UBA’s Historic Interim Dividend Payout to Shareholders

The interim dividend of N2.00 per share announced by United Bank for Africa  for the half year ended June 30, 2024 is not only commendable but also signals bright  future prospects for shareholders,  writes Kayode Tokede

For the first time in its history, United Bank for Africa Plc (UBA) has recommended an interim dividend of N2.00 per ordinary share of N0.50 each payout for half year(H1) ended June 30, 2024.
The interim dividend payout is on the backdrop of continuous impressive corporate earnings that have  impacted on the financial institution intrinsic fundamentals, and underlying force that has impacted on its stock price on the floor of the Nigerian Exchange Limited (NGX) to N34 per share in its 52-week high.
The board proposed an interim dividend of N2.00 per share as against N0.50 per share paid in H1 2023, translating to a dividend yield of 7.8per cent based on the last closing price of N25.75 per share September 27, 2024.  The N2.00 interim dividend will amount to total payout of N68.4 billion and translates to a 21.6 per cent dividend payout ratio, one of the highest in the industry.

The 7.8 per cent dividend yield ranked UBA as the highest among other listed financial institutions that have declared interim dividend payout to shareholders on the Exchange.
Reporting N316.36 billion profit after tax in H1 2024, the Group’s proposed interim dividend payout brings the shared value with shareholders at N68.4 billion. This also positioned UBA’s dividend payout ratio to 21.6 per cent and it is ahead of other banks.
 UBA in 2023 financial year paid shareholders a final dividend of N2.30 per share (N0.90 per share in 2022).
The proposed final dividend of N2.30 per share and the N0.50 per share interim dividend paid in September 2023, brought  the total dividend for the year to N2.80 in 2023  compared with N1.10 per share total dividend paid in the 2022 financial year.

Capital market analysts have hinted that the N2.00 per share interim payout to shareholders in 2024 is a reflection of the  board and management’s determination to reward shareholders, projecting over N3.00 per share total dividend payout by the financial year ended December 31, 2024.
However, UBA’s H1 2024 audited result and accounts showed resilient amid high inflation, rising debt levels, increasing interest rates, and tighter monetary policies that have created significant pressure on economies globally.
The Group declared N1.37 trillion gross earnings in H1 2024, about 39.6 per cent increase from N981.8 billion reported in H1 2023, driven by 142.6 per cent growth in the net Interest Income line to and 85per cent growth in net fees and commission.
From the profit and  loss figures, UBA’s interest income stood at N1.004 trillion in H1 2024, about 134.3 per cent increase from N428 billion reported in H1 2023, driven by gains recorded across all the major lines.

Specifically, the group generated higher income from investment securities (167 per cent growth to N510.21 billion), loans and advances to customers (92.5 per cent to N343.76 billion), loans and advances to banks (464.3per cent to N101.67 billion), and cash & bank balances (18per cent  to N47.92 billion). Expectedly, the growth in these income lines was induced by a combination of the higher yield environment.
UBA recorded N328.94 billion interest expense in H1 2024, about 119 per cent growth from N150.18 billion in H1 2023
The 119 per cent increase in interest expenses is due to the higher cost incurred on deposits from customers (106.7 per cent to N204.49 billion), borrowings (161.1per cent to N68.65 billion) and deposits from financial institutions (142.7per cent to N54.09 billion).
Consequent to the faster growth in interest income than interest expenses, the group recorded a 142.6per cent expansion in net interest income to N674.62 billion in H1 2024 from N278.1 billion reported in H1 2023.

UBA’s non-interest income stood at N367billion in H1 2024, about 33.6 per cent increase from N553 billion in H1 2023.
However, the stellar growth in interest income was sufficient to offset the decrease in non-interest income, causing operating income to close H1 2024 at N936.59 billion in H1 2024, about 19.5 per cent increase from N783.96billion reported in H1 2023.
But  operating expenses closed higher by 107.9per cent to NGN40.52 billion in H1 2024 from N266.37 billion in H1 2023, triggered by the increasing regulatory costs and persistent inflationary pressures.

Precisely, the group incurred higher costs on personnel expenses (92.9 per cent to N133.86 billion); AMCON levy (71.9 per cent to N70.33 billion); fuel, repairs and maintenance 218.7 per cent to N47.85 billion); and NDIC premium (102.6 per cent to N23.51 billion) during the period.
Accordingly, the group’s cost-to-income ratio settled at 50.2 per cent in the period under review from 37.2 per cent reported in the corresponding period of 2023.
In addition, the Group closed H1 2024 with a profit before tax of N401.58 billion from N403.65 billion reported in H1 2023.
Eventually, the Group’s profit after tax settled at N316.36 billion in H1 2024 from N378.24 billion in H1 2023, amid the higher income tax expense (235.3per cent to N85.22 billion).

