The 2017 third quarter result of United Bank for Africa ( UBA) has demonstrated its resilience to deliver robust returns to its shareholders despite the economic hardship that has characterized the country in recent years.
The results reflect strong commitment to succeed in a Nigerian economy battered by years of policy inconsistencies and misplaced priorities.
Nigeria’s economy has been turbulent and with a 1.5 percent contraction in 2016, the country’s GDP shrunk further by 0.5% in first quarter of 2017 aided by low oil production and global oil price plunge that rubbished projections.
Gradually however, increased foreign currency liquidity stimulate trade activities with raw material imports for manufacturing activities, higher oil output and increasing investment in agricultural activities to put Nigeria northward.
While the recession lasted, UBA’s resilience enabled a sustained growth rate in profit with about N60.9 billion in profit trailing Zenith Bank Plc with N129 billion profit and Guaranty Trust Bank Plc with N125.6 billion in profit by the end of third quarter.
The growth was made possible by its enhanced customer engagement and the bank’s continuous improvement in digital service quality in the entire 19 African countries where it operates.
In addition to its profit, its gross earnings underlined its growth, rising 26 percent from N265.5 billion of Q3 2016 to N333.91 billion on the back of its recurring core revenue lines made possible by continous customer engagement.
To some, UBA’s earnings had been buoyed by its key roles in the economy including lending to the real sector. This, they said impacted the Gross Domestic Product ((GDP) growth
Owing to this, Enterprise Stockbrokers Plc, Mr. Rotimi Fakayejo expects UBA’s performance to be sustained because “the bulk of UBA earnings are coming from core-banking operations that include lending to the real sector.
“UBA has been highly favoured by government securities. The stability in the macro economy has made the bank tick and CBN’s intervention in the foreign exchange market also helped UBA to do better on QoQ performance. I expect the bank sustain its performance this year.”
He expects other Tier—one banks like Guaranty Trust Bank Plc, Zenith Bank Plc and Access Bank Plc to also replicate UBA’s performance.
Further analysis shows interest income continues to drive revenue growth at an increase of over 30per cent to N238 billion from N182.99 billion reported in Q3 2016 while interest expenses gained 21 per cent to N85.8 billion from N70.9 billion in Q3 2016.
The interplay between interest income and interest expenses led to 35.9 per cent increase in net interest income to N152.3 billion from N112.07 billion in Q3 2016.
Net fee and commission income rose by four per cent from N44.9 billion in Q3 2016 to N46.7 billion in Q3 2017 over three per cent increase in Fees and commission income.
Net loan impairment expenses remain relatively low at N12.91 billion notwithstanding an increase of 42 per cent year-on-year at the end of September, 2017.
The increasing cost of doing business in the country impacted on its Total Operating expenses in the Q3 2017, pushing it up to be virtually at par with gross earnings at 26.4per cent to N145.7 billion from N115.3 billion in Q3 2016.
UBA has maintained a trend of operating cost moderation for the preceding two years and operating cost margin declined further to 42.6per cent at the end of half year of 2017.
Obviously, the group profit before tax thus gained 33.2 per cent to N78.3 billion as against N58.8 billion recorded in the similar period of 2016.
This impressive performance defies the slow economic recovery in Nigeria as well as some African markets, where the bank operates and it reflects in its earning which rose to N1.74 per share at the end of September compared to N1.42 kobo of 2016 Q3.
However, from the financial institution balance sheet position, its earning assets is still being led by investment securities, which grew by about 12per cent from the year’s opening figure to N1.08 trillion at the end of Q3 2017.
Loans and advances to customers stepped up six per cent to N1.59 trillion from N1.51 trillion in 2016 while lending to other banks, which dropped by one half at the end of June picked up at an increase of over 20per cent at the end of the third quarter of 2017.
Also, total equity of the group moved to N507.6 billion, an increase of about 13 per cent from N448.1 billion reported in 2016 full financial year, whilst it delivered an annualized 18 per cent return on average equity (RoAE).
To the Group Managing Director/CEO, UBA, Mr. Kennedy Uzoka, the growth is a reflection of the bank’s commitment to ride above the difficult economic terrain.
“These extremely positive third quarter results are an attestation of our ability to sustainably grow earnings and market share, notwithstanding the challenging operating environment. They are a tribute to our enhanced customer engagement and focus on continuous improvement in service quality.”
Uzoka stated, “Our investment in digital channels is being rewarded, as our market share of digital banking continues to grow and we have also seen strong momentum in the trade and remittance businesses, where we have doubled the monthly run-rate in fee income, a testament to an increasingly optimistic business and currency environment.”
According to him, the slow, but steady, recovery in economic activities in Nigeria is presenting new opportunities for growth, particularly as improving foreign currency liquidity and the multiplier effect of rising public sector spending are stimulating economic activities.
“We continue to benefit from the strategic diversification of our business, with non-Nigerian business now contributing more than a third of revenues this quarter. These positive developments reinforce our constructive outlook on earnings and balance sheet growth for the last quarter of the year. To this end, we will progressively deliver superior return to our shareholders, as we extract new growth opportunities in our unique Pan-African franchise,” Uzoka affirmed.
Proactive Shareholders Association, Chairman, Taiwo Oderinde gave kudos to the leadership of the bank for effective management and meeting shareholders dividend expectations despite the macro economy challenges.
“What makes the bank tick is its management focused leadership role. The performance will be sustained despite macro economy challenges. The bank has been sustaining the growth in the last 2-3 years and it is expected to remain in as much the leadership aspect is not weakened.
“Meanwhile, the group has a lot to do to match up with GTBank and Zenith Bank in profitability.”