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UBA Records 13% Earnings Growth and Delivers N111billion Profit

UBA has announced its audited results for the full-year ended December 2019, recording impressive growth across the top and bottom lines.

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  • Gross Earnings Crosses the N0.5 trillion mark
  • Contributions of Ex-Nigeria operations’ now at 46%
  • Proposes Final Dividend of N.80

Pan-African financial institution, United Bank for Africa Plc (UBA) has announced its audited results for the full-year ended December 2019, recording impressive growth across the top and bottom lines.

According to the 2019 financials filed at the Nigerian Stock Exchange (NSE) on Friday, February 28, 2020, Africa’s global bank’s gross earnings grew by 13.3% to N559.8 billion, compared to N494.0 billion recorded in the corresponding period of 2018.

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The Bank’s total assets also grew significantly by 15.1% to an unprecedented N5.6 trillion for the year under review. This is the first time the Bank’s gross earnings and assets will respectively cross the N500billion and N5trillion marks.

Financial Empowerment: UBA Launches ‘Click Credit’ to Ease Access to Cash for Customers, UBA Records 13% Earnings Growth and Delivers N111billion Profit

Notwithstanding the challenging business environment in Nigeria, the Bank’s Profit Before Tax was impressive at N111.3 billion, compared to N106.8 billion at the end of the 2018 financial year. Furthermore, the Profit After Tax rose by 13.3% to N89.1 billion compared to N78.6 billion recorded in 2018. On the cost side, Operating Expenses grew by 10.1 percent to N217.2 billion, as against N197.3 billion in 2018, well below average inflation rate within the period, a reflection of cost efficiency gains.

These results depict the Bank’s deepening of its Pan-African business strategy, given the growth in the contribution of its 19 African subsidiaries to the Group’s net earnings and total assets. Ex-Nigeria Operations’ contributed 46% to the Group’s Profit Before Tax(PBT) in the year under review.

(READ MORE: UBA reports a 13.3% profit increase in audited FY 2019 financial statement)

In addition, UBA has been deploying innovative lifestyle products to expand its market share across Sub-Saharan Africa, leveraging its presence in the United Kingdom, United States of America and France, to build a true Africa’s Global Bank, facilitating trade and capital flows between Africa and the rest of the world.

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In its tradition of rewarding shareholders, the Bank proposed a final dividend of 80 kobo for every ordinary share of 50 kobo for the financial year ended December 31, 2019. The final dividend which is subject to the affirmation of the shareholders at its Annual General Meeting will bring the total dividend for the year to N1.00, as the Bank had paid an interim dividend of 20 kobo earlier in the year.

UBA recorded a remarkable 20.2% growth (to N2.1 trillion) in loans to customers, whilst customer deposits increased by 14.4% to N3.8 trillion, compared to N3.3 trillion recorded in the corresponding period of 2018. This reflects increased customer confidence, enhanced customer experience, early wins from the ongoing business transformation program and the deepening of its retail banking franchise.

Commenting on the result, the Group Managing Director/CEO, Kennedy Uzoka noted that the year 2019 was important for UBA Group, as it gained further market share in most of its countries of operation.

 “The year 2019 was a very remarkable one for UBA given the adverse market developments. Nonetheless, we achieved sizable growth in the balance sheets and earnings, even as we reposition the Bank for the future. Gross earnings crossed the N500 billion threshold to N559billion, whilst total assets also crossed the N5 trillion mark for the first time to N5.6trillion.

“Our strategy remains centered around unparalleled service to our esteemed customers. Accordingly, we are making significant investments in a technology-driven transformation journey.  We have recorded early gains as shown in the 39% growth in electronic banking income to N38.8bn in 2019 from N27.9bn in 2018. Our businesses are gaining commendable share in their markets across regions in Africa, as we deepen the scale and scope of our operations.”

Continuing, Uzoka said; “I am indeed excited about the synergy we have built within the UBA Group and the significant progress we have made in our transformation drive. We have positioned the Bank as a truly pan-African banking franchise, leveraging our operations in France, the UK and the USA, to deepen intra-African trade, and facilitate capital flows between Africa and the rest of the world.

“In 2020, we will pursue the aggressive deepening of market share in all our subsidiaries, leveraging technology, rich human resources and our customer-first strategy to win in all the markets we operate, notwithstanding the challenges of our operating environment”.

(READ MORE: Financial Empowerment: UBA Launches ‘Click Credit’ to Ease Access to Cash for Customers)

Also speaking on the performance, the Group CFO, Ugo Nwaghodoh emphasized that the Bank well-positioned to sustain impressive performance across key financial indices, adding that already, some of its previous investment in digital and technological transformation is already paying off significantly.

“We navigated the fragile yield environment in our largest market, to deliver an 8% growth in net interest income to N221.9billion. This was bolstered by a 7.8% and 13.9% growth in interest income from corporate loans and investment securities respectively, as well as a 4.0% cost of funds driven by our stable retail deposits. Resulting from cost-efficiency gains within the year, the cost-to-income ratio moderated to 62.7% (64% in 2018), whilst profit for the year grew 13.3%, to N89.1billion, translating to 16.2% return on average equity (RoAE),” Nwaghodoh said.

