UBA: Performance Across Key Metrics Drives Robust Dividend

Kayode Tokede

United Bank for Africa (UBA) Plc reported a remarkable performance across key financial metrics in half year (H1) ended June 30, 2023, to remain one of Africa’s financial institutions contending as the most profitable and shareholders yearning for investment.

The Pan-Africa financial institution in H1 2023 reported exceptional growth in profits and expansion in balance sheet position driven by the management’s effective management amid domestic and global macro economIC headwinds.

UBA’s profit before tax hits N403.65 billion in H1 2023, an increase of 370.7 per cent from N85.75billion reported in H1 2022, while profit after tax stood at N378.24billion in H1 2023, representing an increase of 437.8 per cent from N70.34billion reported in H1 2022.

For the first time, UBA surpassed Guaranty Trust Holding Company Plc (GTCO) and Zenith Bank Plc in profit before tax.

For example, Zenith Bank declared N350.4 billion profit before tax in H1 2023, an increase of 169.5 per cent from N169.5 billion in H1 20222, while GTCO announced N327.4 billion profit before tax in H1 2023, an increase of 219.1per cent from N103.25 billion generated in H1 2022.

 Hitherto, UBA reported N200.88 billion in 2022full year result and accounts and in 2021, a N153.07 billion was declared as profit before tax. Furthermore, its profit before tax was at N127.3billion in 2020 and in 2019, the Group declared N111.3billion profit before tax.

The board and management of UBA proposed an interim dividend of N0.50 per share as against  N0.20  per share in the corresponding period last year, representing a dividend yield of 3.04per cent based on the last closing price of N16.45 per share as of September 15, 2023.

Profit & loss figures

From the profit & loss figures, UBA’s reported N418.28billion net trading and foreign exchange gain in H1 2023 from N9.15billiion reported in H1 2022 and it contributed to the triple-digit growth in profit before tax in the period under review.

UBA’s gross earnings closed H1 2023 at N981billion in H1 2023, an increase of 164per cent from N372billion in H1 2022.

UBA recorded N428.29billion interest income in H1 2023, an increase of 66.4 per cent from N257.36billion in H1 2022 primarily driven by the elevated yield in the fixed income market and increase in key earning assets.

Thus, income from investment securities grew by 80.5 per cent to N190.48 billion in H1 2023 from N105.51 billion in H1 2022 while income from loans and advances improved by 35.6per cent to N178.59 billion in H1 2023.

The Group’s interest expenses grew by 88 per cent to N150.18 billion in H1 2023 from N79.9 billion in H1 2022 following the increase in costs across the group’s funding base – deposits from banks grew by 237.2per cent to N22.28 billion in H1 2023 from N6.61 billion in H1 2022, while interest expenses on Deposits from customers stood at N98.93billion in H1 2023 from N54.96 billion reported in H1 2022.

The group’s non-interest income grew markedly by 544.2 per cent to 505.85 billion in H1 2023 from N78.21 billion in H1 2022, driven by the higher income generated from foreign exchange foreign exchange revaluation gains that rose significantly by 1303.6per cent to N29.24 billion induced by the naira devaluation;  net fees and commission that gained 30.7 per cent to N78.30 billion, and  investment securities trading that appreciated by 79.3per cent to N25.44 billion.

In addition, the group recorded a substantial gain in its other operating income of about N357.71 billion in h1 2023 from N13.15 billion loss in H1 2022, triggered primarily by the N348.43 billion net fair value gain generated on the group’s derivatives holdings relative to the N22.61 billion loss recorded in H1 2022.

Operating expenses (OPEX) increased by 39.8 per cent to N billion in H12023 following the higher costs incurred on personnel expenses (+32.7 per cent to N69.39 billion, AMCON levy (31.2per cent to N40.92 billion), NDIC premium (+32.1 per cent to N11.61 billion, and depreciation and amortization (23.6per cent to N16.12 billion).

Notwithstanding, UBA’s operational efficiency improved – cost-to-income ratio closed H1 2023 at 35.9 per cent from 65.4 per cent- as the group’s operating income rose by 154.4 per cent grew faster than OPEX.

Customer deposit Lift Total Assets

UBA’s total assets stood at N15.38trillion as of June 30, 2023, an increase of 41.7 per cent from N10.86trillion in 2022 full financial year, driven by significant increase in net loans and customer deposits

The group’s customer deposits rose by 42.4 per cent to N11.14trillion as of June 30, 2023 from N7.82trillion in 2022 FY, while net loans hits N4.68trillion as of June 30, 2023, an increase of 36.1 per cent from N3.44trillion reported in 2022FY. 

Customer deposits contributed 72.4 per cent of the group’s total assets as of June 30, 2023 from72.1 per cent  in 2022FY. 

In addition, the financial institution shareholders’ funds moved to N1.7trillion as of June 30, 2023, an increase of 85.7 per cent from N922.1billion reported in 2022FY.

In terms ratios, UBA’s Non-performing Loan ratio increased to 3.3 per cent as of June 30, 2023 from 3.1 per cent reported in 2022FY, while Return on average equity (RoAE) increased to 57.7 per cent as of June 30, 2023 from 17.1 per cent reported in 2022FY.

CEO’s Comment

Commenting on the result, Group Managing Director/ Chief Executive Officer, UBA, Mr. Oliver Alawuba in a statement said, “ Whilst the Group recorded strong double-digit growth in revenues and profits from its operations, the result also reflects the effect of sizeable revaluation gains, arising from the harmonization of currency exchange rates in Nigeria.

“Our reporting currency found a new exchange level at about N756 to 1US$ as of 30 June 2023, compared to N465 at the beginning of the year. The results again demonstrate the benefits of our long-held diversification strategy across Africa and globally. UBA is a genuinely Pan-African business. The growth of our international business, most recently in the UAE, only reinforces this earnings quality

“Our business is on a steady growth trajectory, as we further strengthen our risk management architecture and make technology investments to deliver premium service to our customers. We have also continued to finance landmark projects in critical sectors of the economies where we operate across Africa, facilitate intra-Africa trade with our valuable offerings and provide a versatile last-mile distribution network for Africa-bound donor and multilateral agency funds.

“The three core geographical pillars of our business (Nigeria, Rest of Africa and Rest of the World) aremaking strong contributions to the Group profit, further justifying our global strategy and business positioning across Africa, UAE, France, UK and USA, and demonstrating the benefits of positioning UBAas the financial intermediary for Africa and the rest of the world.

He added that, “Our Board has approved an interim dividend of 50k per share, which represents an over 150% increase over prior year. As we approach the last quarter of the year, the Group remains strategically positioned to sustain the strong performance, consolidating on H1 2023 results, to deliver superior returns to our esteemed shareholders.”