UBA’s Strong Profitability In Face Of Challenging Business Environment

With the increased Cash Reserve Requirement (CRR) there has been a modest expectation of profitability by banks in Nigeria for the 2022 full year. The Monetary Policy Committee of the Central Bank of Nigeria had at the end of its September 2022 meeting raised the CRR from 27.5 per cent to 32.5 per cent.

Although many of the banks listed on the stock exchange are yet to release their full year audited financials for 2022, many of those that have released have posted a better than modest return. One of such is United Bank for Africa (UBA) which had posted a 43.47 per cent improvement in its profit for last year, compared to what it made in 2021.

The 2022 audited financials of the pan-African Bank released on the Nigerian Exchange Limited (NGX) showed resilience in the face of a challenging business environment. The bank had reported a profit after tax of N170.2 billion for 2022 financial year compared to N118.7 billion that it recorded in 2021.

UBA Group had reported gross earnings of N853.2 billion at the end of the 2022 financial year, which is a 29.2 per cent improvement over N660.2 billion which it earned in 2021. Net interest income had risen by 19.8 per cent to N379.48 billion, while profit before tax rose by 31.2 percent growth, to close the year under review at N200.8 billion, rising from the N153.01 billion recorded at the end of the 2021 financial year.

Shareholders’ Funds of the banking group had risen to N922.1 billion, as at December 2022, a 14.6 per cent compared to prior year, as total assets rose by 27.2 per cent, crossing the N10 trillion mark, to close at N10.9 trillion in December 2022, up from N8.5 trillion in 2021.

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Lending to customers was on the uptick as UBA Group’s loan book rose by 21.4 per cent to N3.4 trillion in 2022, just as customer deposits improved by 22.9 per cent to N7.8 trillion, compared to the N6.4 trillion recorded in the corresponding period of 2021.

The 2022 financial statement also showed that UBA Group cost-to-income ratio dropped to 59.2 per cent, from over 60 per cent in prior year, pointing at the Group’s improving efficiency. Consequently, the banking group had proposed a final dividend of 90 kobo for every ordinary share of 50 kobo, for the financial year ended December 31, 2022.

The final dividend which is subject to the ratification of the shareholders during its Annual General Meeting (AGM) coming up on April 27, 2023, would bring the total dividend for the year to N1.10 per share, as the Bank had paid an interim dividend of 20 kobo, based on its audited 2022 half year results.

Commenting on the banking group 2022 financials, the group managing director and chief executive of UBA Group, Oliver Alawuba, said notwithstanding the tight and challenging operating environment, UBA continues to deliver significant performance.

“The Group delivered record headline earnings (+29.2%) and profitability (+31.2%) amid significant headwinds in markets where we are present and a heightened global risk environment.

“Our record earnings, growth, and robust capital levels supported higher returns for the shareholders.  The Group is on course to achieve its strategic goals, and we are confident we will deliver our targets.

“We have navigated unprecedented macroeconomic headwinds and made significant gains in our diversification strategy and Customer 1st philosophy as we build resilience in our operations across Africa and the Rest of the World to support the mission of providing superior value to our stakeholders.

“The Group’s profit after tax increased by 43.5 per cent to N170.3 billion, with underlying growth in our key income lines and moderation in our cost of fund, resulting in robust growth of 14.6 per cent in the Group’s Shareholders’ Funds and stronger liquidity. We continued to sharpen our risk management structure and practices to align with evolving risks,” Alawuba said.

On the outlook for 2023, Alawuba said, “we are strategically positioned to increase our market share in our countries of presence, with expansion to Dubai, United Arab Emirates and strong growth of our digital banking and payment businesses, which is pivotal to the evolving cashless economy in Nigeria.

“We strive to deliver increasingly attractive returns to our shareholders and continued positive impact in the geographies and economies in which we operate.”

UBA’s executive director, Finance and Risk Management, Ugo Nwaghodoh, said going by this recent performance, the bank remains on strong footing and is comfortably positioned to take on more opportunities in Nigeria, Africa and beyond.

“UBA Group’s 2022 full-year performance was buoyed by strong balance sheet growth and improvement in Net interest margin, as Group’s Total Assets and customer deposits grew 27.2 per cent and 22.9 per cent respectively, whilst NIM grew to 5.61 per cent from 5.57 per cent.

“The continuous rejigging of the Groups’ risk management approach resulted in moderation of the NPL ratio, from 3.6 per cent to 3.1 per cent.  The Group continued to rely on lower cost funds, further reducing its cost funds to 2.1 per cent.

“We are delighted with the strategic progress we have made in FY22 riding on our customers’ trust, the dedication of our people, and the support of our wider partners and stakeholders. The bank remains committed to its business development drive, prudent risk management practices, and we are optimistic to deliver best value for our stakeholders in the days ahead,” he noted.