09042018 - AS APC'S NEC MEETS TODAY: Oyegun, Tinubu's ‘soldiers’ head for showdown

26 —Vanguard, MONDAY, APRIL 9, 2018
FINANCIAL VANGUARD
Investors Forum
UBA Plc: Strong fundamentals may spike
investor sentiments
•Benefits of diversification in uptrend — CFO
By Emeka Anaeto,
Business Editor
AMIDST a flicker of hope
on recovery from the Nigerian
Stock Exchange, NSE, threeweek
long bear run, the shares of
United Bank for Africa, UBA, may
be one of the early beneficiaries of
the bottom-out. The stock had positive
investor sentiment pulling it
back from slide and lifting it by 2.15
per cent gain last week, as against
0.08 per cent decline recorded by
the NSE benchmark week-onweek.
Investment analysts and stockbrokers
had attributed the initial
price down on the stock to the
bandwagon effect of the general
market re-balancing that characterised
March 2018 tradings. But
it appears that many stocks with
strong financial fundamentals especially
in the just released 2017
full year, FY‘17, financial statements,
as well as pointers to an
impressive first quarter 2018,
Q1’18, such as UBA, would be
having a faster recovery.
The group chief financial officer,
GCFO, of the bank, Mr. Ugo
Nwaghodoh, in a chat with Financial
Vanguard, had expressed
optimism that the recent adverse
investor sentiments in most stocks
would soon give way to the reality
of strong positive sentiments especially
for UBA and other stocks
with sound fundamentals.
Regulatory
requirements
He had told a gathering of financial
media professionals that some
of the key drivers of the bank’s
FY’17 impressive performance announced
two weeks ago include:
Growth in interest income; Efficient
cost of funding; and Continued
growth in trading activities, supported
by the bank’s successful
Eurobond float which provided it
competitive FX liquidity.
He also noted that the bank had
maintained high liquidity even in
the tight circumstance and market
situations at 50percent as against
regulatory requirements of 30percent,
adding that despite the spike
from 3.9percent to 4.6percent in its
non-performing loans ration, the
bank’s capital adequacy ratio is still
stronger than most bank’s at 20
percent as against the regulatory
minimum of 15 percent.
Perhaps one of the most attractive
investment value unique to
UBA is the contribution of the subsidiaries
outside Nigeria. The
bank’s FY ’17 results show significant
growth in the contribution
and market share from its pan-African
subsidiaries, among other
positive trends in the financial performance.
The audited results showed that
gross earnings grew substantially
Tony Elumelu, Chairman, UBA Plc
to N462 billion, up by 20 percent
from N314 billion recorded in the
corresponding period of 2017. Also
the Group delivered a strong 16
per cent year-on-year growth in
profit before tax of N105 billion,
compared to N90.6 billion in the
2016 financial year.
The Bank’s subsidiaries outside
Nigeria contributed a third of the
Group’s top-line and 45 per cent
of the profit for the year, a remarkable
improvement from 31 percent
contribution made by the ex-Nigeria
offices in 2016. This, according
to Nwaghodoh affirms the success
of the Bank’s expansion strategy,
with target of 50 percent contributions
by 2020. He also said
this development would moderate
impacts on the bank from adversities
in any single market, citing the
situation in Nigeria where earnings
in fixed income securities are
expected to trend down due to policy
changes by the Central Bank
of Nigeria, CBN, a development
which Nwaghodoh said is not happening
in all other economies UBA
operates in.
Our core
transaction
banking
offerings
gained strong
momentum,
with income
from these
business lines
growing by
double digits
nancial statements, thus putting
the total dividend for 2017 financial
year at 85 kobo per share.
Speaking on this financial performance
and the bank’s overall
financial position, Nwaghodoh
stated: “In a period of high interest
rates, we achieved a relatively
low 3.7 per cent cost of funds. This
operational efficiency reflects the
benefit of our rich pool of stable
Kennedy Uzoka, GMD, UBA Plc
Financial highlights
The Bank’s Operating Income
grew to N326.6 billion, a 20.6 percent
increase compared to N270.9
billion recorded in 2016. This, according
to analysts, affirms the capacity
of the Group to deliver
strong performance through varying
economic cycles and challenging
business environment.
The audited results also showed
that the Bank’s Total Assets peaked
at N4.07 trillion, translating into
16.1 percent year-on-year growth
from the figure of N3.50 trillion
recorded as at 2016 financial year.
