget implementation in 2020.
Our confidence for stellar performance in 2020 is further bolstered by the improved capacity of our executive management team and the transformation agenda currently being rolled out across the bank with the objective of deepening our digital and retail banking capabilities, extending our operational efficiencies through technology leverage and most importantly strengthening our people management capabilities,” he said
“I have no doubt that with this foundation built on the right processes, technology optimization and people strategies, we are on the right path to delivering the UBA of our dreams,” Elumelu added.