Balance sheet position on resilience growth
UBA as at June 30, 2024 performance under review maintained a stronger growth in total assets, driven by its resilience business across 20 Africa where to operate.
The Group reported N28.34 trillion total assets as at June 30, 2024, about 37.2 per cent increase from N20.65 trillion reported in financial year ended December 31, 2023.
Key contributing factors to growth in total assets include 26.1per cent increase in loans and advances to N6.99 trillion as at June 30, 2024 from N5.55trillion reported in 2023, while deposits from customers gained 33.7 per cent to at N23.2trillion from N17.4 trillion recorded in full year ended December 31, 2023.
According to the financial institution, customer deposits continue to dominate the Bank’s funding mix (82per cent), which demonstrates combined efforts at deepening its wallet share of the Corporate, Commercial, and Retail business.
“Low-cost deposit instrumental to achieving a modest cost of funds,” the Bank added. 
The group’s shareholders’ funds remained robust at N2.99 trillion, an increase of 47 per cent from N2.03 trillion in December 2023, reflecting its strong capacity for internal capital generation.

Key ratios
UBA’s Capital Adequacy Ratio (CAR) stood at 28.3 per cent at end of H1 2024 from 32.6 per cent reported December 2023, while liquidity ratio moved from 64.1 per cent in 2023 to 65.8 per cent as of June 30 2024.
Non-Performing Loan (NPL) slipped to 6.2per cent as of June 30 2024 from 5.8 per cent in 2023   on account of further classification of some exposures.

Conclusion
Commenting on the results, the Group Managing Director/CEO, UBA, Mr. Oliver Alawuba, had  stated that the economic environment in H1 2024 remained challenging across the regions where it operates.
According to him, UBA in H1 2024 delivered strong double-digit growth across high-quality and sustainable revenue streams.
“This performance reflects our disciplined execution of strategic goals, focusing on balance sheet expansion, transaction banking, and digital banking businesses across our markets,” he said.

On building an even better bank, he said: “We continue to invest in building a better bank through improvements in People, Processes, and Technology.”
He revealed that the Pan-African financial institution recognised that  people are its greatest asset and this year alone, it has promoted over 2,000 employees and paid the 2023 bonus to eligible staff across Nigeria and UBA Africa (ex-Nigeria).
 He also said the group has improved on its process amid its smart automation initiatives simplifying service delivery.
“For instance, our website now offers self-service options for BVN and NIN linkage, account updates, card blocking, and more. Additionally, a comprehensive review of our procurement processes has led to significant cost optimization.”
On technology investments, he added: “Our ongoing investments in technology are enabling us to deliver superior customer experiences, drive operational efficiency, and unlock new growth opportunities.”

He stated that UBA’s strategic partnerships remain central with its growth strategy.
“In 2024, UBA was one of six banks to sign a Memorandum of Understanding(MoU) with the Pan-African Payment Settlement System (PAPSS), enhancing cross-border trade and financial integration across Africa. We successfully deployed instant payment systems in five African countries, with more to follow.
“Our collaborations with telco partners have also expanded, with funds under management now exceeding $1 billion. These partnerships enable us to deliver impactful solutions such as micro-lending and savings products, enhancing financial inclusion.”
Looking ahead, he added: “We enter the second half of 2024 from a position of strength. Our proven resilience, strong capital position, and market-leading capabilities position us to continue our growth trajectory. Execution will remain our driving force as we focus on market leadership and delivering excellent customer experiences at every touchpoint.”

Meanwhile, analysts at Cordros Research in a report on UBA’s H1 2024 result and accounts stated:  “We like the sturdy growth in the group’s core income line, as the elevated interest rate environment underpinned interest income growth.
“The preceding was enough to offset the lower non-funded income and surge in operating expenses amid the 60.9per cent decline in loan impairment charges.
“Looking ahead, we expect the group to close the year positively, as the high-interest rate environment and improved risky asset creation will remain a catalyst for earnings growth.
“Investors have reacted very positively to the result, with the stock currently trading at limit up. YTD, UBA is up +10 per cent, compared to the NGX Banking index (+4.1per cent) and the broader All-Share index (+31.7per cent).”