UBA 9 Months 2019 Result; Strong Top Line Earnings, Stable Outlook


Tuesday, November 05, 2019 /10.00AM / Teslim Shitta-Bey, Managing Editor/ Header Image Credit: instinctbusinessmag.com


United Bank of Africa (UBA) may not have the same tranquil consumer retail appeal as it had when the "wise men bank with UBA" advert was crafted in the 1990's but the bank has done fairly nicely in both top and bottom line performance for the 9 months up to and including September 2019. Gross earnings sprinted up by +14% Y-o-Y and profit after tax (PAT) climbed up by +32.3%. The rise in net earnings margin indicates a cutback in the Group's cost-to-income numbers (CIR).





Income Statement


  • Gross earnings grew from N374.83bn in 9 months 2018 to N428.22bn in the contemporary period of 2018, a top line growth of +14.2%.
  • Operating Income went up by +11.6% growing from N238.36bn in 9 months 2018 to N265.99bn in the same period of 2019.
  • Operating expenses equally increased in 2019 relative to 2019 by rising from N149.09bn in 9 months 2018 to N161.62bn in 9 months of 2019, representing a rise of +8.4%.
  • Profit before tax scaled up from N61.69bn by September 2018 to N81.63 by the same period of 2019, resulting in a pre-tax growth of +32.3%
  • The Group's CIR saw a 178 basis points fall on a Y-o-Y basis from 62.55% in 9 months 2018 to 60.80% in 9 months 2019, the figure is still fairly high from a competitive perspective but is heading in the right direction
  • Investors would be grateful for an increase in equity return (ROaE) from 15.8% in 9 months 2018 to 20.6% in the similar period of 2019, the stocks share price has, however, not shared the optimism of the deposit money bank's equity earnings. The Group's recent share price of N6.20 is down -10.67% Y-o-Y, but the stock has seen a rebound in its October 2019 floor of N5.70.


Statement of Financial Position


  • Total assets of the Group moved up mildly by 1.9% from N4,87trn in FY 2018 to N4.96trn in 9 months 2019, the gradual increase in total assets reflects containment of fixed asset growth despite an almost +15% growth in loan assets, the trends in fixed and loan assets would suggest a stronger return on assets year-to-date (YTD)
  • The Group's risk assets went up +14.7% from N1.73trn in FY 2018 to N1.98trn in 9 months 2019, the rise in risk assets improved the bank's loan to deposit ratio (LDR) over the period
  • Customer's deposits of the Group rose from N3.35trn in FY 2018 to N3.37trn in 9 months 2019, representing a marginal growth of +0.9% which helped to steady the LDR at about 60%
  • Shareholder's Funds of the bank climbed up +10.5% to N555.53bn from FY 2018, reflecting the Group's internal capital generation capacity


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Pushing The Profit Barrier Up


Despite the moderate growth of the Nigerian economy, UBA Group has leveraged its continental strength to push up top line earnings and bottom line profits. While the Nigerian economy grew at +1.84% in H1 2019, the Group's Gross Earnings went up by +14.2% in 9 months of the year showing that the harsh domestic economic headwinds in Nigeria was doused by stronger growth in East and Central African economies.  The banking Group also benefited from an increase in digital banking offering, credit expansion, remittances and other lifestyle transactional services.


According to the Groups chief executive officer (CEO), Kennedy Uzoka, "UBA has made notable progress in terms of asset quality management, having achieved a +14.7% growth in risk assets during the period, whilst reducing NPL ratio to 5.7% and net impairment loss Y-o-Y by +37.6%. These are testaments to our resolve of maintaining best-in-class risk management culture, whilst supporting customers and businesses across diverse segments of the African economy".


The Group has consistently improved its bottom line with profit after tax in the first half of 2019 growing from N43.79bn in H1 2018 to N56.74bn in H1 2019 (see comparative performances for the sector in Table 1 below), the 9 months result of the Group continues to consolidate on this performance with PAT rising from N61.70bn in 9 months 2018 to N81,63bn in 9 months 2019 (see illustration 1 below). If the pace of growth of bottom line earnings is sustained in Q4 2019, FY after tax profit would likely end at N103.98bn.



