United Bank for Africa (UBA) Plc is on the top list of companies with well-rounded performance. UBA’s top-of-the-chart performance at the stock market combines with considerable growth in all key fundamental indicators to make the bank the best performing banking stock in recent period. Capital Market Editor, Taofik Salako, in this report, reviews the interplay of fundamental earnings and share price appreciation
United Bank for Africa (UBA) Plc outperformed all banking stocks in the first quarter of 2017 with a share price appreciation of 28.22 percent. It had recorded the second highest price gain of 33.1 percent in 2016, just slightly under three points behind Guaranty Trust Bank (GTB), which led the sector with 35.9 percent.
Altogether, UBA’s share price had grown by more than 60 percent in the past 15 months, the highest by any bank and one of the few bright spots in the long-running depression at the stock market. Average return at the Nigerian Stock Exchange (NSE) in the first quarter of 2017 was negative at -5.05 percent.
The NSE Banking Index was down by 0.03 percent while the NSE 30 Index, which tracks large-cap stocks, was almost on the average with a three-month return of -4.93 percent.
In 2016, the stock market had recorded a full-year average return of -6.17 percent, equivalent to net capital loss of N604 billion.
Only 19 companies, including three banks, recorded a capital gain of 20 percent and above in 2016, underlining the general downtrend that marked price changes during the period. A long-running depression had seen quoted equities losing N4 trillion in the past three years, including N1.75 trillion and N1.63 trillion in 2014 and 2015 respectively.
UBA’s share price appears to be riding on the crest of positive analysts’ reviews. There is almost analysts’ consensus on the attractiveness of the UBA.
Investment research and rating firms such as Renaissance Capital, CSL Stockbrokers, Fitch and Augusto among others had maintained that UBA has strong fundamentals to support substantial price appreciation. UBA Group’s audited report and accounts for the year ended December 31, 2016 supported the positive view of its earnings potential, in spite of the Nigerian economic recession.
Key extracts of the Group’s audited report showed impressive growths in the top-line and the bottom-line as it continued to expand its assets base. Group’s gross earnings rose by 21.9 percent from N314.84 billion in 2015 to N383.65 billion in 2016. Interest income had grown by 15 percent from N229.63 billion in 2015 to N263.97 billion.
With 2.9 percent increase in interest expense from N96.03 billion to N98.77 billion, net interest income rose by 23.7 percent to N165.2 billion in 2016 compared with N133.6 billion in 2015. This underlined the profitability of the group’s core banking business.
Group profit before tax grew by 32.4 percent to N90.64 billion in 2016 as against N68.45 billion in 2015. After taxes, net profit rose by 21.1 percent from N59.65 billion to N72.26 billion. With these, earnings per share increased from N1.79 in 2015 to N2.04 in 2016.