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UBA stock a great value play on improved fundamentals

Phillips-Oduoza-UBA

Background

United Bank for Africa was incorporated to takeover French and British Bank limited in 1961(FBB). More recently the merger between it and the former Standard Trust Bank has entrenched its position as a tier-one Nigerian lender.

In 2013 UBA played actively in the financing of big ticket deals, especially in the power sector, with potential long term impact on the bank’s future profitability.

One of such major deal is UBA’s active participation in the $120m (N19.44bn) of financing in respect of Transcorp’s acquisition of the Ughelli Power Plant.

UBA has won the Financial Times’ Bankers’ Award for Overall Best Bank in Africa; as well as the award for Best Bank in Cameroun and best bank in Senegal.

UBA PLC has 32.9 billion Shares outstanding, with Share holders Funds of N225.6 Billion.

Financial Performance for September 2013

UBA grew gross earnings by 12.5 percent to N188.0 billion for the nine months (Q3) period through September 2013 from N166.1 recorded in the corresponding period Q3 2012.

The nine month financial results of the bank shows Profit before tax (PBT) spike by 28.2 percent to N43.4 billion compared to N42.2 billion for the same period of last year.

Interest income increased by 18.8 percent to N132.8 billion Q3 2013 from N111.7 billion Q3 2012, while total comprehensive income for the third quarter of 2013 rose by 2.8 percent to N48.7 billion compared with N37.9 billion in Q3 2012.

The impressive performance in gross earnings and profitability by the bank were fueled by expansion in loan stock.

The bank has pursued the right trajectory by increasing exposure to the power, upstream oil and gas sector and telecoms as loans and advances soared by 26.7 percent to N870.6 billion from N687.4 billion a year earlier.

UBA’s total deposits for the nine months through September 2013 surged by 22.1 percent to N2.2 trillion from N1.7 trillion recorded in the corresponding period Q3 2012.

This signifies customers growing confidence in the bank’s products.

Total assets for the third quarter September 2013 were up by 13.5 percent to N2.5 trillion from N2.2 trillion recorded in Q3 2012.

Share Performance and Outlook

Shareholders of the bank have had their value maximized, as share price rose 68 percent in the past year to close at N9.00 on the floor of the Nigeria Stock Exchange (NSE), last Friday.

UBA had a market capitalization of N296.8 billion ($1.85 billion) as at January 10, 2014.The bank currently sports a Price to book ratio of 1.56 and Price to Earnings ratio of 5.7.

The bank has been consistently pursuing a veracious dividend policy with a view to giving shareholders returns on their investment as it proposed a total dividend of N15.6 billion at 50k per share in December, 2012.

UBA is Africa’s global bank with operations in 19 African countries including Nigeria, as well as offices in New York, London and Paris providing broad-based banking services to over seven (7) million customers.

The African operation ex- Nigeria enables UBA to diversify its income stream and minimize the income loss from regulatory actions in Nigeria.

UBA will grow its loan book this year at a pace similar to 2013.UBA is also expecting a positive re-rating of the bank based on its improved fundamentals, Chief Executive Officer Phillips Oduoza said in a Jan. 7 interview at the bank’s headquarters in Lagos.

By: PATRICK ATUANYA