Through recent turbulent cycles, UBA’s resilient profitability record has been driven by its robust geographical spread, booming digital business, and prudent asset and liquidity management strategies. For context, despite the toll of the Russia-Ukraine war on its presence markets, the Group posted record bottom lines –growing EPS by 28.9% to N1.98 in 9M’22. This Pan-African approach, combined with its last-mile infrastructure, has boosted competitiveness in cross-border trade and payments. Encouraged by this, management recently launched correspondent banking operations in the Middle East and has signalled to advance market share in its RoA markets aggressively.
However, in the near to mid-term, we expect these objectives to be tested by continuing externalities that pose significant threats to the health of these frontier economies—highlighted by Ghana’s debt restructuring woes. Additionally, the Group will actively monitor its substantial exposure to lowly-rated sovereign credit in these markets. Analysts are encouraged by the Bank’s historical capacity to defensively position its asset portfolios to protect NIM and minimise the impact of the heightened credit risk. Specifically, the stage 3 loans ratio has coasted well below the regulatory limit of 5% since FY’18, helping to maintain an average CoR at 0.52% over the same period (vs 2.71% for Tier-1 peers). Analysts see further support from the already-known retail focus, aided by continued digital channel investments. Analysts get considerable comfort from UBA’s macroprudential standing, with strong liquidity, impaired loan coverage (c.159.0%) and capitalisation (CAR: 25.1%). To further buttress its liquidity strength, the Group was able to redeem its 5-year $500 million Eurobond despite incremental pressures from naira devaluation.On adjustments to analysts models, we retain our 12-month target price of N10.71, as we expect the Bank’s ROE to continue to industry-wide moderation, potentially averaging 14.8% over the next 3 years. All in,analysts retain their BUY rating on UBA, with an implied exit PB of 0.39x.
BUY
Target Price:N10.71
Ref Price: N8.05
Upside/(Downside):+32.6%
Market Data
UBAMarket Cap (N’bn)275.30
Last close price (N)8.05
52-week high-low price (N)8.85/6.55
Avg 3M daily volume (mn)5.32
