21 April 2014

Nigeria: UBA Remains Resilient

The recently released United Bank for Africa Plc's (UBA) audited full year results for 2013 showed mixed performance in the bank's top and bottomline.

While its gross earnings was up by 20.2 per cent year-on-year to N264.6 billion in the year under review, from N220.1 billion in 2012, the bank's profit after tax was down by 14.9 per cent year-on-year to N46.4 billion from N54.8 billion in 2012.

The positive growth in gross earnings, in spite of various industry stifling policies by the Central Bank of Nigeria, was achieved on the back of a 23.8 per cent year-on-year growth in interest income in 2013.

However, the bank's profit before tax advanced by 7.8 per cent from N52 billion the previous year, to N56.1 billion in the year under review.

UBA's Group Managing Director/Chief Executive Officer, Mr. Phillips Oduoza said the 2013 profits was largely driven by a 25 per cent surge in deposits to N2.2 trillion. Nonetheless, UBA aggressively grew its risk assets by 40.2 per cent to N963.9 billion in the year under review, from N687.4 billion the previous year.

Notably, the bank increased loans to consumer, upstream oil and gas, manufacturing and telecoms sectors which made up 70 per cent of its loan books.

According to Afrinvest Securities, "UBA remains a strong corporate force in the industry as evidenced in its 2013 results despite beckoning tight regulatory environment.

"We maintain our N279.4 billion and N49.4 billion 2014 estimates for gross earnings and profit after tax representing 5.6 per cent and six per cent growth respectively."

The board of directors had proposed a dividend per share of 50 kobo. UBA's share price closed at N7.40 per share on Friday, representing a decline by 19 per cent, compared to the N9.15 per share it stood on the first trading session of the year (January 2).

But its price last Friday is the highest it has attained this month.

"Based on relative valuation, UBA currently trades at a marginal discount to its peers with a trailing P/E and P/BV multiple of 5.0x and 1.0x, compared to industry average of 6.7x and 1.1x respectively," Afrinvest added.

Oduoza said the bank has slowed down its aggressive expansion across the continent as it consolidates its operations in 19 different countries and meets commitments to fund large power projects in Nigeria.

"We were expanding very rapidly and we initially thought we would expand further in Africa, but we've decided to stop and focus on consolidation," Oduoza said, adding that this was also why a proposed $500 million Eurobond was shelved.

He added: "We have 700 branches. That's a very large network. We've covered the major economies in sub-Saharan Africa.

"Africa outside Nigeria is currently a fifth of UBA's business, but within the next three years it would be half. We are playing in some high growth areas like infrastructure and power, which require long term funding."

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