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Monday, March 27, 2023

UBA Profit Growth Highest Among Nigerian Banks

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Despite the lower yield environment relative to pandemic level and a punitive regulatory terrain, United Bank Plc is thriving as it reported the highest profit growth among Nigerian lenders.

The pan-Africa lender operations across the continents are contributing to Group earnings, and an excellent risk management strategy or efficient portfolio allocations are responsible for good asset quality.

United Bank for Africa (UBA) Plc saw net income spike by 35.61 percent to N104.51 billion as at September 2021.

That compares to Zenith Bank’s 0.80 increases in net income; Access Bank, (+19.15 percent); Fidelity Bank, (+29.92 percent); First City Monument Bank, (-71.45 percent); Guaranty Trust Holdings, (-9.05 percent); Stanbic IBTC Holdings, (-26.41 percent); Union Bank, (-10.79 percent), and Sterling Bank (28.44 percent).

UBA is the fourth largest bank by profit, and if it continues to record double digit growth in earnings and some peer rivals are floundering, then it could climb up the ladder.

It uses or deploys shareholders’ resources in generating higher profit as  return on average equity (ROAE) rose to 19.21 percent in September 2021 from 16.40 percent the previous year.

The pan-Africa lender benefitted from an uptick in fees and commission income that spiked by 20.75 percent to N67.91 billion as at September 2021 as it consolidated its digital banking segment while meeting customers’ needs.

UBA’s net interest income (NII) increased by 23.24 percent to N229.26 billion as at September 2021 from N1860.2 billion the previous year.

Net interest income reflects the difference between the revenue generated from a bank’s interest-bearing assets and the expenses associated with paying its interest-bearing liabilities.

It reported Non-Performing Loans (NPLs) of 3.50 percent as at half year 2021, which is at a five-year low and the lowest among tier 1 banks.

While we support the bank’s effort in keeping NPLs ratio at bay, we believe the central bank’s decision to extend covid-19 forbearance till 2022 also provided support,” said analysts at Chapel Hill Denham in a note to clients.

Analysts at Chapel Hill Denham have a target price of 11.50 on UBA which implies a 41.10 percent upside as at Thursday and buy ratings on the stock. UBA currently trades at a price to book (PB) of 0.4x, discount to its five year PB of 0.50x and Tier-1 banks average of 0.60x

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