Businessday analyst INNOCENT UNAH takes a look at UBA Plc solid 2016 performance, the banks rapidly growing African franchise and why investors should begin to take note too.
Adeleke Bala Okeke has just finished reading an investors’ note sent to him by his stock- brokers.
He smiled knowingly as he revelled in the refreshing evening breeze that swept through his study, ventilating the space in a heavenly caress.
He gulped the last pint of the Marques de Riscal Gran Reserva, his favourite Spanish wine, patting his paunch as he thought of how best to impress his adorable wife with the news of his latest suave invest- ment move.
He had staked a handsome amount of money in shares of United Bank for Africa Plc, the foremost African banking powerhouse and the bank has grown his wealth massively.
Data from Bloomberg, the New York-based software, data, and Media Company, showed that as at ursday, May 11 2017, Ochonma’s UBA investment has earned him a return in excess of 62 per cent from the beginning of the year to date.
The Nigerian Stock Exchange (NSE) by comparison appreciated only 6.25 per cent within the same period.
UBA’s performance has been sterling, pleasantly confounding even the most astute of investment analysts.
One of Nigeria’s prominent in- vestment research rms con rmed the surprising performance in its recent note to investors.
“UBA FY (full year) 2016 numbers came ahead of ours and con- sensus estimates. Net Income was up 21% y/y (year-on-year), coming in 15% ahead of our estimate and 7% ahead of consensus,” the note said.
But the impressive news doesn’t stop there! Some investors who spoke to BusinessDay on why they chose to stake their fortune on the continental banking giant, said that three factors stand out for them: the bank’s loan are well managed relative the other banks, the out- look looks good, and earnings are sustainable.
UBA’s enriched risk management and control framework with clear de nition of risk appetite yielded fruit in the three months ended March 31 2017, as non-performing loans (NPLs) stood at 3.90 per cent, lower than the 5 per cent threshold set by the Central Bank of Nigeria (CBN).
Inundated with the unceasing plaudits for the bank, Businessday explores the evolution of the banking behemoth. Where is the bank presently? How has it shaped bank- ing in Nigeria and Africa and what footprints it has bequeathed?
The Metamorphosis of a Giant
UBA commenced its banking voyage in 1949, when it was birthed as the British and French Bank Lim- ited (BFB). BFB was a subsidiary of Banque Nationale de Crédit (BNCI), Paris, which transformed its London branch into a separate subsidiary called the British and French Bank. Its shares were held by Banque Nationale de Crédit and two British investment firms, S.G. Warburg and Company and Robert Benson and Company.
A year later, BFB opened its offices in Nigeria to break the mo- nopoly of the two existing British owned banks in Nigeria then. BFB conducted its banking business un- der the watch of the British colonial government until the twilight of the administration. On 23 February 1961, one year after Nigeria’s independence in 1960, an entity was incorporated as a limited liability company through the instrumentality of the Compa- nies Ordinance (Cap 37) 1922, to give BFB not only a Nigerian, but also an African focus.
That entity was christened the United Bank for Africa. It took over the assets and liabilities of BFB and so started its task of given Nigerians, nay Africans, a truly home-grown banking service.
In 1970, UBA listed its shares on the Nigerian Stock Exchange (NSE); it also became the first Nigerian bank to undertake an Initial Public O ering (IPO). UBA is the rst sub- Saharan bank to take its banking business to North America when it opened its New York O ce (USA) in 1984 to o er banking services to Africans in Diaspora.
Emergence to National Prominence
UBA, one of Nigeria’s biggest and oldest banks, teamed with the then Standard Trust Bank, a dynamic and fast-growing ‘new generation bank’ in Nigeria incorporated in 1990, to form a rejuvenated UBA.
The merger, which was one of was one of the biggest deals to be e ectuated on the NSE, was con- cluded August 1, 2005. Subsequently, UBA acquired Continental Trust Bank in the same year, further expanding the UBA brand.
The bank’s expansion appetite was fed just a year later, in 2006, when it added Trade Bank that was under liquidation by the Central Bank of Nigeria (CBN).
“The consolidated UBA was born out of a desire, to lead the domestic sector to a new era of global rel- evance by championing the creation of the Nigerian consumer nance market, leading a private/public sector partnership at supporting the acceleration of Nigeria’s economic development and growing the insti- tution from a banking to a one-stop nancial services institution, while spreading its footprints across Africa to earn the reputation as the face of banking in the continent,” said a statement from the bank.
From then, the bank has not stopped its inexorable drive to im- pact the Nigerian and African continent in more ways than banking.
Rewarding Shareholders
UBA has rewarded sharehold- ers by paying increasing dividends consistently and over the last 3 years.
In addition, the bank’s share price has appreciated 41.7 %, grow- ing rising from N4.51 per share at the commencement of trading on January 3 this year, to N6.38 as at the close of trading on Tuesday, May 16, 2017.
