Company Analysis

UBA Plc: Earnings Grow, But LDR Needs Upgrade, Amid Robust Balance Sheet

Rating: Buy
Current Market Price: N7.15

Loan to Deposit Ratio: 43.20%
Year High: N9.25
Year Low: N6.85
Fair Value: N11.59

Key Investment Ratios

  • This report observes the performance indices of United Bank for Africa Plc for the full-year ended 31st December 2020, comparing them with those released for the year ended 31st December 2019 to establish growth and make projections, where necessary.
  • Compared to our third-quarter numbers, our valuation metrics slightly adjusted down the value, since the dividend paid was lower than that of the previous year.
  • Nevertheless, we still believe that everything about the bank remains intact, especially since the earnings for the year were higher than the comparable year.
  • Do understand that our valuation, though conservative, is more appropriate for long-term investors, having been projected for five financial years. Despite this, we expect short-term traders to play within the technical trading gap.
  • Generally, the bank’s numbers stood at an appreciable point above that of the comparable year.
  • See below for a detailed analysis of the released numbers:
Source: Company results, NSE, Investdata Research

Dividend Information

  • At the end of 2020, the management of UBA Plc announced a 35k final cash dividend, by far below the 80k paid at the end of the 2019 financial year.
  • Note that the bank had earlier paid 17 kobo as an interim dividend at the end of the half-year business session, bringing the total dividend paid at the end of the year to 52k
  • Explaining the low dividend proposed in a press statement by the bank, its Group Managing Director/CEO, Mr. Kennedy Uzoka said earnings were intentionally preserved so the bank can face any unforeseen events that may unfold, given the various negative effects of the novel coronavirus pandemic on countries, businesses, and households. He said the amount saved from the dividend cut will be ploughed into the business to ensure it can offer better incentives during and at the end of the 2021 financial year.
  • Meanwhile, the 35 kobo proposed is only 10.25% of the bank’s earnings for the year, lower than the 30.71% paid in the corresponding year.
  • As at the time the result was made available to the investing public, the dividend also represents only 4.38% of the price of UBA shares on the exchange, as against the 12.40% yield achieved in the corresponding year.
Source: Company results, NSE, Investdata Research

Company figures

  • Gross Earnings through the year is valued at N620.37 billion, same as 10.82% above the N559.80 billion posted in its 2019 financial numbers.
  • Interest Income improved by a marginal 5.68% to N427.82 billion, as against N404.83 billion in the corresponding year.
  • Interest Expenses is currently valued at N168.39 billion, slightly below the N182.95 billion posted at the end of 2019 full-year.
  • Operating Expenses is estimated at N229.84 billion, higher than N201.67 billion used through the 2019 financial year.
  • Profit before Tax is estimated at N131.86 billion versus N111.28 billion in the comparable year- 2019.
  • Having taken care of the Tax Expense, the management of UBA reported N113.76 billion as profit for the year, 27.70% higher than the N89.08 billion earned in the previous year.
  • Enhanced by Fair value changes on equity investments at FVOCI, the Total Comprehensive Income for the quarter stood at 26.24% over the comparable period at the stated N157.09 billion versus N124.43 billion.
Source: Company results, NSE, Investdata Research
  • At the end of 2020 third quarter business session, the bank’s Total Assets was valued at N7.69 trillion, same as 37.36% above the N5.60 trillion stated in its 2019 full year earnings document.
  • Total Liabilities equally stood above comparable year by 39.31% to stand at N6.97 trillion versus N5.00 trillion in 2019.
  • Net Assets is valued at N724.14 billion, as against N597.97 billion posted at the end of the corresponding year.
  • Total Deposit received through 2020 twelve months’ business session is estimated at N6.09 trillion, this is 48.64% above N4.09 trillion in 2019.
  • Total Loans and Advances stated in the 2020 full-year financial documents is N2.63 trillion, this is 21.34% higher than the N2.16 trillion posted in 2019.
  • See the above table for details.

Financial Strength/Solvency Ratios

  • Debt Ratio which compared Total Assets to Total Liabilities stood at 90.59%, as against 89.33% in the corresponding year. Note that the high debt ratio is typical of financial institutions.
  • Total Debt for the full-year can replicate equity in 9.63 times against 8.37 times in the corresponding year. As noted above, this is because of the deposit-taking nature of the financial institution.
  • Equity Ratio which compared Equity to Total Assets stood at 9.41%, as against 10.67% in the corresponding year.
  • Estimated Beta value for UBA as at the time this report was compiled stood at 1.09x, which is above market beta though fairly below industry average as at the time this report was compiled.
Source: Company results, NSE, Investdata Research

Profitability Ratios

  • Pre-Tax Margin improved by 6.92% to 21.25%, as against the 19.88% estimated at the end of 2019 full year financial numbers.
  • Interest Expenses to Gross Earnings dropped by 16.94% to 27.14%, as against the previously estimated 32.68% in the corresponding period of last year.
  • Return on Average Equity through the year was 15.71%,  compared to 14.90% in 2019
  • See the table below for detailed profitability ratios and comparison.
Source: Company results, NSE, Investdata Research

Efficiency Ratios

  • Operating Expenses for the period is estimated as 37.05% of the Gross Earnings figure, this is only 2.84% above the 36.03% achieved in the corresponding year.
  • Gross Earnings is same as 8.06% of the Total Assets valuation at the end of the year, this is 19.32% below the 9.99% estimated in 2019.
  • It was equally established that 43.20% of the total deposits for the period was given out as loan, which is 18.36% below the 52.91% deposit given our as loan and advances through 2019 financial year, and lower than the regulatory standard of 65%.
Source: Company results, NSE, Investdata Research

Investment/Valuation Ratios

  • At the end of the year, N3.33 was earned on each unit of UBA shares. This is higher than the N2.60 earned per share in 2019.
  • P/E Ratio stood at 2.40x, as against 2.48x in the corresponding year.
  • The above-mentioned earnings per share is same as 41.58% yield over the price of UBA on the exchange when the result was released, which is a higher yield when compared to the 40.39% yield of 2019.
  • Estimated Book Value per share of UBA is currently N21.17, same as 21.10% above the N17.49 estimated at the end of 2019 financial year.
  • Thus, Price to Book Value stood at 0.38x as against 0.37x, which simply implies that the stock is currently selling below its book value on the floor of the exchange.
Source: Company results, NSE, Investdata Research


While trying to place a fair value on each unit of UBA Plc shares, we considered the average of two – FCFE Stable Growth Model valued the stock at N18.20; and the H-Model that placed the price at N4.99, due to lower dividend which depleted the income expectations from UBA in the number of projected years. We therefore arrived at an average value of N11.59 for each unit of its listed shares. Thus, we have Rated UBA shares a BUY.


Source: Company results, NSE, Investdata Research

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