There are strong indications that the United Bank for Africa Plc could unveil its recapitalisation bid, 20 years after it last sought fresh capital injection that saw rummaging everywhere and anywhere for the then N25 billion, at that time when many had not achieved the prevailing N2 billion.
Just as was the case between 2004 and 2005, the latest search for fresh funds was inspired by the Central Bank of Nigeria (CBN) through its directive that all banks raise their minimum paid-up equity capital and increase their buffer, thereby cushioning the effects of the massive devaluation in the Naira which had eroded their capital. It is also to enhance the capacity of Nigerian banks to undertake bigger ticket transactions, and to compete better against foreign players in the local and even more especially, the continental market which many now have outposts.
In line with the CBN directive, analysts believe that the recapitalisation exercise will offer UBA Plc an opportunity to recapitalise its Nigerian parent company, and the African subsidiaries that have over the years progressively grown their contributions to its top and bottom-lines, besides broadening the group’s balance sheet significantly.
In his 75-year, and especially over the past decade, the group has grown into a fierce competitor among the biggest and best for big ticket transactions in Nigeria and across Africa, in line with its motto as “Africa’s Global Bank.”
The African operations have significantly diversified operation, accounting for over 50% of its balance sheet considered a remarkable milestone that underscores its integration of economies across the continent, thereby de-risking it from the vagaries of the Nigerian business environment. This was achieved through sustained investment in both human capital and other resources in line with its global vision.
That vision saw the former Group Managing Director and Chief Executive, Mr. Anthony Elumelu, who is today chairman of the group, and his management team appointing a Managing Director to drive operation of subsidiaries across Africa. UBA Plc’s presence in key international financial hubs of New York, London, Paris, and Dubai, makes it the only bank of Sub-Saharan African origin with a truly global presence, is a testament to the group’s resilience, strategic innovation, and strong corporate governance.
Recall that the group’s current GMD, Mr. Oliver Alawuba was the immediate past Chief Executive of the entire African business outside of Nigeria, managing the businesses in Benin Republic, Burkina Faso, Cameroon, Congo Brazzaville, Congo Democratic Republic, Cote d’lvoire, Gabon, Ghana, Guinea, Kenya, Liberia, Mali, Mozambique, Nigeria, Senegal, Sierra Leone, Tanzania, Tchad, Uganda and Zambia. Each of these subsidiaries comes with its own regulatory frameworks and economic challenges, while transforming UBA from a national bank into a global financial institution with over 35 million customers.
UBA African As Growth Pole
The various African subsidiaries have also contributed significantly to the top and bottom lines of the group. From 36 percent of gross earnings income in 2017, the various subsidiaries garnered 34 percent in 2018, and 33 percent in the following year. But since 2019, they have progressively grown cumulatively contribution, first to 40 percent in 2020, reaching its peak of 46 percent in 2021, before dropping slightly to 44 percent a year later. It rose marginally to 45 percent in the 2023 full-year. It is expected that UBA’s African business could achieve as much as 50 percent this year and more in the years to come.Their contributions to the group’s profit line is even better, as the African arms accounting for 50 percent in 2017, soaring to 74 percent three years later, before slipping to 63 percent in 2021, 52 percent by 2022 and 41 percent at the end of last year.
As Alawuba noted while reacting to the group’s 2023 audited half-year report, “the three core geographical pillars of our business (Nigeria, Rest of Africa and Rest of the World) are making strong contributions to the Group profit, further justifying our global strategy and business positioning across Africa, UAE, France, UK and USA, and demonstrating the benefits of positioning UBA as the financial intermediary for Africa and the rest of the world.”
The group’s operations in the UK, United Arab Emirates, US, and France, have continued to also pull their weights, contributing to revenue and profit.
Value Creation For All Stakeholders
UBA’s strong financial performance, valuation, and growth prospects make it a compelling investment opportunity. This is given the expected primary market to further strengthen its position across the globe and create more wealth for investors with dividend income and price appreciation, after recording 52-week high of N34. Notably, UBA has been a significant attraction for foreign portfolio investors, as evidenced by its substantial FPI inflows.
Capital gains opportunity
UBA is distinguished for creating value and capital gains for investors judging by the increased liquidity of the stock on the NGX, just as its reliable dividend payout remains a function of its strong financial position that support consistent payout and provide regular income to shareholders. Sound corporate governance by the bank has reflected in the management team’s commitment to enterprise-risk management. UBA’s capital raising plan is an opportunity for expansion beyond Nigeria, including strategic international growth and IT infrastructure investments leading to a stronger financial position and higher net income.
