UBA hedges high inflation, interest with 375% returns

United Bank for Africa (UBA) Plc has delivered an extraordinary 375 percent capital gain to investors over nearly five years, outperforming both the Nigerian stock market average and the financial services sector as a whole.

Data from the Nigerian stock market shows that UBA investors have earned an average annual return of approximately 75 percent over the period, showcasing UBA’s strength as a high-yield, inflation-resistant investment.

Between December 31, 2019, and December 6, 2024, UBA achieved a cumulative capital gain of 374.83 percent, which translates to an average annual return of 74.97 percent. This means that an investor who invested N500,000 in UBA shares at the start of 2020 now holds a market value of over N2.374 million, not including the cash dividends accrued during the period.

UBA has built a reputation as a shareholder-friendly company, offering consistent and above-average cash dividends. In 2024, UBA paid an interim dividend of N2 per share based on its half-year results, marking the highest payout by any Nigerian bank and one of the top three in the stock market.

An investor who committed N500,000 to UBA shares in 2020 would have received approximately N139,860 as interim dividends for the 2024 financial year alone, representing over 25 percent of their initial investment.

UBA is currently conducting a N239.4 billion rights issue, offering shareholders an opportunity to increase their stakes. The bank is issuing 6.84 billion new shares at N35 per share, on a ratio of one new share for every five held as of November 5, 2024. The rights issue will close on December 24, 2024.

Retail shareholders, who make up nearly three-quarters of UBA’s 280,000 shareholders, have embraced the rights issue enthusiastically. Many are applying for more shares than their pre-allotted rights, while others are trading their rights in the stock market, taking advantage of favorable extant rules.

UBA’s stellar performance has been a key contributor to the bullish trend in the Nigerian stock market, which has recorded five consecutive years of positive returns. The Nigerian Exchange’s benchmark All Share Index (ASI) has consistently ranked among the world’s top-performing markets, with average returns of 45.90 percent in 2023 and significant gains in preceding years: 19.98 percent (2022), 6.07 percent (2021), and 50.03 percent (2020).

In 2024, the ASI has achieved an average year-to-date return of 31.34 percent, while UBA has outperformed with a 35.26 percent year-to-date return, more than double the 15.53 percent average return for the banking sector.

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UBA’s capital gain also surpasses key indices like the NGX 30 Index (32.97 percent), NGX Premium Index (30.43 percent), and NGX Pension Index (33.95 percent), underscoring its status as a premium investment choice.

Despite Nigeria’s challenging economic environment, with an inflation rate of 33.88 percent and a benchmark interest rate of 27.25 percent as of October 2024, UBA has maintained its position as a dependable and high-performing investment. Its share price, which started 2020 at N7.15, now stands at N33.95—an impressive 375 percent increase over the period.

Long-term shareholders, including notable figures such as Sir Sunny Nwosu, founder of the Independent Shareholders Association of Nigeria, and Faruk Umar, President of the Association for the Advancement of Rights of Nigerian Shareholders, have lauded UBA for its consistent performance and shareholder-friendly policies.

Nwosu praised the bank’s strong dividend history and shareholder-focused decisions, urging fellow investors to take advantage of the ongoing rights issue. Similarly, Umar highlighted UBA’s robust management and governance, expressing optimism about future returns.

UBA’s financial performance remains a key driver of its market success. For the nine months ending September 30, 2024, the bank reported an 83.2 percent growth in gross earnings, rising from N1.308 trillion in 2023 to N2.398 trillion. Operating income grew by 51 percent to N1.54 trillion, while profit before tax rose to N603.48 billion, compared to N502.09 billion in the same period of 2023.

Net profit after tax increased from N449.26 billion to N525.31 billion, with earnings per share improving from N12.93 to N14.78. The bank’s balance sheet expanded significantly, with total assets growing by 54 percent to N31.80 trillion as of September 2024.

This growth was driven by a surge in customer deposits, which increased by 52.7 percent to N26.50 trillion, and loans and advances, which grew by 46.8 percent to N7.68 trillion. Total equity also jumped by 76.8 percent to N3.59 trillion, reflecting UBA’s solid financial footing.

Market experts have attributed UBA’s impressive performance to a combination of strong fundamentals and strategic foresight. Olatunde Amolegbe, managing director of Arthur Steven Asset Management, emphasised the forward-pricing mechanism in stock valuation, noting that UBA’s consistent growth and profitability make it a compelling investment.

David Adonri, managing director of HighCap Securities Limited, added that share prices reflect both past performance and future potential, with UBA standing out as a high-value stock.