In the 2017 financial year, the
Bank’s Net loans achieved a prudent
9.7 percent growth at N1.65
trillion, while the customer deposits
grew to N2.73 trillion, representing
10 percent year-on-year
growth on N2.49 trillion recorded
in 2016 financial year.
Reflecting a strong internal capital
generation, the Bank’s shareholders’
fund also soared 18.2
percent to N529.4 billion in the
2017 financial year.
Subject to the approvals of the
shareholders, the Board of UBA
Plc proposed a final dividend of
65 kobo per every share of 50 kobo
each. This final dividend proposal
is in addition to the 20 kobo per
share interim dividend paid after
the audit of the 2017 half year fisavings
and current account deposits.
The net interest margin stabilized
at seven per cent, even as
yields on treasury assets dropped
in the last quarter of 2017. Our core
transaction banking offerings
gained strong momentum, with
income from these business lines
growing by double digits.
“We remain committed to our responsible
approach to balance sheet
management, with focus on growing
risk asset and broader balance sheet
in a profitable and prudent manner.
Amidst a subdued Nigerian credit
market, we grew our loan portfolio by
10 per cent, leveraging our robust
liquidity and capitalization to support
good businesses through this challenging
economic cycle. We closed
the year with a Basel II capital adequacy
ratio of 19 per cent and a liquidity
ratio of 50 per cent, well ahead
of 15 per cent and 30 per cent regulatory
requirement respectively. Our
disciplined approach to lending and
broader risk management continues
to uphold our asset quality.”
Operational Efficiency
Notwithstanding tight system liquidity,
UBA’s net interest margin
remained stable at 7.0 percent, as
it sustained cost of funds at 3.7percent.
Reflecting the impact of higher
cost of risk, the bank closed the year
with 16 percent return on average
equity (RoAE) and 2.1 percent return
on average assets (RoAA).
Having conservatively provided
for the major hit to its risk asset
portfolio, the bank’s GCFO expects
both RoAE and RoAA to recover
strongly in 2018. He stated: “We
expect our improved customer service
and innovative offerings to
accelerate market share gain just
as technology enhancement and
investment in people should drive
productivity and efficiency gains.”
Diversified Asset
In spite of slow recovery in economic
activities in Nigeria, UBA’s
single largest market, the Group’s
total assets grew 16 percent yearon-year,
buoyed partly by the successful
issuance of USD500 million
debut Eurobond and a change
in exchange rate for translating the
FX balances.
Leveraging on enhanced customer
service, the Group grew retail
deposits by 21percent, at the
backdrop of a near-zero savings
by households. Individual customers’
deposit now represents 43percent
of UBA’s deposit funding.
These low cost, stable deposits,
reinforce the bank’s optimism on
reducing funding cost, improving
margins and profitability going
forward.
The Group maintained its appetite
for a well-diversified balance
sheet, with more than half of the
assets in liquid, low risk instruments.
Asset Quality
UBA’s vision and financial goals
are based on creating a sustainable
business which delivers long
term value creation. This is based
on maintaining moderate risk appetite
to achieve a good balance
between profitability and sustainability.
Given its conservative provision
on a major exposure, the bank do
not expect any further charge.
Thus, both NPL ratio and cost of
risk should begin to moderate from
2018. Notwithstanding inflationary
pressures and lagged impact of
Naira devaluation, the bank’s costto-income
ratio, CIR, remains below
the sub-60 per cent guidance
and the bank says it is on track to
deliver our medium term CIR target.
Boost to Internationalisation
Previous week UBA announced
that its London subsidiary has obtained
regulatory permission to
carry out Wholesale Banking activities
in the UK. Following this
authorization, UBA is now the only
Sub-Saharan African bank to conduct
banking activities in New York
and London, as well as in 20 other
countries across Africa.
Commenting on the landmark
achievement, the Group Managing
Director/CEO, UBA PLC, Mr.
Kennedy Uzoka said: “This authorization
strengthens our capabilities in
meeting the growing cross-border financing
needs of our customers. It
enhances our customer coverage and
product offerings whilst positioning
our Group as an optimal conduit for
trade and foreign investments into
and across Africa as well as export
flows to the United Kingdom. Importantly,
the licence will enable us to
fulfill our aspiration of deepening financial
intermediation in Sub-Saharan
Africa and providing the muchneeded
financial support to the
broader real sector of the African
economy,” he added.
The CEO of United Bank for Africa
(UK) Ltd (“UBA UK”), Mr.
Andrew Martin noted further, “this
enhanced positioning of our business
is timely, as it comes at a time
when the UK is seeking to expand
trade and broaden economic ties
with Nigeria and Africa in general.”