**Rating**: Buy **Current Market Price**: N8.40

**Loan to Deposit Ratio**: 45.31%**Year High**: N9.25**Year Low**: N6.25**Fair Value**: N12.26**Equity Analyst**: Tunde Segun Jeariogbe

**Key Investment Ratios**

- This report ca the nine months financial performance indices of United Bank for Africa UBA as recently released by the board, we compared same with similar numbers released at the end of the 2020 third quarter to establish growth, projections and make recommendations accordingly.
- Generally, the bank’s top line at the end of the quarter improved marginally while the bottom line stood well above that of the comparable period by marginal points.
- The bank did not meet up with the regulatory standard for Loan to Deposit Ratio (LDR), having dispensed only 45.31% of its deposits in the form of loans, lower than the 65% regulatory threshold.
- In our opinion, given the current economic state, the move to lower loan exposure is a welcome development, as this will help in lowering risk.

**Company Figures**

- Gross Earnings through the period was valued at N461.86 billion, the same as 1.81% above the N453.67 billion posted in its 2020 nine months financials.
- Interest Income improved by a marginal 8.38% to N343.70 billion, against N317.12 billion in the corresponding quarter.
- Interest Expenses is currently valued at N114.44 billion below the N131.12 billion posted at the end of 2020 third quarter.
- Operating Expenses is estimated at N189.70 billion, higher than N178.28 billion used through the 2020 third-quarter business session
- Profit before Tax is estimated at N123.54 billion versus N90.37 billion in the comparable quarter of 2020.
- Having taken care of the Tax Expense, the management of UBA reported N104.59 billion as profit for the quarter, this was 35.61% higher than the N77.13 billion earned in 2020.
- Due to the Fair value changes on equity investments at FVOCI, the Total Comprehensive Income for the quarter stood at 2.67% over the comparable period at the stated N92.94 billion versus N90.52 billion.

- At the end of the 2021 third-quarter business session, the bank’s Total Assets is valued at N8.34 trillion, the same as 18.27% above the N7.05 trillion stated in its 2020 third-quarter earnings document.
- Total Liabilities equally stood above comparable year by 17.90% to stand at N7.55 trillion versus N6.40 trillion in 2020.
- Net Assets is valued at N798.27 billion as against N655.32 billion posted at the end of the corresponding quarter.
- Total Deposit received through 2021 nine months is estimated at N6.63 trillion, this is 18.46% above N5.60 trillion in 2020.
- Total Loans and Advances stated in the 2021 third quarter financial documents is N3.00 trillion, this is 22.72% higher than the N2.45 trillion posted in 2020.
- See the above table for details.

**Financial Strength/Solvency Ratios**

- Debt Ratio which compared Total Assets to Total Liabilities stood at 90.44% as against 90.72% in the corresponding quarter. Please note that the high debt ratio is typical of financial institutions.
- Total Debt for the nine months can replicate equity in 9.46 times against 9.77 times replicate in the corresponding quarter. As noted above, this is because of the deposit accepting nature of the financial institutions.
- Equity Ratio which compared Equity to Total Assets stood at 9.56% as against 9.28% in the corresponding quarter.
- Estimated Beta value for UBA as at the time this report was compiled stood at 0.98x this stood below market beta and the industry average as of the time this report was compiled.

**Profitability Ratios**

- Pre-Tax Margin stood up by 34.07% to stand at 26.71% against the 19.92% estimated at the end of 2020 third-quarter financial numbers.
- Interest Expenses to Gross Earnings dropped by 14.27% to 24.78% against the previously estimated 28.90% in the corresponding quarter.
- Return on Average Equity through the quarter was 13.10% against 11.77% in 2020.
- See the table below for detailed profitability ratios and comparisons.

**Efficiency Ratios**

- Operating Expenses for the period is estimated as 41.07% of the Gross Earnings figure, this is 4.52% above the 39.30% in the corresponding period.
- Gross Earnings is the same as 5.53% of the Total Assets valuation at the end of the quarter, this is 3.59% above the 6.43% estimated in 2020.
- It was equally established that 45.31% of the total deposits for the period was given out a loan this is 3.59% above the 43.74% of deposit given our as loan and advances through the first nine months of 2020, and lower than the regulatory standard of 65%.

**Investment/Valuation Ratios**

- At the end of the quarter, N3.06 was earned on each unit of UBA shares. This is higher than the N2.26 earned per share in the 2020 third-quarter business session.
- Our nine months adjusted P/E ratio stood at 0.92x as against 1.25x in the corresponding quarter of 2020
- The above mentioned earnings per share is the same as the 36.41% yield of the price of UBA on the floor of the exchange when the result was released to the investing public, this is a higher yield when compared to the 26.69% yield of 2020 third quarter.
- Estimated Book Value per shares of UBA is currently N23.34, same as 21.81% above the N19.16 estimated at the end of 2020 third quarter.
- Thus, Price to Book Value stood at 0.36x as against 0.44x. This simply implies that the stock is currently sold below its book value on the floor of the exchange.

**Valuation**

While trying to place a fair value on each unit of UBA Holdings shares, we considered the average of two valuation models. FCFE Stable Growth Model valued the stock at N19.53 while H-Model placed the price at N4.99. We therefore arrived at an average value of **N12.26** for each unit of its listed shares. Thus, we rated UBA shares a BUY given the gap between our valuation and the current market price.