UBA on Path to Improved Profitability, Management Assures Shareholders
Oduoza highlights factors responsible for bank’s growth
Pan-African financial services group, United Bank for Africa (UBA) Plc’s significant 36 per cent growth in the first quarter pre-tax profit is a clear indication that the bank is firmly on the path to delivering improved returns to shareholders despite rising volatility in global markets.
Mr. Tony O. Elumelu, Chairman, Board of Directors, said this recently during the bank’s Annual General Meeting (AGM) held in Lagos, while assuring shareholders that the bank’s diversified revenue base across the continent and improved yields on earning assets would drive the bank’s earnings going forward.
The bank’s first quarter result, covering the period January to March 2015, shows a significant 22 per cent growth in gross earnings to N83.1 billion as at March 2015 from a comparative figure of N68.1 billion made in the first three months of 2014.
Also, the bank recorded an even higher 36 per cent growth in profit before tax to N18.4 billion as at March 2015 compared to N13.5 billion as at March 2014. The bank’s
profit after tax also grew by 35 per cent to N17 billion from N12.6 billion within the same period.
Elumelu said that the bank’s financial performance in the first quarter was a reflection of its resilience and a significant improvement on the 10 per cent earnings growth to N290 billion recorded in the 2014 financial year.
“Strong fee-based earnings from credit-related transactions, e-banking, remittances and trade services provided the impetus for non-interest income growth; in addition to the strong trading gains in the year,” said Elumelu.
He assured the shareholders that the bank would continue to strengthen its risk management and corporate governance capabilities to ensure effective mitigation of existing and emerging risk factors in its global operations.
The bank, in the 2014 financial year, made a profit before tax of N56.2 billion while profit after tax grew modestly by three per cent to N47.9 billion, translating to N1.56 earnings per share.
While explaining the bank’s dividend policy in the current financial year, Elumelu said it was guided by the need to be prudent and retain cash for the bank’s future expansion initiatives.
“Though UBA is adequately capitalised with capital adequacy ratios in excess of regulatory requirement, we proactively raised additional capital during the year to further boost our capital base and it would not have been prudent to pay so much dividend after raising capital from the market. Shareholders should however expect higher dividend in the future,” said Elumelu.
In his own explanation of the drivers of the bank’s financial performance, Phillips Oduoza, the bank’s Group Managing Director/CEO, said it was the result of growing low cost deposits, enhanced customer service orientation within the bank, improving market share in the e-Banking space and the consolidation of the competitiveness of its African subsidiaries.
“In 2014, we defended our market share across Africa, despite intensifying competition and macroeconomic volatilities. UBA Africa continued to wax stronger, with increasing earnings contribution to the group. We grew our loan book by 14 per cent to cross the N1 trillion mark.
“We remained focused on creating quality assets as seen in the moderated impairment charge and overall cost of risk.
“We will leverage our competitive advantage inherent in our large customer base, vast geographical footprint, highly skilled workforce and cutting edge technology to continue to drive revenues,” said Oduoza.
Oduoza also explained that the steady growth trajectory in the bank’s operating income was a reflection of improving balance sheet optimisation, cross selling and product penetration, adding that despite the cost of doing business in Africa remaining relatively high and regulatory pressure constraining earnings in the year, the bank’s growth has a strong upside in the years ahead.
“Our African subsidiaries have witnessed a cumulative average growth rate of 14 per cent in the last three years and have more than doubled their profitability within the same period,” Oduoza said.
The bank, Oduoza added, has just completed upgrading its online banking platform, U-Direct, to bring about more stability, greater security and better user experience.
This is following the upgrade of the Bank’s Core Banking Application, from Finacle version 7 to version 10x, to usher in improved processes, faster turnaround time, and robust customer relationship management in a bid to drive operational efficiency in the bank’s operations.
Shareholders at the AGM expressed their support for the various initiatives taken by the bank to improve profitability and also approved all of the board’s resolutions including the dividend payment proposal presented at the AGM.
UBA Plc is one of Africa's leading financial institutions offering banking services to more than eight million customers across 700 branches in 19 African countries and three global financial centres.
With presence in New York, London and Paris, UBA connects people and businesses across Africa and the rest of the world through retail, commercial and corporate banking, innovative cross-border payments, trade finance and remittances.
Oduoza also hinged the growth recorded by the bank in the last financial year on the strength of three key financial ratios.
Specifically, he said the growth was boosted by noninterest income, which rose significantly to about 60 per cent and interest income arising from the increase in the volume of risk assets.
Oduoza made this known yesterday during an interview with Arise News, a THISDAY sister cable television station.
The third, he stated, was from the bank’s African subsidiaries, stressing that out of 18 African countries that the bank has outside Nigeria, 17 of them reported profits.
“So there was a strong contribution coming from Africa," Oduoza added.
On why the bank decided to pay a low dividend despite the growth, he said the bank’s shareholders are very satisfied with the 10 kobo dividend it paid because they are aware of the bank’s plans for the future.
According to him, “It is a balance between today’s performance and future growth. And we like to retain a substantial portion of our profit towards the growth of business for the future.
“In the future, the dividend is going to be far better than this but at this particular point in time, it calls for a lean dividend payout and that is basically what we have done.
“At our AGM last Friday, our shareholders were very happy with that and also understood the rationale behind the low dividend we paid."
Speaking on the cost of doing business in Africa, he said the major issue is the fact that African countries are deficient in infrastructure.
“We generate power, telecommunications and also the brick and mortar branches we use to serve the customers. What we have done is to start migrating the customers to electronic platforms because the electronic platforms are easier and cost effective. So we believe that the cost to income ratio would be going down as we migrate more customers to electronic platforms, “he said.
Probed on what UBA wants to achieve in 2015, Oduoza said: “In this financial year, we believe that all our 18 countries outside Nigeria are going to be profitable. And in the long run, I’m looking at a situation where 50 per cent of our activities will come from our African branches, and the other 50 per cent coming from Nigeria.
“Secondly we intend to deepen our presence in the electronic banking space and we are going to see a growth in our risk assets because funded income is very critical for our growth. It will be combinations of African countries, non-interest income and of course the risk assets contributing.
“We have an excellent risk asset quality; the nonperforming loan ratio is 1.6 per cent which is probably the lowest you can see in the industry. It is also within the ratio of the central bank’s 5 per cent. So we are going to see continuous improvement in the quality of assets.”