S&P Global Ratings affirmed its long- and short-term global scale issuer credit ratings on Nigeria-based United Bank for Africa PLC (UBA) at ‘B/B’ outlook is stable.
The rating agency said it believed the Nigerian lender will continue to maintain sound earnings and asset quality over the next 12 months, despite the sluggish economy in Nigeria and the high economic risk in other parts of Africa where the group operates.
The affirmation reflects our view that the group will maintain its top-tier competitive position in the Nigerian banking sector. UBA benefits from a good franchise in the corporate and retail segments in Nigeria and increasing geographic diversification, according to the S and P Global Ratings Agency report.
“Overall, we think the group has an adequate business position. Furthermore, we believe that the group will display relatively stable asset quality and good earnings generation over the next 12 months,” said the report.
(UBA) posted third-quarter earnings that beat analysts’ estimates, fuelled by improved yield on loan book and money market instruments.
For the first nine months through September 2017, UBA’s net income spiked by 23.04 percent to N60.92 billion, ahead of the N54 billion estimates of 8 analysts surveyed by BusinessDay.
Interest income surged by 30.11 percent to N238.82 billion in the period under review, from N182.98 billion as at September 2016.
As a result of improved earnings, net interest margins moved to 7.30 percent in the period under review, from 6.70 percent as at December 2016.
Analysis of UBA’s third quarter results showed that interest income from loans and advances and term bonds was up 48.71 percent to N113.20 billion while treasury bills (under investment securities) surged by 114.36 percent to N47.19 billion.
UBA’s non-interest income increased by 18.83 percent to N84.60 billion, thanks to 81.15 percent surge in fixed income trading securities to N28.94 billion as the lender continues to make a giant stride in the electronic trading space.
“We assess UBA’s risk position as adequate, which reflects our expectation that the group will exhibit broadly stable asset quality in the next 12 months. The group’s cost of risk increased to 2.1% in 2016 compared with 0.5% in 2015, before declining to 1.2% at end-June 2017,” said the S and P report.
UBA has been maintaining a steady growth in earnings in the past two years amid a volatile and tough operating environment.
Little wonder investment house CSL Research Limited has place a ‘Buy’ ratings on the lender’s stock, with a target price of N10.19 from a current price of N9.23.
UBA’s shares have gained 154.84 percent since the start of the year, while market capitalization stood at N328.81 billion as at November 17.
The stable outlook on UBA reflects that on Nigeria and our expectation that the group’s financial profile will remain broadly stable in the next 12 months.We would lower the ratings on UBA if we lowered the rating on Nigeria or observed a higher-than-expected deterioration in the group’s assets quality indicators over the next 12 months, according to the credit ratings agency.
BALA AUGIE
