UBA’s N239bn Rights Issue Offers Shareholders Opportunity to Invest for Improved Returns

United Bank for Africa (UBA) Plc on Friday, November 15, 2024 commenced its N239.4billion Rights Issue, an opportunity for existing shareholders to expand their holdings in Africa’s Global Bank with customer touch points in 20 African countries, international presence in New York, London, Paris and Dubai, writes  Kayode Tokede

On November 15, 2024, UBA commenced its N239.4 billion rights issue and it is expected to close December 24, 2024.  The Pan-African financial institution is offering to existing shareholders 6,839,884,274 ordinary shares of 50 kobo each at N35 per share.
This offer is on the basis of one new share for every five existing shares already  held by shareholders as of November 5, 2024. The rights issue is part of a broader N400 billion equity shelf programme approved earlier in 2024.

The management has budgeted N94.01 billion or 40 per cent of the proceeds amount on expansion of its lending portfolio; N70.51billion or 30 per cent on technology & digital transformation and N70.51 billion or 30 per cent on business network expansion and upgrade.
Of the N94.01billion on expansion of its lending portfolio, the management said it planned to utilise N15.98billion to grow the retail lending portfolio; N19.74billion to support SMEs and Entrepreneurs; N31.96 billion on infrastructure lending and N26.32billion on corporate and institutional portfolio.
As gathered by THISDAY, the stock price of UBA reached 52-high of N35.05 per share and 52-low of N18.9 per share this year.

The stock price of UBA has appreciated by nearly 29 per cent year-to-date (YtD) to N32.35per share as of November 22, 2024 from N25.10 per share it closed 2023.
However, the offer gives existing shareholders the opportunity to purchase additional shares in proportion to their current holdings as the financial institution is working in compliance with the revised minimum capital requirements for Nigerian commercial banks announced by the apex banking regulator in Nigeria – the Central Bank of Nigeria (CBN) earlier this year.

With an additional 6,839,884,274 ordinary shares, UBA after the offer is expected to have 41,039,305,642.00 outstanding shares on the Nigerian Exchange Limited (NGX) and market capitalisation around N1.44 trillion (considering the price at N35.00 per share).
UBA as of September 2024 declared N1.31 trillion retained earnings from N919.87billion reported in 2023 full year (FY), while its “other reserves” stood at N2.04trillion as of September 30, 2024 from N926.5billion in 2023.
From the balance sheet position, it closed September 2024 with a total equity of N3.6trillion, about 76.6per cent increase from N1.96trillion reported in 2023FY.

The offer is expected to further strengthens regulatory capital and positions the Group for growth in lending, digital banking and unique diversified global banking strategy. Also it will enhance shareholders’ return amid growing profit and stock price appreciation.
UBA has consistently demonstrated growth and resilience, evidenced by the Group’s strong financial performance and recent recognition within the industry. UBA’s progressive dividend policy, which has seen an increase of 14.8per cent in annualised dividend yield has demonstrated the Group’s ability to reward shareholders consistently.

The Africa’s global bank for the first time in its history, paid shareholders an interim dividend of N2.00 per ordinary share of N0.50 each payout for half year(H1) ended June 30, 2024.
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 amounted 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.

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.
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.”
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.”

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.
The financial institution this year has demonstrated resilient amid domestic and foreign macroeconomy challenges.
In the latest unaudited financial statement, UBA announced a 20 per cent growth in profit before tax to N603.48 billion in nine months ending September 2024, from N502.09 billion recorded in nine months of 2023.  Similarly, profit after tax also rose remarkably by 16.9 per cent from N449.26 billion recorded a year earlier to N525.31 billion in nine months of 2024.

On the offer to shareholders
In his letter to the shareholders, the Group Chairman of UBA, Mr. Tony Elumelu, noted that following the resolution of the  shareholders at the Annual General Meeting held in May 2024, authorising the establishment of the N400 billion Equity Shelf Programme, UBA will embark on a Rights Issue, as the first step in its broader capital raising programme.
“UBA’s Rights Issue aims to raise N239.4 billion, through the issuance of new Ordinary Shares to our shareholders. The primary objective of this Rights Issue is to further strengthen our capacity to take advantage of growth opportunities and sustain our leadership in the banking industry,” Elumelu said.
Explaining the use of proceeds, the Group Chairman noted that, beyond regulatory compliance, the funds will expand the Group’s lending capacity, investment in digital infrastructure, support sustainable business practices and expand the Group’s African operations.
Elumelu also highlighted how UBA is driving economic growth across Africa.
 “Our historic partnership with the Africa Continental Free Trade Area (AfCFTA) Secretariat, where UBA pledged up to US$6 billion in financing over the next three years to support eligible SMEs across Africa underscores our commitment to fostering economic development.”

Operating Structure
UBA operates in 20 African countries and four  international financial centres. Its African operations are: UBA Ghana Limited; UBA Cameroun (SA); UBA Cote d’Ivoire; UBA Liberia Limited; UBA (SL) Limited; UBA Uganda Limited; UBA Burkina Faso; UBA Benin; UBA Kenya Bank Limited; UBA Chad (SA); UBA Senegal (SA); UBA Tanzania Limited; UBA Gabon; UBA Guinea (SA); UBA Congo DRC (SA); UBA Congo Brazzaville (SA); UBA Mozambique (SA); UBA Mali; UBA Zambia Limited and UBA Plc (Nigeria). The International operations are:
UBA America,  UBA UK, UBA France, and UBA UAE. The UBA African banks are engaged in the business of banking and provide corporate, commercial, consumer, and international banking services, trade services, cash management, and treasury services.

UBA UK Limited is a UK bank regulated by the Prudential Regulation Authority and the Financial Conduct Authority and received its banking license in March 2018. Prior to gaining its bank status, the company was authorised in the UK to undertake investment business and was originally incorporated on September 25, 1995.
The bank is primarily engaged in wholesale banking, with a focus on facilitating trade and treasury flows between Europe and Africa. The bank offers trade finance, corporate banking, and treasury solutions to corporate and institutional clients. Also, the Bank operates New York and Dubai-DIFC offices to support trade with Africa and the Americas on one hand and Africa and Asia on the other hand.
UBA Pensions Custodian Limited obtained an operating license on 20 February 2006 and commenced operations in Nigeria on 3 May 2006. It principally operates as a custodian of pension assets, to hold and deal in such assets as directed by the Pension Fund Administrators and in line with regulations of the National Pension Commission in conformity with the Pensions Reforms Act 2004 and as amended in 2014.