UBA: Improving financial efficiencies in risk assets, costs

Despite an increasingly challenging operating environment, United Bank for Africa (UBA) plc reported a significant improvement in cost of operations and non-performing loans on its books.

UBA released its full year 2013 financial results last week showing a significant drop in the ratio of non-performing loans as at full year to an industry low of 1.19 percent in 2013 compared with 1.90 percent in full year 2012. The bank’s full year financials also show a significant drop in cost-to-income ratio to a low of 60.9 percent in full 2013 from 64.8 percent in full year 2014.

Analysts believe that the positive from the significant drop in these two key indices shows management has kept an eye on the right numbers for UBA, which has operations in 19 African countries including Nigeria.

The bank’s non-performing loans ratio is seen as one of the lowest in the Nigerian and African banking industry and shows a significant improvement in how the bank manages its lending process to reduce the chances of its loans going bad.

The UBA 2013 full year results also show significant improvement in other key indices such as Net Interest Margin, which improved to 5.9 percent in 2013 from 5.8 percent in 2012, an indication that the bank is making more money from every naira lent out.

Also, the bank’s liquidity ratio stood at a healthy 55 percent, well above the regulatory minimum of 25 percent, a strong indication that UBA remains largely liquid despite the increase in the Cash Reserve Ratio (CRR) for public sector deposits to a high of 75 percent by the Central Bank of Nigeria (CBN). This confirms the position of analysts that UBA will not significantly be negatively impacted by the increase in CRR on public sector deposits.

Its full year results released to the Nigerian Stock Exchange (NSE) show gross earnings rose 20.24 percent to a new high of N264 billion in 2013, from N220 billion in full year 2012. The increase in gross earnings came mainly from significant increase in interest income that rose by 23.8 percent to N186 billion, and fee and commission based income which rose 5.1 percent to N50.01 billion.

“All our businesses contributed to the strong Gross Earnings growth,” said Phillips Oduoza, group managing director/CEO, UBA Group.

“We achieved a good result despite a tough operating environment, demonstrating the strength and resilience of our people and their dedication to implementing our plans in 2013,” he said.

Giving an insight into the business behind the bank’s earnings, he said “our customer-focused, corporate banking and treasury-led business model drove our success for the year. Also, in line with our African focus, we shared the responsibility of empowering African businesses through our network, our capital and our commitment to excellent service delivery.”

The UBA Group has the capacity to continually evolve and come up with new ways to provide high end and value adding products and services to its customers to enable it to thrive in a tough economic environment, the CEO assured, noting that the bank’s management remain committed to achieving set targets for 2014, by maintaining a disciplined approach to the execution of agreed strategic initiatives.

The full year results show a profit before tax of N56 billion in 2013, representing a 7.08 percent increase over the N52 billion profit before tax in 2012. The bank also closed the year with a total assets of N2.64 trillion, an increase of 16.23 percent over the N2.27 trillion in 2012, while total equity increase by 22.1 percent to N235 billion.

 Iheanyi Nwachukwu