With a game changer from non interest income, UBA sustains the momentum from its second quarters ,beats its closest rivals to gain leadership in profitability
The financial year 2023 promises to be the best year for the United Bank Africa, a bank with a vision of attaining the status of African biggest brand ; with virtually all its performance indicators pointed sharply northward ,UBA has indicated its preparedness to gain a powerful turnaround and live up to its vision of African global bank.
Its results in the current year had dabbed off any doubt over its resolve to lead the pack in terms of profitability. Its profit after tax skyrocketed by 287.2% in the third quarter of 2023 to hit N449.30b from N116b in the corresponding period of 2022
The indication of this is that UBA has ,for the first time in the recent time , overtaken Zenith Bank which had dominated and led that industry with the biggest profit after tax as it recorded N434 b at the end of third quarter of 2023 to stay behind UBA.
The foundation for the latest brilliant performance was laid earlier in the first half of the current financial year when its profit after tax moved swiftly upward to N378.24b from N70.34b , an increase of 437.8 percent
The above scenario is leaving glimpses of what is possible within this bank at the end of the current financial year and has continued to raise the investors and the financial world’s level of expectations concerning UBA’s full year results for 2023.
The bank is not likely disappoint going by the impressive fundamentals. It did not only overtake its closest rivals in terms absolute profitability figure but also in terms of cost efficiencies , it has proved its prowess . Analysts believed the management of costs by its leadership is the key strategic capability driving its current exploits. UBA ,indeed, deployed its core competencies on its resources to achieve better values for money in the perood under review ; it demystified inclement macroeconomic environment and expanded its profit exponentially to lead the pack in the third quarter of 2023.
To achieve the above feat in profitability ,UBA, had gross earnings in the third quarter of 2023 expanded by 115.2% and wrenched up bottom line with a deft application of management’s experience beginning from leveraging net interest income.
By hauling up net interest income by 56.8 percent to N443.08billion from N282.51billion, UBA displayed its capability to gain better spread or the difference between the rates at which the funds are borrowed and the rate at which they are invested or loaned out .Within this period , it took the bank N33.50k to get N100 interest earned income compared to N35 in the second quarter . Also , while its interest expenses increased by 88% in the second quarter of 2023 compared to the corresponding period in 2022 , in the third quarter of 2023 it increased by 62%.
Not only that .The volume of loan deployed helped in no small way to boost its interest income .The bank’s Net loans jerked up heavily by 47.2% to N5.07trillion from N3.44 trillion , led partly to a 58.6% increase in its interest income at N666.29b from N420.23b
The above strategic move manifested on its increased in total assets and indicated the management’s larger heart for risk taking which also confirms the critical position of loan to its profitability target . During the period under review , its total assets grew by 49.5 percent inching up to N16.24trillion from N 10.86trillion .
Increasing its loan portfolio is strategic ., Loan is the highest earning asset in the balance sheet , contributing materially to the achievement and fulfilment of the objectives of profitability by providing higher return than other financial assets ; moreover, it helps the bank management to satisfy the legal and regulatory objectives of the monetary authorities , a key element in the creation and maintenance of depositor relationships ,particularly with the business firms and a vehicle through which management attempts to satisfy the credit needs of the community or the credit markets the bank serves or intends to serve
Despite the above inspiring performance , the core banking segment posed a dangerous threat to the bottom line with Net impairment charge on loans and receivables rising by 964.4% to hit N144.62b from N13.59b
But UBA was rescued from this potential spoiler as its Non-interest income grew by 335.6% to N574.54b from N131.88b .Specifically , its Net trading and foreign exchange income skyrocketed by 1,072% to N450.25b from N38.41b
Two stakeholders ,its investors and the bank are the palpable beneficiaries of this feat . While its investors benefited from its cost efficiencies in terms of higher and better value for money at the same cost as indicated above , the bank enjoyed better competitive advantage as its cost base became the basis for achieving competitive advantage.
These advantages are reflected in its key efficiency and profitability ratios .One of these is its Cost-to-income ratio which is the measure of the costs of running a company in relation to its operating income. The higher the ratio, the greater the risk of zero profitability As a result of the significant improvement in efficiency, the bank’s cost-to-income ratio fell by -54.3 percent to 28.9% at the end of second quarter 2023 from 63.2% in the corresponding period of 2022 ; it fell by 42.4% -to 36.44% when compared with 63.21% in the corresponding period of 2022 third quarter , this is one the best any player has attained in the recent time .-
It is not the absolute profitability figure that matters but how resourceful a player is .That is more important to the investors .
