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UBA’s Resilience Boosts Profitability

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United Bank for Africa has continued to show resilience in the face of economic downturn as shown in its recently released audited results for the half year period ending June 30, 2019.

UBA is one of the few pan African banks with tentacles spread across 20 countries of the continent as well as offices in three global financial centers: London, Paris and New York.

While growth slowed and inflation rose in many of its countries of operation, the bank has been able to pull a double digit growth in profitability.

Its audited first half result published on the Nigerian Stock Exchange showed impressive growth across key performance indices as well as a significant contribution from its African subsidiaries.

The results showed an uptick in its gross earnings which was up by 14 per cent to stand at N293.7 billion, from N257.9 billion in 2018, in spite of the increasingly unpredictable environment witnessed in some of its countries of operations.

The pan African financial institution delivered double digit growth in its profit before tax which rose by 21 per cent to N70.3 billion for the half year to June 2019, up from N58.1 billion recorded in the similar period of 2018.

Profit after tax climbed 29.45 per cent up to N56.7billion, as against N43.8 billion in the previous year, while earnings per share increased by 31.71 per cent from N1.23 to N1.62. Profit for the first half of the year, translated to an annualised return on average equity of 21.7 per cent.

The improvement in profitability of the financial institution is despite a moderate rise in its interest income which had risen by 9.4 per cent in the review period from N187.29 billion to N204.885 per cent. Its interest expense rose by 24.3 per cent from N76.21 billion in the half year period of 2018 to N94.76 billion at the end of the 2019 half year.

Its impairment on loan losses had declined significantly by 53.7 per cent from N6.3 billion last year to N3.12 billion. The banking group however made more profit from trading and foreign exchange income which recorded a 60.1 per cent increase.

Notwithstanding, the weak economy and risk exposure, with all sectors of the system struggling due to the harsh economic environment in which companies operate, the Non-Performing Loan ratio dropped to 5.62 per cent from 6.45 per cent position as at the full year 2018.

As at June 30, 2019, the total assets of the bank grew by 4.8 per cent crossing the N5 trillion mark to N5.10 trillion. Customer deposits also rose by 4.8 per cent to N3.51 trillion, compared to N3.35 trillion as at December 2018.

This growth trajectory underscores UBA’s market share gain, as it increasingly wins customers through its revitalized customer service culture coupled with innovative digital banking offerings. The bank’s shareholders’ funds remained strong at N542.5 billion, reflecting its strong capacity for internal capital generation.

In line with its culture of paying both interim and final cash dividend, the board of directors of UBA declared an interim dividend of 20 kobo per share for every ordinary share of 50 kobo each held by its shareholders. The bank’s Price to Earnings ratio is 0.88x, while investors’ waiting period has dropped significantly from 1.57x as a result of growth in its earnings power and general down market condition.

Analysts say that this result emphasises the capacity of the Group to deliver a strong performance through economic cycles in spite of the overall challenging business environment.

Speaking on the results, the group managing director and chief executive, UBA, Mr Kennedy Uzoka said, “I am pleased with the half year performance of the Group, having delivered 14 per cent growth in gross earnings and 21 per cent growth in profit before tax.

“Despite the subdued yield environment in some of our large markets, we achieved a nine per cent growth in interest income and defended the net interest margin,” Uzoka said. “We also achieved a 39 per cent growth in our electronic banking revenues, as we broaden and deepened our digital banking play across Africa.

“Revenues from our remittance and funds transfer businesses grew 69 per cent and 53 per cent respectively. All these factors attest to the efficacy of our strategies and the resilience of our business model.”

He further stated, “I am very optimistic that the ongoing Group-wide transformation program, will in the quarters ahead, enable the Bank deliver substantial operational efficiencies and best-in-class customer service, which will ultimately boost earnings. We sustained our asset quality with the NPL ratio down to 5.62 per cent, from 6.45 per cent as at 2018 full year. We will continue to adopt best practice standards to grow and manage the portfolio in the quarters ahead.”

Also speaking on the results, the Group CFO of UBA, Ugo Nwaghodoh said, “We had a strong start in the year given the prevailing macroeconomic environment across our various markets.  There is better diversification in profit contribution as our banking subsidiaries across Africa contributed 38 per cent of the profit before tax, whilst our recently repositioned UK business contributed four per cent. We expect this dispersion to continue, as the subsidiaries consolidate on their share of the various markets.

“I am particularly delighted that the key ratios are trending in the right direction. The net interest margin is trending upwards and will continue to improve as we responsibly grow the risk asset portfolio and realign the funding mix to lower our cost of funds.

“The cost-to-income ratio trended down to 60 per cent with our focus on balance sheet and operational efficiencies which should enable us deliver our medium term CIR target. Capital adequacy ratio increased to 28 per cent from 23.6 per cent in December 2018, providing a very strong buffer for asset growth.”

United Bank for Africa was founded 70 years ago in Nigeria and today, operates in 20 African countries and in the United Kingdom, the USA and with presence in France. UBA serves over 17 million customers across the globe with more than 1000 branches and touch points. In 2018, the bank received the award of Africa’s Best Digital Bank by the Banker’s.

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