Unied Bank for Africa (UBA) Nigeria Plc in its audited financial statement for full year 2016 recently released showed an impressive performance, as it was able to grow profitability and other key financial indicators despite macroeconomic headwinds arising from lower oil price, a severe dollar shortage and rising inflation.
The Bank has a steady dividend policy as it recommended a dividend of N0.55 per share on every ordinary share. Increased gross earnings largely driven by rise in trading income
Gross earnings for the full year grew remarkably by 21.85 percent to N383.64 from N318.84 billion the corresponding period; driven primarily by 1152.23 percent surge in net trade in foreign exchange income to N43.28 billion. Interest income increased by 23.65 percent to N263.97 billion in December 2016 as against N229.63 billion the previous year; driven by rise in interest income on term loans to N126.13 billion and a 34.05 percent increase in investment securities and bonds.
Interest expense was up slightly by 2.85 percent to N98.77 billion in December 2016 as against N96.03 billion as at December 2015.
Similarly, total noninterest income as a result of momentous improvement in net trading income increased by 37.37 percent to N105.68 billion from N76.68 billion as at December 2015.
Other key contributing factors include:
18.27 percent increase in fees and commission income to N73.20 billion from N61.89 billion which resulted mainly from increased card related commissions.
“Despite the slowdown in the Nigerian economy, our largest market and the need for a prudent approach to business, nonetheless we demonstrated our entrepreneurial culture, enhanced customer service and geographic diversification, which all contributed to growing major income lines,” said Kennedy Uzoka, the GMD/CEO of UBA Plc.
“We grew gross earnings by 22% to N384 billion, supported by strong growth in both interest and noninterest income lines. The local currency weakness in a number of our chosen markets, particularly the Naira devaluation in Nigeria, impacted on our cost of doing business,” said Uzoka.
Commendable improvement in profitability coming off cost efficiency
The bank recorded total operating income of N271.0 billion, a 29 percent year on year growth relative to 2015 performance; reflecting the simultaneous growth in both funded and non-funded income. On other hand, total operating expenses moved by 12 percent to N153 billion in the period under review as against N137 billion as at December 2015.
The increase in operating expenses was due to the high cost of operations, caused by higher energy costs and the devaluation of the currency.
Despite the high cost of doing business, UBA remained efficient as cost to income ratio reduced to 63 percent, a 388bps YoY reduction, in line with management guidance.
UBA’s profit before tax surged by 32 percent to N91 billion in the period under review as against N68 billion the previous year. Profit after tax increased by 22 percent to N72 billion in December 2016 from N60 billion as at December 2015. Net interest margin (NIM) improved 40bps YoY to 6.7%, reflecting improved balance sheet management and better value extraction.
“Despite the macroeconomic challenges in a number of countries where UBA operates. “Given the operating environment in 2016, I am very pleased with our profitability – an impressive 32% growth in profit before tax to N91 billion – whilst we have also focused keenly on operational efficiencies, illustrated by the reduction in our Cost-to-Income Ratio.” Uzoka said.
Strong assets base buoy by loan growth
The bank’s total assets increased by 27 percent to N3.50 trillion in December 2016 from N2.75 trillion as at December 2015. Net Loans and advances to customers increased by 45 percent to N1.51 trillion in the period under review as against N1.03 trillion as at December 2015; driven by the naira devaluation. Deposits from customers moved by 19.23 percent to N2.48 billion in the period under review as against N2.08 billion as at December 2015.
Improvement in key ratios
After tax return on average equity was stable at 19 percent while net margin stood at 18.83 percent in the period under review.
Notwithstanding the volatile and uncertain operating environment, UBA’s maintained a healthy balance sheet, as reflected in our prudential ratios; 40% and 20% liquidity and BASEL II capital adequacy ratios respectively.
The Nigerian lender’s relatively conservative risk appetite was justified as Non Performing Loans (NPLs) of 3.90 percent is lower than the 5.0 percent regulatory threshold.
“As we implement our Customer First Philosophy, we are approaching 2017 with real
optimism, especially with the outlook remaining positive in many of our markets, where we benefit from our increasingly diverse revenue streams. We reiterate our pledge to delivering excellent service to our customers, and remain committed to creating superior and sustainable return for our shareholders.” said Udoka.
United Bank for Africa Plc is a leading financial services group in sub-Saharan Africa, with presence in 19 African countries, as well as the United Kingdom, the United States of America and France. From a single country operation founded in 1949 in Nigeria, Africa’s largest economy, UBA has emerged as a pan-African provider of banking and other financial services, to about 11 million customers globally, through one of the most diverse service channels in sub-Sahara Africa; 632 business offices, 1,750 ATMs, some 13,500 PoS, and a robust online and mobile banking platform.
UBA was the first Nigerian bank to make an Initial Public Offering (IPO), following its listing on the NSE in1970. It was also the first Nigerian bank to issue Global Depository Receipts (GDRs). The shares of UBA are publicly traded on the Nigerian Stock Exchange (NSE) and the Bank has a well-diversified shareholder base, including foreign and local institutional investors as well as individual shareholders.
“Our performance in 2016 reflects the strong potential and resilience of our business,” said Ugo Nwaghodoh, Chief Financial Officer (CFO) of UBA Group
BALA AUGIE
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