UBA PLC: Leading the African Banking Renaissance

Businessday analyst INNOCENT UNAH takes a look at UBA Plc solid 2016 performance, the banks rapidly growing African franchise and why investors should begin to take note too.

Adeleke Bala Okeke has just finished reading an investors’ note sent to him by his stockbrokers.

He smiled knowingly as he reveled in the refreshing evening breeze that swept through his study, ventilating the space in a heavenly caress.

He gulped the last pint of the Marques de Riscal Gran Reserva, his favourite Spanish wine, patting his paunch as he thought of how best to impress his adorable wife with the news of his latest suave investment move.

He had staked a handsome amount of money in shares of United Bank for Africa Plc, the foremost African banking powerhouse; the bank has grown his wealth massively.

Data from Bloomberg, the New York-based software, data, and Media Company, showed that as at Thursday, May 11 2017, Ochonma’s UBA investment has earned him a return in excess of 62 per cent from the beginning of the year to date.

The Nigerian Stock Exchange (NSE) by comparison appreciated only 6.25 per cent within the same period.

UBA’s performance has been sterling, pleasantly confounding even the most astute of investment analysts.

One of Nigeria’s prominent investment research firms confirmed the surprising performance in its recent note to investors.

“UBA FY (full year) 2016 numbers came ahead of ours and consensus estimates. Net Income was up 21% y/y (year-on-year), coming in 15% ahead of our estimate and 7% ahead of consensus,” the note said.

But the impressive news doesn’t stop there! Some investors who spoke to BusinessDay on why they chose to stake their fortune on the continental banking giant, said that three factors stand out for them: the bank’s loan are well managed relative the other banks, the outlook looks good, and earnings are sustainable.

UBA’s enriched risk management and control framework with clear definition of risk appetite yielded fruit in the three months ended March 31 2017, as non-performing loans (NPLs) stood at 3.90 per cent, lower than the 5 per cent threshold set by the Central Bank of Nigeria (CBN).

Fig 1: NPL Ratio of Tier-One Banks as at 31/12/2016

Inundated with the unceasing plaudits for the bank, Businessday explores the evolution of the banking behemoth. Where is the bank presently? How has it shaped banking in Nigeria and Africa and what footprints it has bequeathed?

The Metamorphosis of a Giant

UBA commenced its banking voyage in 1949, when it was birthed as the British and French Bank Limited (BFB). BFB was a subsidiary of Banque Nationale de Crédit (BNCI), Paris, which transformed its London branch into a separate subsidiary called the British and French Bank.

Its shares were held by Banque Nationale de Crédit and two British investment firms, S.G. Warburg and Company and Robert Benson and Company.

A year later, BFB opened its offices in Nigeria to break the monopoly of the two existing British owned banks in Nigeria then. BFB conducted its banking business under the watch of the British colonial government until the twilight of the administration.

On 23 February 1961, one year after Nigeria’s independence in 1960, an entity was incorporated as a limited liability company through the instrumentality of the Companies Ordinance (Cap 37) 1922, to give BFB not only a Nigerian, but also an African focus.

That entity was christened the United Bank for Africa. It took over the assets and liabilities of BFB and so started its task of given Nigerians, nay Africans, a truly home-grown banking service.

In 1970, UBA listed its shares on the Nigerian Stock Exchange (NSE); it also became the first Nigerian bank to undertake an Initial Public Offering (IPO). UBA is the first sub-Saharan bank to take its banking business to North America when it opened its New York Office (USA) in 1984 to offer banking services to Africans in Diaspora.

Emergence to National Prominence

UBA, one of Nigeria’s biggest and oldest banks, teamed with the then Standard Trust Bank, a dynamic and fast-growing ‘new generation bank’ in Nigeria incorporated in 1990, to form a rejuvenated UBA.

The merger, which was one of was one of the biggest deals to be effectuated on the NSE, was concluded August 1, 2005.

Subsequently, UBA acquired Continental Trust Bank in the same year, further expanding the UBA brand.

The bank’s expansion appetite was fed just a year later, in 2006, when it added Trade Bank that was under liquidation by the Central Bank of Nigeria (CBN).

Fig 2: UBA Total Assets

Source: Company 2016 Financials; BusinessDay Analysis

“The consolidated UBA was born out of a desire, to lead the domestic sector to a new era of global relevance by championing the creation of the Nigerian consumer finance market, leading a private/public sector partnership at supporting the acceleration of Nigeria’s economic development and growing the institution from a banking to a one-stop financial services institution, while spreading its footprints across Africa to earn the reputation as the face of banking in the continent,” said a statement from the bank.

From then, the bank has not stopped its inexorable drive to impact the Nigerian and African continent in more ways than banking.

Rewarding Shareholders

UBA has rewarded shareholders by paying increasing dividends consistently and over the last 3 years.

Source: Cashcraft, BusinessDay Analysis

In addition, the bank’s share price has appreciated 41.7 %, growing rising from N4.51 per share at the commencement of trading on January 3 this year, to N6.38 as at the close of trading on Tuesday, May 16, 2017.

Source: Cashcraft, BusinessDay Analysis

UBA’s Social Impact

UBA has used its Corporate Social Responsibility (CSR) programme, which is anchored by the UBA Foundation, to fulfil its social contract with the communities in which it operates, and their people.

UBA is the first Bank in Nigeria to establish such a foundation because of its acute empathy and concern for the society.