Table 1 Profit After Tax for Selected Banks H1 2018-H1 2019

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Assets Vs Deposits: The LDR Balance


With loan assets growing faster than deposit liabilities the banks LDR has obviously risen thereby protecting the bank from regulatory sanctions that would likely adversely affect the Groups income statements in 2019. In particular the LDR growth balance has assisted the Group in retaining a healthy bottom line. However, with the central bank of Nigeria's (CBN's) new order that banks must maintain an LDR of 65% by December 2019, UBA will have to grow loans and advances faster, as it restrains increases in its deposit liabilities or grow loans and advances at a rate faster than growth of retail liabilities (such as current and savings accounts).   Between December 2018 and September 2019 customer deposits increased by +0.7% from N3.35trn in December 2018 to N3.37trn in September 2019.


Table 2  LDR of Selected Nigerian Banks 9 months 2019 

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The Group would need to grow lending relative to deposits by an additional +12% to +13% by December 2019. In other words the bank would have to increase lending by roughly N251.68m by the end of the year on the assumption that customer deposits remain flat.



Staying Liquid


UBA has made an effort at ensuring liquidity but after adjusting for 50% of its risk assets becoming sticky, the Groups liquid assets to total assets ratio was in the region of 47.52% in 9 months 2019 as against 61.72% in December 2018, suggesting tightening liquidity.   



About Leverage


The African lender saw its leverage remain stable as equity went up by +10.97% between December 2018 and 9 months ending September 2019. Equity rose from N483.47bn in December 2018 to N536.53bn in September 2019. UBA's debt to equity ratio of 8.41 (H1 2019 see Table 3 below) was 41 basis points above the median for listed companies on the Nigerian Stock Exchange in H1 2019. In the 9 months to September 2019 the Group saw a debt-to-equity ratio of 7.9 slide down from 8.41 in H1 2019 (see Table 3 below).    


Table 3 Selected Banks Debt to Equity Ratio H1 2019

Debt-to-Equity Ratio


Total Liabilities (N'm)

Shareholder's Fund (N'm)

Debt-to-Equity Ratio

Unity Bank








Stanbic IBTC




Union Bank




Zenith Bank








Fidelity Bank












Sterling Bank




Access Bank




Wema Bank




Ecobank (ETI)




Source: H1 2019 Results of Selected Nigerian Banks



Getting Inside UBA's SWOT



UBA's continental foray has shielded it against country risk associated with the Nigerian economy and subsequent adverse fiscal and monetary policy actions. Regular Central Bank circulars amending operating rules has worsened institutional risk for a number of local Nigerian banks. The UBA Group was in 9 months 2019 able to resist economic headwinds to grow both top and bottom line earnings.



Relative slow growth in total assets has improved the Groups return on average asset (ROaA), but this is a temporary and marginal growth as the banking conglomerate will need to increase risk asset growth which in turn will increase total assets and drag down ROaA by year end 2019. The weak growth of consumer deposits in 9 months 2019 assisted the Group to increase LDR but may be a sore point by the year end if loans and advances stall over Q4 2019.



Growth in some African countries should help the Group resist the recessionary orientation of the larger African economies of Nigeria and South Africa. The continental giant's diversity would be useful in the digital battles ahead as the electronic banking narrative would have different outcomes across continental markets.




 The challenges for UBA would be the shrinking of the global and continental economy as a result of a variety of conflicts across the world on a number of issues from trade between America and China, and Politics between China and Hong Kong and the festering Brexit concerns in Europe. Nigeria's outlook will still largely be determined by events in the international oil market.




Illustration UBA SWOT 9 Months 2019

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UBA's African optimism has paid off marginally, but whether it will continue to do so will depend heavily on how soon and fast the continental economy begins to pick up and how deep digital penetration goes across Africa's struggling economies. A fast-paced growth in digital application and adoption will enable UBA and similar corporate adventurers cut cost and provide prime services at minimal expenses. The jury is still out on UBA's gambit, but the foray so far looks promising and stable. 

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8.      UBA Appoints Abdoul Aziz Dia As a Non-Executive Director - May 09, 2019

9.      UBA Q1 2019 Results Review: Compelling Valuation Relative To Peers - May 07, 2019  

10.   UBA Plc Q1 2019 - Solid Outing To The Year - April 24, 2019 

11.   UBA Declares N28.66bn PAT in Q1 2019 Results,(SP:N6.85k) - April 23, 2019 

12.   UBA Announces notice of the Company's Board Meeting and Closed Period - April 3, 2019

13.   UBA Plc FY 2018 Conference Call and Earnings Presentation - The Key Takeaways - March 21,  20


Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

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