Like its peers, United Bank for Africa (UBA) is putting finishing touches to the process of raising fresh capital in compliance with the directive of the Central Bank of Nigeria (CBN), but what is unique about the bank’s move is that the bank has shattered the record in interim dividend payment in the banking sector on its way to raise capital. BAMIDELE OGUNWUSI, writes
Shareholders of United Bank for Africa (UBA) are expecting a rewarding recapitalisation exercise as the bank has submitted an application to the Securities and Exchange Commission (SEC) in the quest to raise fresh capital in compliance with the directive of the CBN.
Just as shareholders were expecting the bank to flag off its recapitalisation, the board of the bank has approved an interim dividend of N2.00 per ordinary share of 50 kobo for the half year ended June 30, 2024, a record breaking payment by the bank.
The N2.00 interim dividend will amount to total payout of N68.4 billion and translates to a 21.6 per cent dividend payout ratio while the 7.8 per cent dividend yield ranked UBA as the highest among other listed financial institutions that have declared interim dividend payout to shareholders on the Exchange.
While speaking during the bank’s Investors’ Conference held recently, the Group Managing Director, UBA, Mr. Oliver Alawuba said: “Our application has been submitted to SEC and we expect their approval in the next couple of weeks following which the market will be advised”.
Alawuba, stated that despite global economic challenges, including high inflation and political instability across some regions in Sub-Saharan Africa, UBA achieved double-digit growth, strengthening its position in the banking industry.
The interim dividend payout is on the backdrop of continuous impressive corporate earnings that have impacted on the financial institution intrinsic fundamentals, and underlying force that has impacted on its stock price on the floor of the Nigerian Exchange Limited (NGX) to N34 per share in its 52-week high.
During the conference, he highlighted the economic environment, both globally and regionally, and the strategic execution that has driven the bank’s strong financial performance.
“Despite global economic challenges, including high inflation and political instability across some regions in Sub-Saharan Africa, UBA achieved double-digit growth, strengthening its position in the banking industry.
“We have remained resilient and focused on executing our strategy, driven by our commitment to the principles of Enterprise, Excellence, and Execution,” he stated.
H2 2024
Going forward, Alawuba said the group is confident of a positive Outlook for the second half of 2024.
As UBA enters the second half of the year, it does so from a position of strength, he said, adding that the bank is well-positioned to continue its growth trajectory, with an emphasis on market leadership and customer satisfaction.
UBA is committed to full-year targets of 45 per cent deposit growth, 40 per cent loan growth, and a Return on Average Equity of 28 per cent.
Giving a breakdown of the bank’s financial Performance, Alawuba noted that UBA recorded Strong Growth across all key metrics.
Profit before tax surged to N401.6 billion, an impressive reflection of the bank’s effective risk management despite macroeconomic pressures.
Customer deposits grew by 34 per cent increasing from N17.4 trillion at the end of 2023 to N23.2 trillion in H1 2024, a sign of strong customer trust and loyalty
Total Assets rose by 37 per cent, reaching N28.3 trillion, up from N20.7 trillion at the end of 2023. Net Interest Income experienced significant growth, expanding by 143 per cent year-on-year to N675 billion, further demonstrating the bank’s strength in its core banking operations.
Further breakdown shows that in digital banking, UBA reported a 107.8 percent year-on-year growth in income, highlighting the bank’s leadership in digital transformation and financial inclusion.
On digital banking and Innovation, UBA’s investment in technology and innovation has paid off significantly, as income from digital banking and payments saw a dramatic increase, with funds transfer fees rising by 188.7 per cent and remittance fees jumping by 228 per cent.
Alawuba, emphasised that UBA’s strategy of leveraging technology and data analytics is a key driver of this growth, helping to boost financial inclusion across Africa.
UBA’s focus on trade facilitation also showed promising results, with income from trade transactions growing by 83 percent to N18 billion, reaffirming the bank’s pivotal role in regional and international trade.