Today, the UBA foundation is a beacon for other corporate organisations in their CSR efforts, making these organisations not to see CRS as a marketing tool, but as an instrument to promote sustainable development in the society.

UBA has spent huge money for such annual projects as the UBA Foundation National Essay Competition for Senior Secondary School students in Nigeria and some African Countries, prostate cancer awareness campaign, and the Read Africa initiative. It has also donated hugely to national institutions – hostels, lecture theatres, hospital equipment, generators, and many others.

UBA: Growing into a Continental Colossus

Inspired by its burning desire to build a strong domestic and African brand, the bank intensified its African footprint, exporting its unique banking services to 18 African countries.

Today, UBA is one of Africa’s leading financial institutions offering universal banking to about 14 million customers across over 1,000 branches.

It is also well established in three global financial centres: New York, London, and Paris.

From Ghana, Benin Republic, Cote d’Ivoire, Burkina Faso, to Guinea, UBA’s impact is being beneficially felt; it is delivering lasting imprints across various spheres of lives of the people in Chad, Cameroon, Kenya, Gabon, Tanzania, Zambia, and Uganda.

Businesses of the citizens of Liberia, Sierra Leone, Mozambique, Senegal, Congo DR, and Congo Brazzaville have been catalysed by the entrance of UBA into their climes.

As the bank said, “UBA is your partner for banking services for Africans and African related.”

UBA and Africa: A symbiotic Union
Across Africa, the UBA has made several strides in infrastructure and investment.  Tony O. Elumelu, Chairman of the Board of the bank, said that the Bank’s commitment to African growth has been pervasive, impacting various sectors.

“Across Africa, the Bank has won and executed important mandates, which demonstrate our ability and commitment to finance growth across our continent,” Elumelu said in his address to the bank’s shareholders on the performance for the 2016 financial year.

How so true! With over $895 million committed to more than 6 projects in West, East and Central African countries, UBA is truly a quintessence of African continental big brother.

Fig 4: Selected UBA Projects

SIZE ($ Million)
Trade financing to the Senegalese state oil company, SAR
Provided by UBA Senegal
Oil and Gas
Road Infrastructure Finance
Arranger and Bank Agent
Trade financing to SONARA
Provided by UBA Cameroun
Oil and Gas
Trade financing for SNPC
Provided by UBA Congo Brazzaville
Congo Brazzaville
Oil and Gas
Construction Financing
financing the construction of a stadium in Douala, Cameroon, to host the African Cup of Nations in Cameroon in 2019

Source: Company’s 2016 Financials; BusinessDay Analysis

In return for the massive support UBA has given their economies, the African subsidiaries have added zest to the bank’s continental vision. The contributions of the African subsidiaries to UBA’s sterling performance have increased in the past 5 years.

According to the bank’s 2016 financial statement, the subsidiaries contributed close to 31% of gross earnings, a consistent improvement from barely 20% in 2012.

Fig 5: Contribution from rest of Africa to PAT

Source: Company’s 2016 Annual Report; BusinessDay Analysis

In a period when the local currency, the Naira had weakened considerably against other currencies, the bank’s performance was boosted by foreign currency translation of the transactions of the various subsidiaries.

Moreover, the strong earnings of the subsidiaries reflect the robust growth of the subsidiaries’ assets, an observation captured by the bank’s 2016 financial statement.

“Partly driven by the weakness of Nigerian Naira relative to other African currencies, the African subsidiaries ex- Nigeria (UBA Africa) doubled interest income and grew non-interest income by 17%.”

“Overall, UBA Africa grew gross earnings by 69%, contributing 30% of the Group’s top-line, from 21% in 2015 financial year. Interestingly, we had over 50% growth in dividends from subsidiaries, reflecting the stronger performance from the foreign operations and impact of Naira devaluation on FCY dividend income.”

Marching Forward

The Bank is unwavering it its resolve to dominate the African banking space and become the bank of choice for every African.

As Tony Elumelu, pioneer post-merger managing director and current chairman of UBA said in the 2016 annual report, the bank’s pan-African network, with staff of more than 25 nationalities, and most importantly its pan-African customers are of ever-increasing importance to UBA.

“We remain optimistic about the global economic environment and our commitment to being Africa’s global bank is unwavering,” Elumelu told the shareholders.

Resolutely committed to funding impactful and bankable projects across Africa, the bank has used its African presence to enlarge the size of its risk assets.

As Kennedy Uzoka, UBA’s chief executive officer informed shareholders recently, the lender’s African subsidiaries buoyed its loan book by 18 per cent as it funded various business expansion and infrastructure projects.

From every indication, UBA is already looking beyond the African continent to magnify its impact in the banking milieu. Elumelu said the bank’s continued expansion is inflexible, making it the only African bank to operate in New York, London and Paris.

UBA’s unquenchable thirst for African impactful expansion is fuelled by its unapologetic belief that Africa is on its way to monumental growth.

It is convinced that its African mission will succeed with unassailable pace, given that its pan-African operations have delivered on the promises made at the outset of its growth strategy as the bank has begun to reap the benefits of being one the largest banking networks in Africa.

As the African continent wait expectantly for the rapid emergence of UBA as the unarguable continental banking powerhouse, all indices signal that UBA will not only meet, but outclass the expectations of over 1 billion Africans across 54 countries.