Meristem recommends UBA right issues

In an investment guide released on Friday, Meristem, an investment management and financial advisory services firm, recommends UBA right issues, as UBA announced plans to raise N13.19 billion in new capital via right issues.

UBA is set to offer 3.298 billion ordinary shares at an offer price of N4 with the aim of raising N13.19 billion. The offer, if fully subscribed, is expected to increase the bank’s market capitalisation based on current price to N156 billion.

According to Meristem, “overall, we have faith in the bank’s strategy, especially its focus on the “next generation” and its continued efforts to significantly grow interest income. UBA therefore, in our opinion, remains a good investment for investors with long-term horizon.”

The bank proposed share sale will be on the basis of one (1) new ordinary share for every 10 ordinary shares at N4 per share.

UBA is raising capital towards shoring up its Tier 1 capital and ensuring compliance with Central Bank of Nigeria’s directive of 33 percent Tier 2/Tier 1 capital ceiling for banks shore.

According to the bank’s books, UBA recently employed a growth strategy that involves active loan growth, which even though slowed in 2014, is expected to gain traction going forward. Consequently, loan-to-deposit and non-performing loan ratios stood at 46.2 percent and 1.6 percent in H12014, which remain well within CBN approved bounds, and thus allow for further risk asset creation.

“It is our expectation that even with the exponential growth anticipated, the bank will keep the quality of its assets high,” said Meristem Securities analyst.

Despite the headwinds in the financial sector, UBA has performed well over the years, winning some awards last year. The bank won in five categories to become one of the highest single winning bank brands ‎ at 2014 awards organised in London by The Banker magazine.

The Securities and Exchange Commission (SEC) on December 30, 2014, approved the proposed rights issue of N13 billion for existing shareholders of UBA, Obi Adindu, communications adviser to SEC director-general, said.

 

Josephine Okojie