The share price of United Bank for Africa Plc (UBA) jumped to a one-month high Thursday after the Nigerian lender said it was finalising the sale of the troubled power distribution company it foreclosed two years ago over failure to repay loans.
UBA’s share price closed at N8.50, the highest level since March 7, according to data tracked by BusinessDay.
The stock price rally comes a day after some 64.20 million units of the lender’s shares were traded, the most activity since July 19, 2022.
“We are at advanced stage of discussion towards disposal and we believe that in the course of this year that will be totally consummated and we will be done with the full realization of that asset,” Ugochukwu Nwaghodoh, executive director, said at an investor call on Wednesday in Lagos.
The sale will help UBA recoup some $122 million in debt owed by the struggling Abuja Electricity Distribution Company, one of six electricity distribution companies controlled by lenders and the Asset Management Corporation of Nigeria for failure to pay loans taken to buy electricity assets from the Nigerian government in 2013.
“That takes a huge burden off the bank’s balance sheet and would give a boost to its bottom-line this year if a deal gets over the line as the company has guided,” a pension fund manager whose company holds some of the bank’s stocks said.
UBA, whose operations in 20 African countries makes it the country’s most diversified bank, recorded a stellar performance last year with its gross earnings rising 29.2 percent to N853 billion, thanks to the double-digit growth in interest and non-interest income.
Profit before tax jumped 31.2 percent to N153 billion while profit after tax climbed 43.5 percent to N118.7 billion. Total assets gained N2.3 trillion in the period under review to cross the N10.0 trillion mark.
The bank’s business in the 19 African countries, excluding Nigeria, in which it operates expanded yet again in 2022, contributing N327.1 billion (18.7 percent) to revenues and N92.6 billion (46.1 percent) to profit.
That’s up from the N14.8 billion in revenues and N4.1 billion in profit the bank’s other African operations contributed to the total pool in 2007.
The lender also closed the year with a return on average equity of 19.7 percent, well above the 2021 industry average of 12.63 percent.
Read also: Five things to note from UBA’s 2022 financials
The bank targets an average return on equity of 20 percent in 2023.
UBA plans to slowly expand its loan book this year as it assesses the risk of an inflationary environment and likely devaluation of the naira, according to Oliver Alawuba, its chief executive officer, who was also on the investor call.
Nigerian inflation quickened at its fastest pace in almost 18 years in the month of February, piling pressure on the Central Bank of Nigeria to continue its cycle of aggressive rate hikes.
After growing its loan book by 21 percent last year, double the 10 percent target set at the beginning of that year, UBA aims to increase its loan book by 12.5 percent this year. Customer deposits rose 28 percent to N9 trillion in 2022 from N7 trillion in 2021.
The ratio of non-performing loans to total credit will probably rise to 4 percent from 3.1 percent last year.
UBA’s 2.4 percent price gain on the day outperformed the 0.08 percent rise in the banking index, which tracks the price movement of all the listed banks.
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