UBA Impervious to Macro-Shocks on Strong Liquidity

United Bank for Africa Plc’s (UBA) strong liquidity and solid capital validates the pan Africa’s lender’s resilient and diversified loan portfolio and moderating non-performing-loans (NPLs) even amid a challenging environment.

Investors are now paying attention to financial conditions or the balance sheet of financial institutions following the collapse of Silicon Valley Bank (SVB) and Regional Bank in the United States that compounds the woes of a country grappling with rising inflation and high interest rates that could tip it into a recession.

UBA with branch offices across the continent and the United Kingdom saw its Non-Performing Loans (NPLs) fall to 3.10 percent in December 2022 from 3.60 percent as at December 2021.

And the 3.10 percent is lower than the Central Bank of Nigeria (CBN) regulatory threshold of 5 percent.

The moderation in NPLs is on the back of expansion in loan book, which means the lender is efficient in extending credit to the real sector of the economy.

The lender has a well-diversified loan book across geography and strategic economic sectors translating to moderate credit risk; and prudent underwriting standards, and proactive credit monitoring underpins its lending business.

Loans and advances to customers were up 28.10 percent to N3.44 trillion as at December 2022, from 2.83 trillion as at December 2021.

The Bank maintains a well-diversified balance sheet, with over 50 percent of the assets in liquid and low-moderate risk instruments.

It is important to note that customer deposits continue to dominate the Bank’s funding mix (83 percent) with a 22.9 percent year on year (YoY) deposit growth.

“This demonstrates combined efforts towards deepening wallet share of corporates, commercial and retail customers,” said the Bank.

“The remarkable deposit growth (mostly low cost) enabled the funding of investment securities and other earning assets, “adds the Bank.

Taking a cursory look at the lender’s loan book distribution by sector shows the 0il and gas make up 15 percent of loan portfolio; Manufacturing, 14 percent; Finance and Insurance, 14 percent; Government, 12 percent, Information and General 19 percent.

Nigerian banks have been intensifying their risk management strategies following the exposure to the oil and gas during the 2016 economic downturn, which was why they were not vulnerable to the coronavirus pandemic crisis that tipped the country into its second recession in 25 years in 2021.

Last year, the CBN stated that commercial banks’ non-performing loans (NPLs) levels in Nigeria fell below 5 percent to 4.94 percent at the end of December 2021, for the first time in about a decade.