Another ratio that confirms this bank’s resourcefulness is its Net interest margin (NIM) , a measurement comparing the net interest income a financial firm generates from credit products like loans and mortgages, with the outgoing interest it pays holders of savings accounts and certificates of deposit .In the second half of 2023 its Net Interest Margin (NIM) rose by 8.4% to 5.99% from 5.53% ; in the third quarter it hit 6.719%
With the highly inspiring rise in bottom line figures, marginal returns looked up sharply
Operating profit margin improved impressively as it moved up from 68 percent to 77.8 percent. Net profit margin rose to 34.3percent from 19percent . Its feet footed of net profit margin countered the current skyrocketing inflation rate in 2023, it represents a 10 percent gain to investors over inflation
The positive impact of this could be seen from its Earnings per share that is calculated as a company’s profit divided by the total outstanding shares of its common stock. An an indicator of a company’s profitability ,UBA’s EPS skyrocketed to N12.93k from N3.27k , an increase of 295.0% This ratio is a good way to determine earnings to the investor and is the monetary share value
To cement its place as the most profitable bank, return on equity (ROE), and return on assets (ROA), improved to 44.37per cent and 4.42per cent in 2023 from 19.72 per cent and 1.76 per cent respectively in 2022, indicating the bank is able to generate greater profit from every naira of its assets and equity than before ; by this its management is becoming more efficient and resourceful
The brilliant performance of UBA in this current financial year with improved fundamentals has given it a better competitive muscles to dramatically increase its market value and overtake its rivals as it becomes the toast the stock investors .
With data updated as at November 4, 2023 and last price of N20.45k this bank’s market capitalization stands at N699.4b to stay just behind Zenith Bank and Guaranty Trust Bank .At this price per share, its shareholder returns within 7days gains 6% and 192% in one year to exceed both its industry and market averages . UBA exceeded the Nigerian Banks industry which returned 89.9% over the past year and the market which returned 66.3% over the past year.
United Bank for Africa began the year with a share price of 7.60 NGN and has since gained 169% on that price valuation, ranking it 23rd on the NGX in terms of year-to-date performance. Shareholders can be optimistic about UBA knowing the stock has accrued 19% over the past four-week period—12th best on NGX.
UBA stock has turned its investors millionaire overnight with its 52 Week High at ₦21.95 compared with its 52 Week Low at ₦6.95 delivering 216% gain per share .
The bank’s stock potentials still remain enormous with its current fundamentals particularly with price earnings ratio 1.4x and price to book ratio 0.4x
signalling the stock is cheaper relative to its peers and the market averages
MANAGEMENT’S VIEWS AND COMMENTS ON Q3,2023 RESULTS
Commenting on the result, UBA’s Group Managing Director/ Chief Executive Officer, Mr. Oliver Alawuba said: “I am pleased to present UBA Group’s results for the quarter ended 30 September 2023, which show a strong and sustainable improvement in key performance metrics over the period. The Group recorded robust double-digit growth in its top line, with gross earnings rising YoY by 115% to ₦1.3 trillion in September 2023.
Despite the high inflationary and challenging global environment, the Group was able to leverage the rising interest rates environment in our markets and improved digital offerings, in growing funded and non-funded income. I am particularly excited by the 263% YoY growth in profit before tax, which has helped to drive increased returns to shareholders, with a 44.4% RoAE, compared to 19.7% achieved as at December 2022.
We continued to record improved gains in our customer acquisition and retention strategies across our countries of presence, evident in the 48.6% growth in customer deposits to ₦11.6 trillion from ₦7.8 trillion at the end of 2022FY. This enabled the Group drive loan growth and interest income, with net loans and advances at ₦5.07 trillion, representing a year-to-date (YTD) increase of 47.2%.
For 2023, we remain committed to improving the Group’s performance, as we strategically position to take advantage of emerging opportunities, in our 24 countries of operation and across the globe. We will continue to deliver excellent rewards to our stakeholders.
Also speaking on the performance, Executive Director Finance and Risk, Ugo Nwaghodoh said: “The continued impressive performance of the UBA Group in the third quarter of 2023 is founded on our continuous improvement and growth in gross earnings and balance sheet size, as gross earnings grew by 115% year-on-year to ₦1.3 trillion and total assets up by 49% to ₦16.2 trillion from ₦10.9 trillion as at December 2022. The growth in gross earnings is driven by 56.8% growth in net interest income and 3.36x growth in non-interest revenue. The material increases in net interest income was on the back of 47.6% expansion in the bank’s interest earning assets.
The performance demonstrates our Group’s resilience and commitment towards delivering value and enhancing the confidence of its customers, stakeholders and the wider public, notwithstanding the competitive landscape and current global trend in the industry.”
