United Bank for Africa (UBA) Plc offers its clients a wide range of corporate, investment, and personal banking products and solutions.
The lender is one of the biggest and the most profitable in Nigeria.
The bank was incorporated on 23, February 1961 to take over the business of BFB. UBA eventually listed its shares on the Nigerian Stock Exchange (NSE), in 1970 and became the first Nigerian bank to subsequently undertake an Initial Public Offering (IPO).
UBA became the first sub-Saharan bank to take its banking business to North America when it opened its New York Office (USA) in 1984 to offer banking services to Africans in Diaspora.
The bank just released its audited third quarter results for the period ended September 30th 2015, showing a strong and positive performance across most indicators, despite increased operating expenses stoked by regulatory induced charges.
The savvy and astute management of the bank were able to grow key margins and improved ratios despite the prevailing tight liquidity and harsh regulatory environment that analysts had expected would dampen earnings of lenders in Africa largest economy.
Enhance yields on assets drives gross earnings
Gross earnings for Q3 2015 grew by 17.31 percent to N247.20 billion from N210.75 billion the same period of the corresponding year of 2014; driven primarily by improving performance of the its African platform, as well as growth in transaction volume, increase share of customers’ wallet and enhance yields on assets.
The bank grew interest income by 17.19 percent to N175.09 billion in September 2015 as against N149.41 billion last years. The growth in interest income is attributable to a jump in interest earnings on loans and advances in the review period.
However, interest expense moved by 8.19 percent to N72.97 billion in 2015 compared with N67.45 billion in 2014. The increased interest expense was due to the hike in interest rate by the central bank.
Analysts say the recent decision by the Abuja based bank in relax its tightening stance will culminate in reduced interest expense starting from 2016.
Nigeria’s central bank reduced the Monetary Policy rates to 11 percent from 13 percent previously held for the first time in six years. The Abuja based bank also reduced the Cash Reserve Requirement (CRR) to 20 percent from 25 percent.
Analysts beckoned the new rate relation will increase liquidity to as much as N1trillion, increase lending to the real sector of the economy and compliment government spending on infrastructure.
UBA Group non-interest income moved by 24.58 percent to N102.11 billion in September 2015 as against N81.96 billion the preceding year.Net Commission income was up by 12.16 percent to N40.57 billion in 2015 as against N36.17 billion last year. Net trading income jumped by 23.25 percent to N19.88 billion in 2015 from N16.12 billion last year.
The bank said the growing fees from its trade and remittance services, e-banking, credit-related fees and improved treasury management compensated for the regulatory-induced weakness in FX trading income.
Increased profits despite rising operating expenses
UBA Group pretax profit grew by 35.71 percent to N57.36 billion in September 2015 from N42.54 billion in September 2014. Net income followed the same trajectory as it increased by 45.45 percent to N48.55 billion in September 2015 compared with N33.62 billion in September 2014.
It should be noted that the bank recorded these impressive performances at the bottom lines despite an 11.91 percent increase in operating expenses to N104.60 billion in September 2015 as against N93.46 billion last year. Operating profit rose by 20.98 percent to N167.42 in September 2015 as against N138.38 billion last year.
The bank said on its website that the growth in profitability reflects the simultaneous benefit of improved earnings generation and consolidation in its markets.
Strong efficiency level amid regulatory induced costs
For the Q3 period 2015, UBA’s cost to income ratio fell to 64.55 percent in September 2015 compared with 67.53 percent in September 2014. Net margin another measure of profitability and efficiency increased to 19.63 percent in 2015 from 15.95 percent in 2014. Pretax margin moved to 23.20 percent in 2015 as against 20.18 percent in 2014.
The lower CR means a bank is efficient in keeping costs at reasonable level while meeting its strategic objective of growing .
The bank also recorded improved net interest margin (NIMs) despite the liquidity squeeze and attendant rise in funding cost. Higher NIMs reflect enhanced asset pricing.
Naira devaluation impacts on total assets
For the first nine months through September 2015, UBA Group grew total assets by 3.98 percent to N2.87 trillion from N2.76 trillion last year. The 3 percent growth in total assets was caused by the devaluation of the naira.
Nigeria central bank has devalued the naira twice since November 2014 as it seeks to stabilize the economy reeling from a more than 60 percent drop in the price of oil which account for 2/3 of government revenue and 90 percent of foreign exchange earnings.
The naira was unchanged at 199.05 per dollar and has been all but fixed at 198 to 199 since early March. Forward prices suggest it will weaken to 241.25 in a year.
“The Group will remain cautious as it continues to leverage its strong funding base to grow the asset base; deposits accounts for about 80 percent of the balance sheet funding, the company said on its website”
The Nigeria lender’s loans and advances to customers fell by 5.68 percent to N1.01 trillion in 2015 from N1.07 trillion in September 2014. Loan to deposit ratio which measures the aggressiveness to lending reduced to 46.08 percent in 2015 as against 49.53 percent last year. Deposit to customer increased by 0.46 percent to N2.17 trillion in September in 2015 from 2.16 trillion last year.
“We have continued to sustain our financial performance in 2015, leveraging our unique pan-African platform and the strength of our committed work force in gaining competitive edge in the market place” said Phillips Oduoza, the Group Managing Director/CEO, UBA Plc.
He also attributed the impressive performance of the Bank to enhanced balance sheet efficiency and improving extraction of value from the Bank’s channels. “We have also maintained our discipline on how, where and with whom we do business and I am happy with the results, as reflected in our earnings and asset quality” said Oduoza.
The adaptation of a complete and integrated approach to risk management by the management of the bank has culminated in reduced Non performing Loans (NPL) amid exposure to oil and gas.UBA maintained a NPL ratio of 2.1 percent and 0.6 percent cost of risk. These ratios are among the lowest in the banking industry.
UBA Group led a consortium of local banks to facilitate a $1.2 billion syndicated facility for the National Oil Company in Nigeria, NNPC. Further reflecting the strength of the Bank, Global Credit Rating (GCR) affirmed UBA’s AA- (LCY) and BB- (FCY) credit ratings.
With a 20 percent capital adequacy ratio and 49 percent liquidity ratio, UBA Group will continue to balance the quest for earnings and growth, with the best sustainability principles.
“We are committed to sustaining our improved profitability; as we explore latent opportunities and adequately position our business to take full advantage of emerging opportunities in Africa, the bank said on its website
The UBA group is a leading financial institution in Africa, operating in 19 African countries, as well as New York, London and Paris. The Group provides a suite of banking services to over 8 million retail and corporate customers the continent and the rest of the world.
UBA group share price closed at N3.61 on the floor of the exchange while market capitalization closed at N139.67 billion.
BALA AUGIE
