With N403.65bn PBT, UBA Makes History as Most Profitable Bank in Nigeria

Reaping bountiful from the Central Bank of Nigeria (CBN) unification of foreign exchange, United Bank for Africa (UBA) Plc in half year ended made history as the most profitable financial institution in Nigeria, ahead of Zenith Bank plc, Guaranty   Trust Holding Company Plc (GTCO) and Access Holdings Plc. Kayode Tokede writes on what contributed to UBA’s outstanding H1 2023 results and 2023 outlook.

UBA reported N403.65 billion Profit Before Tax (PBT) in half year ended June 31, 2023, representing an increase of 370.7 per cent from N85.75 billion reported in the corresponding period of 2022, while profit for the period stood at N378.24 billion in H1 2023, an increase of 438 per cent from N70.34 billion reported in H1 2022.

The reported N403.65 billion PBT is the highest declared by UBA in its history, making the Pan-African financial institution most profitable and ahead of its competitors in the banking sector.

Zenith Bank before now was the most profitable bank in Nigeria, followed by GTCO.

However, Zenith Bank in H1 2023 declared N350.36billlion, an increase of 169.5 per cent from N130.01 billion in H1 2022, while GTCO announced N327.4billion PBT in H1 2023, a growth of 217 per cent from N103.2billion reported in H1 2022.

In addition, Access Holdings in the period under review announced N167.6 billion PBT as against N97.79 billion reported in corresponding period of 2022.   This is an increase of 71.4 per cent growth in Access Holdings’ profit before tax.

UBA in 2022 full financial year declared N200.88 billion PBT from N153.07 billion in 2021, and it was behind Zenith Bank, and GTCO that announced N284.65 billion and N214.15 billion in 2022 financial year, respectively. 

UBA over the years has maintained a trajectory in profit, and effective management that has impacted on shareholders’ return on Investment (ROI) and stock price appreciation on the Nigerian Exchange Limited (NGX).

The group recorded double and triple-digit growth across its major income lines, as it continued to show substantial progress in increasing the contribution and market share from its subsidiaries in Africa and globally.

Specifically, at the end of the first two quarters of the year, and despite the tough global macroeconomic backdrop and geo-political challenges in Africa.

The annualised Return on Average Equity (RoE) of UBA, thus, increased to  57.7 per cent in  H1 2023, ahead of Zenith Bank that closed H1 2023 att 36.9 per cent, but behind GTCO with RoE of 61.4 per cent in  H1 2023. With the growth in profit, UBA joined Zenith Bank, GTCO to declare interim dividend of 50k per share UBA’s interim dividend when compared to 20k last year represents an annualized interim dividend yield of 7.2 per cent.

The strong contributions to Group profit is the operations in 20 African countries, UBA America, UBA UK, UBA UAE, UBA France. Demonstrating once again the effectiveness of UBA’s global strategy and positioning as the financial intermediary for Africa and the rest of the World – delivering on the Elumelu strategy.

What Made UBA Outstanding

Whilst the Group recorded strong double-digit growth in profit before tax and profit from its operations, the result also reflects the effect of sizeable revaluation gains, arising from the harmonization of currency exchange rates by the Central Bank of Nigeria (CBN).

UBA show its Net trading and foreign exchange gain at N418.3billion in H1 2023 from N9.15billion reported in H1 2022.

The local currency found a new exchange level at about N756 to dollar as of June 30,  2023, compared to N465 at the beginning of the year.

The Group’s gross earnings sttod at N981.8billion in H1 2023, representing an increase of 163.7 per cent from N372.34 billion reported in H1 2022. The reported N981.8 billion gross earnings of UBA is higher than that of Zenith bank and GTCO.

THISDAY analysis revealed that Zenith bank declared N967.26 billion gross earnings in H1 2023 from N404.76 billion in H1 2022, while GTCO reported N672.6 billion gross earnings in H1 2023, an increase of 181 per cent from N239.3 billion in H1 2022. For Access Holdings, its gross earnings stood at N940.31 billion, representing an increase of 59 per cent from N5911.8billion in H1 2022.

In addition to UBA’s profit & loss figures, it 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 237.2 per cent to N22.28 billion in H1 2023 from N6.61 billion in H1 2022, while interest expenses on Deposits from customers stood at N98.93 billion 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 N505.85 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 1303.6 per 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 79.3 per 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.

Customer deposit contributes to total assets

UBA’s total assets stood at N15.38 trillion as of June 30, 2023, an increase of 41.7 per cent from N10.86 trillion 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 N11.14 trillion as of June 30, 2023 from N7.82 trillion in 2022 FY, while net loans hits N4.68 trillion 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 N1.7 trillion 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.

Analysts View

According to analysts at Cordros Research, the group’s H1  2023 result mirrored the earnings growth across its tier 1 peers, supported primarily by the foreign exchange liberalisation implemented during the period.

“We envisage this strong earnings growth to remain by year-end, driven by the combined impact of the elevated interest rates and naira devaluation in the period,” the firm added.

The Chief Executive Officer, Highcap Securities Limited, Mr. David Adnori said UBA, among other Tier-1 were the major buyer and seller of foreign exchange when the CBN suspended BDC operators.

According to him, “Most Nigerian banks have excess foreign exchange currency and when the CBN unified the market in early June, automatically their savings appreciated and it resulted in extraordinary foreign exchange gain in the half year ended June 30, 2023. The unification of foreign exchange by CBN crystallized and it was in the favour of UBA, among other banks.”

Adnori noted that the H1 2023 performance of these banks cannot be sustained, stressing that it was extraordinary earnings due to naira revalued.

He noted that the market has been normalized and Nigeria has seen the true value of the naira.

He added, “Nigeria economy has adjusted and these banks’ performance is not sustainable. However, because of the increase in net asset value, it has increased their working capital to scale up business and they can also absorb any shock.”

The 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 $1 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) are making 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 UBA as 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 150per cent 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.”