According to the GMD, the bank’s strategic partnerships continue to propel its growth. UBA is a key partner in the Pan-African Payment Settlement System (PAPSS), enhancing cross-border trade and financial integration across Africa.
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Additionally, UBA has expanded its collaborations with telecommunications companies, with funds under management now exceeding $1 billion.
“UBA’s commitment to Environmental, Social, and Governance (ESG) initiatives remains strong. “At UBA, we are determined to ‘do good’ by supporting inclusivity and environmental sustainability. We have pledged to plant One Million Trees over the next one year as part of our environmental stewardship.
“We continue to roll out our Braille account opening packages to more countries, promoting inclusiveness for visually impaired customers. Our loans to young entrepreneurs, women-led businesses, and SMEs across Africa are part of our broader commitment to driving inclusive growth,” he stated.
UBA’s achievements in the first half of 2024 have been recognized through several prestigious awards, including Global Finance’s Best Bank in Frontier Markets and Best SME Bank in Africa.
These accolades affirm UBA’s leadership in the banking sector and its focus on delivering value across its diverse markets.
In his closing remarks, Alawuba expressed gratitude to UBA’s employees, customers, and shareholders, pledging continued dedication to achieving even greater milestones in the months ahead.
At another forum, Alawuba disclosed that in recent years, Nigerian banks have faced challenges from both external shocks (such as the global pandemic, volatile oil prices, and global monetary tightening) and internal pressures like inflation and Naira depreciation.
But, the current recapitalisation initiative in the sector, according to him, is not just about compliance with regulatory requirements, but about equipping the banking sector with the financial strength to be a reliable engine for economic transformation.
He said that with a stronger capital base, banks will have the cushion to withstand both external and internal shocks.
“This resilience is critical to maintaining market confidence and ensuring that the financial system can continue to function even during times of crisis. We saw the importance of this during the global financial crisis and the COVID-19 pandemic.
“A robust capital base also attracts foreign investments, as global investors seek stability and growth opportunities, “he stated.
The recapitalization policy must lead to a significant expansion in the provision of credit to the real sector, particularly in Agriculture, Manufacturing, and Infrastructure.
African business
Alawuba, said the bank has done considerably well in the continent and they have started recording growth
“East Africa remains Africa’s fastest-growing region, with a projected growth of 4.9 per cent in 2024. Seven economies (Rwanda, Ethiopia, Djibouti, Tanzania, Uganda, Burundi, and Kenya) are expected to grow by 5 per cent or more.
“Key drivers include government investments in infrastructure, connectivity, and trade facilitation, alongside efforts to modernize agriculture and boost productivity in services.
“After a slowdown in 2023, growth in Southern Africa is expected to pick up, reaching 2.2 per cent in 2024. For Zambia, real GDP is projected to grow by 4.5 per cent, driven by recoveries in mining, services, and manufacturing, supported by a rebound in copper prices and progress in debt restructuring under the G20 Common Framework.
“Overall, Sub-Saharan Africa’s outlook remains cautiously optimistic, though risks from debt, inflation, and political instability persist”.
Reactions
Capital market analysts have hinted that the N2.00 per share interim payout to shareholders in 2024 is a reflection of the board and management’s determination to reward shareholders, projecting over N3.00 per share total dividend payout by the financial year ended December 31, 2024.
Prominent shareholder activist, and a former Secretary of the Independent Shareholders Association of Nigeria (ISAN), Mr Adabayo Adeleke, said shareholders are expectant.
He said: “We are expecting the bank to roll its plans. UBA has done well with this interim dividend. This is a signal to other banks. It is good as this is happening as the bank is about to raise fresh capital. We, as shareholders, are waiting for the bank because the bank has been good to us”.
Another shareholder, Johnson Ademola, said the bank has shown that better days are ahead for the bank and shareholders.
“The decision to pay us an interim dividend of N2.00 per share is a pointer that the full year will be good. It is also an indication that whatever plan that the bank came up with in raising money will be embraced with open hands by shareholders. The bank may choose either a rights issue or public offer, we are ready”, Ademola, said.
