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UBA’s expansion bet paying off as subsidiaries’ revenue jump six-fold

UBA’s expansion bet paying off as subsidiaries’ revenue jump six-fold

UBA’s expansion bet across Africa and selected markets in Europe, the Middle East, and America is paying off as the lender’s subsidiaries report a near six-fold jump in revenues in six years.

Revenues from UBA’s Africa (excluding Nigeria) and rest of the world operations climbed to N928.6 billion in 2023 from only N163 billion in 2017, marking a 469.7 percent surge, according to data obtained from the lender’s financial statement.

Those operations have also been very profitable as after-tax profit from UBA’s subsidiaries around the world rose 543.5 percent to N251 billion in 2023 from N39 billion six years ago. The lender declared a total profit of N607.6 billion in 2023. Notably, its subsidiaries played a key role, contributing 41.4 percent of the total profit.

UBA, Nigeria’s second-largest bank by assets, operates in 19 other African countries as well as the UK, the UAE, the USA, and Paris, France.

Although the fortunes of its subsidiaries are swelling, their contribution to the group is shrinking due to the big jump in revenues from the Nigerian operations which surged 331 percent to N1.35 trillion in 2023 from N314 billion in 2017.

The lender’s subsidiaries (rest of Africa and rest of the world) contributed 45 percent to total revenues in 2023, up from 44 percent the previous year but down from a peak of 46 percent (achieved in 2021) in the six years under review.

For the Rest of Africa operations specifically, revenues totaled N767 billion and contributed 37 percent to the group’s total of N2 trillion in 2023.

For operations in the UK, UAE, US, and France, revenue reached a total of N161 billion contributing 8 percent to the group’s total for the same year.

The subsidiaries contributed 41 percent to the lender’s total profit in 2023, down from 52 percent last year and a peak of 74 percent in 2020 during the COVID-19 pandemic.

The reduced contribution of UBA’s operations across Africa and the world to the bank’s total profit is more reflective of the surge in the profit of the Nigerian operations which benefited from a currency devaluation last June.

Rest of Africa’s contributions to the group for 2023 in terms of profit are recorded as 25 percent, a decline from 42 percent the previous year and 66 percent in 2020, the highest percentage of profit recorded in six years.

Countries outside Africa like the US, UK, France, and now UAE have a 16 percent profit contributing N99 billion to the group’s N607 billion for 2023.

United Bank for Africa’s strategy to expand its reach across Africa and globally through subsidiaries is to increase market presence as a multinational pan african bank.

This not only strengthens UBA’s position across the rest of Africa and the rest of the world but also mitigates risk by diversifying its income across different economies. This strategy may have proven particularly effective during the 2020 pandemic.

UBA’s subsidiaries outside Nigeria contributed the highest percentage of profit 74 percent over the last six years, potentially due to this risk mitigation strategy.

This success was further solidified when six UBA subsidiaries won “Bank of the Year” awards in 2020, a historic achievement. However, in 2023, UBA’s profit from these subsidiaries declined to 25 percent which could be attributed to factors such as a strong performance by UBA Nigeria and fluctuations in foreign exchange rates impacting other subsidiaries.

UBA Nigeria’s exceptional performance for 2023, N1.3 trillion in revenue and N503 billion in profit might have paced out the profitability of its subsidiaries of N928.6 billion in revenue and N251 billion in profit leading to resources and focus shifting to the Nigerian market and leaving less for subsidiaries in other regions.

These fluctuations in exchange rates at 33.69 percent eroded the subsidiaries’ profits when converted to Naira due to its weakening compared to the currencies where UBA subsidiaries operate.

It converted the profits into a smaller amount in naira thereby reducing UBA’s overall profit from these subsidiaries even though their local currency profits remained stable.