The Chairman and patriarch of United Bank for Africa (UBA), Tony Elumelu has announced that the bank is planning to inject billions more into its subsidiaries in Kenya, Tanzania and Uganda. According to Reuters, Elumelu made this remark on this sidelines of a news conference on Tuesday. According to him, expanding to these countries is core to their plans of making UBA the leader African financial services.
The report also claimed that UBA was now planning to expand from 18 African Countries to 25 African Countries. UBA has branches in Kenya, Tanzania, Sierra Leone, Uganda, Congo Brazzivile, Cameroun, Mozambique, Chad, Liberia, Ghana, Guinea, Senegal, Ivory Coast, Benin, Burkina Faso, Congo DRC, Congo DRC and Gabon. The UBA model has always been to be in the fore front of African banking and fits well into Mr Elumelu’s Africapitalism disposition.
The bank recently released its 2016 Q1 results where it reported a pre-tax profit of N18 billion a 1.6% drop from the profits reported a year earlier. The bank in its full year annual reports reported a 25% rise in profit after tax of N59.6 billion. For shareholders of the bank, its turnaround plans appear to be in full swing. The latest remark from the Chairman may however stoke some concerns considering that the bank is planning to expand to countries that has over the past few years being a drain in group profits.
For example, the three countries where it plans to inject capital have made back to back losses for the group. UBA Kenya reported a loss after tax of about N518,000 in 2015 (2014: -N494,000). It’s subsidiary in Uganda also reported a loss after tax N141 million (2014: -N876m) and the subsidiary in Tanzania it reported a loss after tax of N160 million (2014: N370 million). UBA Kenya actually has negative retained earnings of about 1.2 billion Kenyan Shillings. By injecting further capital into these subsidiaries, investors may once again be in line to take in some more losses. The three subsidiaries as at December 2015 had a combined Net Asset of about N3 billion, so we project about N1billion could be injected and another 1 billion or two invested in its other subsidiaries while exploring investments in new countries.
Mr Elumelu is known to be very conceited when it comes to ‘Africapitalism’ and may suggest nothing shareholders can do to stop such inroads even if it means costing them billions. According to him, “UBA was gearing up with a view to “harnessing the potential represented by the wider African economy through its expansion plans….Our intention is to be the leader in African financial services,” This by the way has been the plans since the days of old UBA and since he merged it with Standard Trust Bank. UBA is currently Nigeria’s third largest bank by Total Assets but trails the likes of GTB and Zenith Bank in profits.