The record profit declared by the United Bank for Africa (UBA), one of Nigeria’s systemically important banks, in its first half of 2023, has confirmed it as the most profitable bank in the country.
A Systemically Important Bank (SIB) is a bank, whose failure might trigger a financial crisis. They are colloquially referred to as “too big to fail” banks.
Other SIBs in Nigeria’s banking sector include Access Bank, First Bank of Nigeria, GTBank and Zenith Bank.
UBA’s profit before tax rose to N404 billion in the first half of 2023, representing a 371 percent increase.
Its profit after tax grew by 438 per cent in the first half of 2023 to N378.24 billion, from N70.34 billion in the corresponding period of 2022.
Zenith Bank recorded after-tax profit of 162 percent, Access Bank 52.6 percent, GTBank 261.63, and First Bank and First Bank profit grew by 228.3 percent in the first half of 2023.
A look at the metrics that contributed to UBA’s growth showed that the bank’s performance was driven by the progress the Group made in digital payments, retail penetration and also the benefits it derived from the effect of revaluation gains, arising from the harmonization of foreign exchange rates at the different access windows in Nigeria.
UBA’s operating income soared by 206.6 percent to reach N783.96 billion in June 2023 from N255.67 billion reported a year earlier.
This expansion was not restricted to one area but rather permeated the bank’s main sources of revenue, highlighting its resiliency and power.
Increase in Gross Profits
The gross income of UBA increased significantly, rising by 164 percent to N981.78 billion in June 2023. The bank’s ability to seize chances and increase revenue creation is demonstrated by this excellent result, which well exceeds the N372.36 billion reported in June 2022.
Boom in Interest Income
The bank’s interest income from core operations increased significantly as well, rising to N428.3 billion in H1 2023 from N257.4 billion the previous year. This extraordinary growth was mostly fueled by interest income from investment securities, cash, and bank accounts, which soared after the Central Bank of Nigeria (CBN) raised interest rates.
The CBN has maintained a hawkish monetary policy stance since May 2022 to rein in inflation.
The exceptional performance underscored the Group’s commitment to consistently deliver value to its shareholders, said Oliver Alawuba, Group Managing Director/Chief Executive Officer, UBA.
“The Group recorded strong double-digit growth in revenues and profits from its operations, the result also reflects the effect of sizable revaluation gains, arising from the harmonization of currency exchange rates in Nigeria. Our reporting currency found a new exchange level at about N756 to 1US$ as of 30 June 2023, compared to N465 at the beginning of the year. The results again demonstrate the benefits of our long-held diversification strategy across Africa and globally. The growth of our international business, most recently in the UAE, only reinforces this earnings quality,” he said.
“With our presence in 20 African countries as well as the United Kingdom, France, and the United Arab Emirates (UAE) and being the only sub-Saharan African bank with an operational banking licence in the USA, we make doing business across borders easy,” UBA said.
Return on Average Equity
The annualized return on average equity, which increased by 57.7 percent in H1 2023 from 17.1 percent in the same period of the previous year, was one of the most eye-catching metrics demonstrating UBA’s excellent performance. This increase highlights the bank’s consistent dedication to value creation and highlights its extraordinary efficiency in creating returns for its shareholders.
The growth in the shareholders’ funds of UBA, which reached N1.712 trillion, reflects the Group’s excellent internal capital generation capabilities. The expansion demonstrates the bank’s sound financial standing and its capacity to raise internal equity capital, both of which are essential to sustaining and growing the bank’s operations.
Compared to the N7.8 trillion recorded at the end of 2022, UBA’s customer deposits saw a strong growth of 42.4 percent, reaching N11.14 trillion in the first half of 2023. Several causes, including the bank’s strong deposit mobilization push, which led to a huge growth in customer deposits throughout the review period, can be attributed to the significant increase in customer deposits.
The increase in customer deposits reveals the bank’s capacity to draw in and keep clients, as well as its commanding position in Nigeria’s market. UBA has been successful in attracting a wide range of clients by utilizing its enormous network of business offices, technology and customer touchpoints across 20 African countries. UBA is one of the major banks in the nation by total assets, total deposits, and shareholders’ funds.
The increase in deposits from customers at UBA also demonstrates the bank’s dedication to provide a broad range of banking services, such as retail, commercial, and corporate banking as well as cutting-edge cross-border payments, trade financing, and investment banking.
United Bank for Africa has experienced significant growth in its total assets, reaching N15.38 trillion as of H1 2023. The impressive figure showcases the bank’s robust internal capital generation capacity and its ability to maintain a strong balance sheet.
The growth in total assets can be attributed to several factors, including: UBA’s extensive presence in 20 African countries, as well as in the United States, the United Kingdom, the United Arab Emirates, and France, which allows the bank to serve a diverse range of customers and businesses.
The bank’s progress in digital payments and retail penetration, which has enabled it to expand its customer base and generate more revenue.
Revaluation gains arising from the harmonization of foreign exchange rates in Nigeria, which has positively impacted the bank’s financial performance.
UBA’s unique positioning in major financial centers such as New York, London, Paris, and Dubai, which allows it to connect people and businesses across Africa through retail, commercial, and corporate banking, innovative cross-border payments and remittances, and trade finance.
UBA’s strong total assets of N15.38 trillion demonstrate the bank’s financial strength and its ability to deliver value to its shareholders.
Interim Dividend of 50k per share
UBA announced an interim dividend of 50 kobo per share for the first half of 2023 in a move that emphasizes its dedication to provide value to its shareholders. This declaration was a significant increase over the 20 kobo per share paid to shareholders the previous year, and it resulted in an attractive annualized interim dividend yield of 7.2 percent.
The interim dividend increase demonstrates UBA’s continuous dedication to generating value for its shareholders. It serves as a material reward for their faith and investment in the goals and abilities of the bank. The bank’s strong financial condition and confidence in the sustainability of its performance are reflected in this decision.
Timeline for Shareholders’ dividend
Subject to any withholding tax, UBA will distribute its interim dividend of 50 kobo per share to shareholders whose names are listed in the register of members as of the close of business on September 26, 2023. The bank is committed to making sure that the dividend distribution procedure is quick and easy.
If all requirements are met, shareholders can anticipate receiving their dividends online on October 6, 2023. This schedule guarantees that stockholders receive rapid compensation for their devotion to and investment in UBA’s expansion.
UBA urges shareholders to complete the e-dividend registration in order to further streamline the dividend distribution procedure. As a result, stockholders won’t require tangible dividend warrants and can take advantage of the ease of getting their dividends electronically.
The e-dividend registration procedure is simple and made to be as hassle-free as possible for shareholders. It not only adheres to international best practices but also to UBA’s dedication to technical advancement and client-centeredness.
Elumelu’s Plan for Linking Continents
Tony Elumelu, Chairman of the UBA Group, had strategically positioned the bank to deepen ties between Africa and the rest of the globe. In order to promote economic growth, promote international trade, and facilitate investment, this approach makes use of UBA’s distinctive presence in key financial hubs and its broad network across African nations.
The Elumelu strategy’s effectiveness is seen from UBA’s impressive performance in H1 2023. In addition to boosting the bank’s profitability, it has also strengthened its position as a key participant in the global financial ecosystem. By employing this method, UBA is able to forge beneficial ties with foreign markets while making significant contributions to the economic growth of Africa.
UBA’s dedication to serving as the financial intermediary for Africa and the rest of the world is a testament to its vision and ambition in a world where international connection is more crucial than ever. UBA is well-positioned to be a catalyst for economic advancement, both in Africa and internationally, as it continues to broaden its worldwide reach and improve its services.