UBA Grows Profit To N113bn; Analyst Recommend Hold On Stocks

United Bank of Africa (UBA) Plc., one of the Tier 1 banks in Nigeria has released it’s Audited Financial Statement year ended December 2020 on Monday, 8th March 2021 to the investing public.

According to the publication, the Group’s Gross Earnings grew by 10.52% from ₦559.81 billion in FY’ 2019 to ₦620.38 billion in FY’2020, representing an increase of ₦60.57 billion in the absolute term when compared to correspondingFY’2019 amid the coronavirus and economic lockdown.

The growth in the Gross Earnings was driven by a 5.69 % increase in Interest Income to ₦427.86 billion in FY’ 2020, 14.82% increase in Fees and Commission Income to ₦126.94 billion in FY’ 2020, 58% increase in Net Trading and Foreign Exchange Income to ₦59.45 billion in FY’2020 on the backdrop of gains from the revaluation of naira and also, there was 7.96% decline in Interest Expense from ₦182.96 billion to ₦168.40 billion largely due to 17.13% reduction in expenses incurred on Deposit from Customers despite the rise in the Deposit from Customer in the FY’ 2020.

Consequently, the Group’s Profit-Before-Tax (PBT) and Profit-After-Tax (PBT) increased by 18.49% and 27.70% to ₦131.86 billion and ₦113.77 billion respectively in FY’ 2020, when compared to ₦111.29 billion and ₦89.09 billion in the corresponding period of 2019.

UBA Grows Profit To N113bn; Analyst Recommend Hold On Stocks

The Group in its Financial Position grew it’s Deposit from Banks and Customer from ₦4.10 trillion in FY’2019 to ₦6.09 trillion in FY’2020 partly due to a 48.09% increase in Deposits from Customers from ₦3.83 trillion in FY’ 2019 to ₦5.68 trillion in FY’ 2020 and also the 56.57% rise in the Deposit from Banks to ₦418.16 billion in FY’ 2020 from ₦267.07 billion in FY’ 2019.

Despite the 28.46% reduction in the Loans and Advances to banks from ₦108.21 billion in FY’ 2019 to ₦77.42 billion in FY’ 2020, the Loan and Advances, however, grew by 21.34% from ₦2.17 trillion in FY’ 2019 to ₦2.63 trillion in FY’ 2020 on the back of 23.96% increase in the Loans and Advances to Customers from ₦2.06 trillion in FY’2019 to ₦2.55 trillion.

The Total Asset and Total Liabilities increased by 32.61% and 38.84% to ₦10.33 trillion and ₦6.97 trillion in FY’ 2020 when compared to ₦7.79 trillion and ₦5.02 trillion FY’ 2019.

The Return on Average Asset (ROAA) reduced from 1.7% to 1.6%. This highlights the underutilization of the Assets at the bank’s disposal to generate more profits. While the Return on Average Equity (ROAE) grew to 17.21% in FY’ 2020 when compared to 16.60% in FY’2019.

Consequently, the Earning-Per-Share increased to ₦3.20 in FY’ 2020 when compared to ₦2.52 in corresponding FY’ 2019. Regardless of the growth in EPS, a dividend of ₦0.35 from FY’2020 retained earnings was declared by the bank for the period of 2020, as against the ₦0.80
paid in FY’2019.

Based on the performance of the bank in the year 2020. In spite of Covid-19, economic headwinds, and also the projected improvement in economic activities, we however reviewed our target price to ₦8.50 which is 18.06% upside potential to the closing price of 7.20 as of Tuesday, 9th March 2021.

Hence we recommend a HOLD on the stock.

GTI Research