UBA Market Valuation Spikes By 101% in 12-month 

Pan-African lender, United Bank of Africa (UBA) Plc, has seen a significant jump in its market valuation ahead of the first half of 2023 earnings release. Shareholders wealth has increased significantly amidst improved sentiment in the market.

In the first quarter of 2023, UBA Group had a good start to the year with a solid earnings record, consolidating on its past year’s profitability performance. In the second quarter of the year, analysts expect the financial services group to beat its profit target on expected gains from foreign exchange (FX) revaluation and sustained interest rate hikes.

Amidst an expectation of interim dividend declaration, the group saw its market valuation above N500 billion in the stock market as value hunters in the local exchange take positions on expected earnings attraction.

In the last 12 months, UBA group has doubled down on its shareholders’ investment, apart from total dividend payment made for its upbeat earnings beat in 2022. Over the period, its share price has gained more than 101%, boosting shareholders’ confidence in the group’s future earnings stream.

As of Friday’s close, the group’s 34.199 billion shares outstanding were valued at N506.151 billion as equities investors in the market spot value ahead of its second quarter earnings release.

From the beginning of the year to date, UBA’s share price has gained more than 90%, pushing every N1 million investment in the company’s stock to N1.9 million as of Friday’s close.

Its share traded at N7.60 on the last trading day on December 30, 2022. Though with highs and lows trading session, it has maintained an uptrend before it reached N14.50 last week after it lost 40k from the previous week’s close.

The company is forecast to post earnings per share of ₦5.38 compared to ₦4.84 last year.

In the first quarter of 2023, the financial service boutique posted a 29% year-on-year increase in post-tax profit, according to details from its unaudited financial statement submitted to the regulators.

UBA surged to N53.59 billion in the first quarter from N41.50 billion reported in the comparable period in 2022. Consequently, the bank’s earnings per share grew by 29% to N1.47 versus N1.14 reported in the comparable period.

Analysts said the expansion in the group’s EPS was buoyed by the impressive growth across the core and non-core income in the first quarter of 2023 – translating to an EPS growth rate of 16.4%.

Specifically, income from core operations spiked by more than 53% year on year while the non-core side delivered a 35.3% year-on-year growth.

UBA generated N191.88 billion as interest income, which translated to a 53.4% year-on-year increase in the period. The strong increase was driven by gains recorded across all the major lines.

Importantly, the financial services behemoth group generated higher income from loans and advances to customers, investment securities, cash and bank balances, and loans and advances to banks.

This was supported by changing market dynamics that have strengthened the net interest margin, specifically sustained monetary policy tightening set out to combat the inflation surge in Nigeria.

A higher interest rate environment affects both sides of the divide, just as the bank’s lending was repriced, fund suppliers began to demand higher rates to part with their money.

In Q1-2023, UBA recorded a 79.7% growth in interest expense (to N72.25 billion) due to the higher cost incurred on deposits from financial institutions, borrowings, and deposits from customers.

Also supporting earnings, non-interest income advanced during the period by 35.3% to N56.08 billion, driven by gains from investment securities, net fees and commission income, and FX trading. In its financial scorecard, UBA reported that operating income increased by 38.1% year on year to N168.68 billion.

With the hydra-headed hot red inflation rummaging the economy, the group saw a 38.2% spike in operating expenses, pushed higher by regulatory costs. The Pan Africa lender’s profit-before-tax grew by 38.0% to N61.37 billion.

According to analysts’ estimates, UBA is not significantly more volatile than the rest of Nigerian stocks over the past 3 months, typically moving +/- 9% a week.

In addition, some equities analysts said its weekly volatility (9%) has been stable over the past year, adding that the stock is good value based on its price-to-earnings Ratio (2.8x) compared to the peer average (4.4x).

The group is expected to grow earnings and revenue by 11.6% and 14.5% per annum respectively. Ranked among dividend aristocrats in the Nigerian market, equities analysts said UBA’s dividends in 3 years are forecast to be well covered by earnings.