United Bank for Africa Plc is a leading Pan-African financial institution, offering diverse banking and payments services to more than eighteen (18) million customers, across 1,000 business offices and customer touchpoints in 20 African countries. With a presence in New York, London and Paris, UBA are connecting people and businesses across Africa through retail, commercial and corporate banking, innovative cross-border payments and remittances, trade finance and ancillary banking services.

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Business News

IMF advises banks to suspend dividend payment

However, halting dividend payments may not go down well for many retail and institutional investors, who rely on bank dividends for regular income.

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In an article published on its website, International Monetary Fund (IMF) Managing Director, Kristalina Georgieva, advised banks to halt dividend payment for now. According to her, with the expectation of a deep recession in 2020 and partial recovery in 2021, banks’ resilience will be tested. Therefore, having in place strong capital and liquidity positions to support fresh credit will be essential.

According to the article, one of the steps needed to reinforce bank buffers is retaining earnings from ongoing operations which are not insignificant.

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IMF staff calculate that the 30 global systemically important banks distributed about US$250bn in dividends and share buybacks last year.

READ MORE: State Governments: Another cycle of non-payment of salaries to begin soon

In a circular dated January 31, 2018, the Central Bank of Nigeria (CBN) stipulated new conditions for eligibility of Nigerian banks to pay dividend and the quantum of dividend to be paid out by banks who are eligible. Prior to the release of the circular, dividend payout policy for Nigerian banks had been spelt out in Section 16(1) of BOFIA 2004 (as amended) and Prudential Guidelines for DMBs of 2010. The circular provided guidelines and restrictions around divdidend payout for banks based on NPL ratio, CRR levels, and Capital Adequacy Ratio (CAR).

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However, there were no regulatory restriction on dividend payout for banks that meet the minimum capital adequacy ratio, have a CRR of “low” or “moderate” and an NPL ratio of not more than 5%. However, it is expected that the Board of such institutions will recommend payouts based on effective risk assessment and economic realities. Indeed, current economic realities demand caution.

Current economic realities mean that banks face asset quality threats, further devaluation threat which may impact capital in some cases, and lower profits which in turn affects the quantum of capital retained. Ideally, these should reflect in NPL ratio and CAR ratio and should immediately restrict banks’ ability to pay dividend. However, there is usually a time lag before these ratios begin to reflect the new economic realities. Therefore, IMF’s advise may come in handy for many banks.

(READ MORE: Software security limitations cited as major reason for Covid-19 bank rush)

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That said, halting dividend payments may not go down well for many retail and institutional investors, who rely on bank dividends for regular income. Banks like Zenith and Guaranty Trust have a good history of consistent dividend payment with attractive yields which is a major attraction for many shareholders.

IMF advises banks to suspend dividend payment

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Economy & Politics

CBN reduces MPR to 12.50%, holds other metrics

Central Bank of Nigeria (CBN) has reduced the Monetary Policy Rate (MPR) from 13.50% to 12.50% and retains CRR at 27.5%, Liquidity ratio at 30%.

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The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has reduced the Monetary Policy Rate (MPR) from 13.50% to 12.50%.

Governor, CBN, Godwin Emefiele, disclosed this while reading the communique at the end of the MPC meeting on Thursday in Abuja.  Meanwhile, other parameters such as the Cash Reserve Ratio  (CRR) remained at 27.5%, Liquidity ratio at 30%.

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Highlights of the Committee’s decision

  • MPC cuts MPR by 100 basis points to 12.50%
  • CRR stood at 27.5%
  • The Liquidity Ratio was also kept at 30%

According to Emefiele, the decision of the MPC to reduce the Monetary Policy Rate  was informed by the impact of the Covid-19 pandemic on the economy, increased inflationary pressure, restrictions in international trade and more.

He highlighted the decline in the nation’s GDP as well as the decline in the manufacturing and non-manufacturing purchasing index which were attributable to slower growth in production, rate of unemployment, amongst others.

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Economy & Politics

Buhari seeks approval from green chamber to borrow fresh $5.5billion

FG also seek approval for the revised 2020-2022 mid-term expenditure framework (MTEF) which became necessary as a result of the crash in crude oil prices and the cut in the production output.

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President Muhammadu Buhari is seeking the approval of the House of Representatives to borrow fund to finance capital projects at the federal and state (to support state governors) levels in the 2020 budget.

This request was disclosed via the official twitter handle of the House of Representatives.

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The president’s letter, which indicated that the fund would be sourced locally and internationally, was read on the floor of the House of Representatives by the Speaker, Femi Gbajabiamila, during plenary on Thursday, May 28, 2020.

In the letter to the lower chamber, Buhari, is also seeking the approval for the revised 2020-2022 mid-term expenditure framework (MTEF) which became necessary as a result of the crash in crude oil prices and the cut in the production output.

Although the tweet did not contain the total amount of loan that is being requested, reports suggests that the President is seeking approval to borrow the sum of $5.513 billion from external sources to finance 2020 budget deficit and support state governments to meet challenges caused by the coronavirus pandemic.

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Details shortly…

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