UBA’s Social Impact
UBA has used its Corporate Social Responsibility (CSR) pro- gramme, which is anchored by the UBA Foundation, to fulfill its social contract with the communities in which it operates, and their people.
UBA is the rst Bank in Nigeria to establish such a foundation because of its acute empathy and concern for the society.
Today, the UBA foundation is a beacon for other corporate organi- sations in their CSR efforts, mak- ing these organisations not to see CRS as a marketing tool, but as an instrument to promote sustainable development in the society.
UBA has spent huge money for such annual projects as the UBA Foundation National Essay Competition for Senior Secondary School students in Nigeria and some African Countries, prostate cancer awareness campaign, and the Read Africa initiative. It has also donated hugely to national institutions – hos- tels, lecture theatres, hospital equipment, generators, and many others.
UBA: Growing into a Conti- nental Colossus
Inspired by its burning desire to build a strong domestic and African brand, the bank intensi ed its African footprint, exporting its unique banking services to 18 African countries.
Today, UBA is one of Africa’s leading nancial institutions o er- ing universal banking to about 14 million customers across over 1,000 branches.
It is also well established in three global nancial centres: New York, London, and Paris.
From Ghana, Benin Republic, Cote d’Ivoire, Burkina Faso, to Guin- ea, UBA’s impact is being bene cially felt; it is delivering lasting imprints across various spheres of lives of the people in Chad, Cameroon, Kenya, Gabon, Tanzania, Zambia, and Uganda.
Businesses of the citizens of Li- beria, Sierra Leone, Mozambique, Senegal, Congo DR, and Congo Brazzaville have been catalysed by the entrance of UBA into their climes. As the bank said, “UBA is your partner for banking services for Africans and African related.”
UBA and Africa: A symbiotic Union
Across Africa, the UBA has made several strides in infrastructure and investment. Tony O. Elumelu, Chairman of the Board of the bank, said that the Bank’s commitment to African growth has been pervasive, impacting various sectors.
“Across Africa, the Bank has won and executed important mandates, which demonstrate our ability and commitment to finance growth across our continent,” Elumelu said in his address to the bank’s share- holders on the performance for the 2016 nancial year.
How so true! With over $895 million committed to more than 6 projects in West, East and Central African countries, UBA is truly a quintessence of African continental big brother.
In return for the massive support UBA has given their economies, the African subsidiaries have added zest to the bank’s continental vision. e contributions of the African subsidi- aries to UBA’s sterling performance have increased in the past 5 years.
According to the bank’s 2016 nancial statement, the subsidiaries contributed close to 31% of gross earnings, a consistent improvement from barely 20% in 2012. In a period when the local cur- rency, the Naira had weakened con- siderably against other currencies, the bank’s performance was boosted by foreign currency translation of the transactions of the various subsidiaries.
Moreover, the strong earnings of the subsidiaries reflect the robust growth of the subsidiaries’ assets, an observation captured by the bank’s 2016 nancial statement.
“Partly driven by the weakness of Nigerian Naira relative to other African currencies, the African sub- sidiaries ex- Nigeria (UBA Africa) doubled interest income and grew non-interest income by 17%.”
“Overall, UBA Africa grew gross earnings by 69%, contributing 30% of the Group’s top-line, from 21% in 2015 nancial year. Interestingly, we had over 50% growth in dividends from subsidiaries, reflecting the stronger performance from the foreign operations and impact of Naira devaluation on FCY dividend income.”
Marching Forward
The Bank is unwavering it its re- solve to dominate the African banking space and become the bank of choice for every African.
As Tony Elumelu, pioneer post merger managing director and current chairman of UBA said in the 2016 annual report, the bank’s pan-African network, with sta of more than 25 nationalities, and most importantly its pan-African customers are of ever- increasing importance to UBA.
“We remain optimistic about the global economic environment and our commitment to being Africa’s global bank is unwavering,” Elumelu told the shareholders.
Resolutely committed to fund- ing impactful and bankable projects across Africa, the bank has used its African presence to enlarge the size of its risk assets.
As Kennedy Uzoka, UBA’s chief executive officer informed share- holders recently, the lender’s African subsidiaries buoyed its loan book by 18 per cent as it funded various business expansion and infrastructure projects.
From every indication, UBA is already looking beyond the African continent to magnify its impact in the banking milieu. Elumelu said the bank’s continued expansion is in ex- ible, making it the only African bank to operate in New York, London and Paris.
UBA’s unquenchable thirst for African impactful expansion is fuelled by its unapologetic belief that Africa is on its way to monumental growth.
It is convinced that its African mis- sion will succeed with unassailable pace, given that its pan-African opera- tions have delivered on the promises made at the outset of its growth strat- egy as the bank has begun to reap the bene ts of being one the largest banking networks in Africa.
As the African continent wait expectantly for the rapid emergence of UBA as the unarguable continental banking powerhouse, all indices signal that UBA will only meet, but outclass the expectations of over 1 billion Africans across 54 countries.
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