Q3 results: UBA on track to surpass consensus FY’15 profit forecast

Pan-African financial services group, United Bank for Africa (UBA) plc is one of the ‘early bird’ companies that have released their third-quarter (Q3) to September 30,2015 results at the Nigerian Stock Exchange (NSE).

The bank’s nine months unaudited financial results show a strong 44percent rise in profit after tax (PAT) to N48.6billion and a 17percent rise in gross earnings to N247.2 billion.

Ahead of the released Q3’15 result, stock investors sustained their bargain appetite for the shares of UBA, which prompted consistent increase in its market value over the last one month’s trading sessions.

The third quarter results show Net Operating Income (NOI) recorded a strong 21percent growth to N167.4 billion. The Cost-to-Income Ratio (CIR) remained within management’s guidance of 65percent, compared to 68.7percent in the corresponding Q3 period of 2014.

UBA noted that it was able to achieve this as it continued to focus on improving operational efficiencies to deliver superior return to its shareholders. In other indices, UBA closed the Q3’15 period with total assets of N2.87 trillion, loan book of N1.01 trillion and a deposit base of N2.18 trillion.

In the period under review, UBA maintained a Non-Performing Loan ratio of 2.1% and 0.6percent cost of risk.  These ratios are amongst the lowest in the banking industry.

“We have continued to sustain our financial performance in 2015, leveraging our unique pan-African platform and the strength of our committed work force in gaining competitive edge in the market place” said Phillips Oduoza, Group Managing Director/CEO, UBA Plc.

He also attributed the impressive performance of the Bank to enhanced balance sheet efficiency and improving extraction of value from the Bank’s channels. “We have also maintained our discipline on how, where and with whom we do business and I am happy with the results, as reflected in our earnings and asset quality” said Oduoza.

While highlighting some of the significant achievements in the third quarter, Oduoza disclosed that UBA led a consortium of local banks to facilitate a $1.2 billion syndicated facility for the National Oil Company in Nigeria, NNPC. Further reflecting the strength of the bank, Global Credit Rating (GCR) affirmed UBA’s AA- (LCY) and BB- (FCY) credit ratings.

United Bank for Africa plc has a market capitalisation in excess of N156billion and the company’s shares outstanding –those currently held by all its shareholders, including share blocks held by institutional investors – are 36,279,526,322 units. As at close of transactions on the Nigerian Stock Exchange last Monday, UBA share price rose to N4.3kobo, up by 1.18percent when compared to the price at the beginning of the week’s trade.

“We believe the results put UBA on track to surpassing consensus full year PBT and PAT forecasts of N66bn and N56bn respectively” Olubunmi Asaolu led team of research analysts at FBN Capital Limited said in their first reaction to the results, adding that “The P&L loan loss provisions imply that the bank’s cost of risk is still running below 1percent and is unlikely to worsen beyond that for the full year in our view.”

“Year to date (ytd), UBA shares are down -7.9percent, better than the NSE ASI at -14.5%. We believe a lot is riding on whether UBA can pull off the trend we have witnessed in its asset quality ratios – more than any other factor – as far as the performance of the shares are concerned over the coming year. We remain of the view that the bank can. Our estimates are under review. We rate UBA shares Outperform,” the research analysts at FBN Capital Limited stated.

Also speaking on the results, Ugo Nwaghodoh, group Chief Finance Officer, UBA plc noted that the bank’s entrepreneurial persistence continues to yield results as the Group increasingly extracts synergy opportunities across its African network.

“Our business in Africa, excluding Nigeria, contributed a quarter of our profit after tax in the period; a resounding benefit of our geographic diversification” said Nwaghodoh.

He explained that the Group’s balance sheet remains strong, with a 20percent capital adequacy ratio and 49percent liquidity ratio, noting that UBA will continue to balance the quest for earnings and growth, with the best sustainability principles.

Nwaghodoh assured that UBA is encouraged by the improving performance metrics, assuring “we will not relent on our commitment to achieving desired scale, size and profitability in all our chosen markets.”

 Iheanyi Nwachukwu