Since 2012 the stock has tested a low of N1.63 each and consistently grown its earnings performance, progressively supporting dividend payout and capital appreciation. Below is UBA quarterly price action
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Offer Proceeds
It is expected that proceeds of the fresh capital will help to support the group’s human capital development across the various countries, with the possibility of acquiring more operating licences. This is apart from improving the group’s investment in digital technology and network infrastructure, while continuing to innovate for improved service delivery to today’s better enlightened customers.
In the process, the fresh capital raising will enable UBA Group support African economies, taking its pan-African strategy beyond banking as it deepens investment. It will significantly improve the group’s contributions, becoming better able to take on big ticket transactions in key and capital-intensive sectors on the continent like energy, agriculture, infrastructure, transportation, telecommunications and education as a veritable partner.
Such investments have over the years had a multiplier effect on the various economies, stimulating job creation, enabling industrial growth, and fostering economic prosperity. In this way, UBA will continue to help its host countries build their infrastructure to unlock long-term economic growth. The fresh capital injection will also help keep the group at the forefront of mobile banking and digital payment innovations with digital banking platforms which allow customers transfer money instantly, pay bills, and access loans without visiting a physical branch.
In the process, UBA Plc will further position itself in its mission of financial inclusion, particularly in Africa where vast populations remain unbanked, deploying mobile-based financial services, and opening more doors to millions of previously excluded individuals and businesses. In the process, it will contribute more to Africa’s digital banking revolution beyond technology with its digital platforms and network of branches that offer opportunities for millions of Africans to open accounts, secure loans, and engage in financial activities that were previously out of reach. In this way also, the group is better able to boost economic empowerment across the continent through more accessible financial products and services, supporting small and medium-sized enterprises (SMEs), agriculture, and other sectors vital to African economies.
Recognition Galore
As pointer to the good work UBA Group and its various subsidiaries across Africa, while creating jobs and enhancing economies of their hosts, they have accumulated recognition from far and near. Some of the most recent were the 2024 Best Bank in Frontier Markets by Global Finance, The Banker magazine’s Bank of the Year Awards 2023, clinching Bank of the Year Awards in eight countries: Cameroon, Tchad, Ghana, Cote d’Ivoire, Mozambique, Republic of Congo, Sierra Leone and Tanzania. This was in addition to being named Regional- Bank of the Year for Africa 2023.
That year also, Global Finance magazine also named UBA Plc subsidiaries Best SME Bank in Nigeria, Ghana and Mozambique; just as it won in three categories of: FMDQ Money Market Liquidity Provider, FMDQ FX Market Liquidity Provider, and FMDQ Dealing Member of the Year, at the 2023 edition of the FMDQ Gold Awards.
CSR Efforts
As part of its Corporate Social Responsibility (CSR) initiatives, the group has sustained its National Essay Competition. 15-year-old Usongobong Paul, from Akwa-Ibom State, emerged as the overall winner of the 2022 edition, beating 11 other finalists. The competition, now in its 12th year, had over 5,000 entries from students of senior secondary schools across Nigeria. The winner got a scholarship worth N5 million to study in any African university of her choice, as well as a brand-new state-of-the-art laptop among other goodies at the NEC 2022 Grand Finale, which was held at the Tony Elumelu Amphitheatre in UBA House, the group’s Marina, Lagos headquarters.
Global Business Magazine awarded it the Best CSR Bank in Ghana 2023; while International Business Magazine named it the Preferred Banking Platform Ghana; and Preferred Bank for Business Ghana all in 2023.
Earlier in 2022, the CSR Excellence in Education Award in the Adult Literacy Programme Category was given to UBA Zambia for implementing the UBA Foundation Read Africa Initiative.
In 2022, UBA Plc won The Banker magazine award of Bank of the Year 2022, winning the awards in six countries across Africa, just as it was listed among top 1000 global banks by The Banker Magazine.
African Integration
The group’s strategic foray into the African and global environment means that UBA Plc can serve clients doing business in both Africa and other parts of the world seamlessly, giving it a competitive edge over other African banks. These efforts have transformed the bank into a major facilitator of inter-African trade, and conduit of foreign direct investment to the various nations, while facilitating cross-border transactions.
In the process, UBA Plc has remained a critical player in the integration of African economies with global markets, while supporting cross-border trade, remittances, and investments that are essential for Africa’s economic development. This will enable the group compete effectively when the African Continental Trade Agreement (AfCTA) finally becomes operational.
While details of the plan by UBA Plc fresh capital is being eagerly awaited by equity investors and traders alike, it is expected that the audited result for the half-year ended June 30, 2024 will support its share price in the coming months as investors position for juicier returns on their investment post-offer.
