UBA Plc: Selling At A Discount, But Time To Grow Loan Book, Enhance Returns

Rating: Buy
Current Market Price: N8.20

Loan to Deposit Ratio: 43.74%
Year High: N9.80
Year Low: N4.40
Fair Value: N12.44
Equity Analyst:  Tunde Segun Jeariogbe

Key Investment Ratios

  • This report observed the nine-month financial performance indices of United Bank for Africa Plc, as recently released by the management. We compared same with similar numbers released at the end of the 2019 third-quarter to establish growth, make projections and recommendations accordingly.
  • Generally, the bank’s top line at the end of the quarter improved marginally, while bottom line stood below that of the comparable quarter marginally.
  • The bank did not meet the 65% regulatory threshold for Loan to Deposit Ratio (LDR). It only achieved a ratio of 43.74%.
BourseNigerian Stock Exchange
Code NameUBA
Market ClassificationPREMIUM BOARD
Nature of BusinessCommercial Banking
Date of IncorporationFebruary 23rd 1961
Date ListedMarch 31st 1970
End of Accounting Year31st December
Share Price@Relsd (N)                                                         8.45
Earnings per Share                                                         2.26
Intrinsic Value(N)                                                       12.44
Share Outstanding34,199,421,368
Market Capitalisation                                     288,985,110,560

Company figures

  • Gross Earnings through the quarter stood at N453.67 billion, same as 5.94% above the N428.19 billion posted in 2019.
  • Interest Income improved by a marginal 6.46% to N317.14 billion, as against N297.90 billion in the corresponding quarter of last year.
  • Interest Expenses is currently valued at N131.12 billion, less than the N138.98 billion posted at the end of 2019 third quarter.
  • Operating Expenses is estimated at N178.28 billion, better than N150.01 billion used through the previous third-quarter.
  • Profit before Tax is estimated at N90.37 billion, versus N98.23 billion in the comparable quarter of 2019.
  • After taking care of the Tax Expense, the management reported N77.13 billion profit for the quarter, representing 5.51% drop from the N81.62 billion reported in 2019.
  • Enhanced by Fair value changes on equity investments, Total Comprehensive Income for the quarter stood at 10.41% over comparable period at the stated N90.52 billion versus N81.99 billion.
Statement of Comprehensive Income
GROSS EARNINGS               453,670,000,000           428,219,000,0005.94
INTEREST INCOME               317,142,000,000           297,903,000,0006.46
INTEREST EXPENSES               131,120,000,000           138,989,000,0005.66
NET INTEREST INCOME               186,022,000,000           158,914,000,00017.06
OPEX               178,288,000,000           150,015,000,00018.85
DEPRECIATION                 14,371,000,000              11,606,000,00023.82
PBT                 90,372,000,000              98,233,000,0008.00
TAX                 13,242,000,000              16,605,000,00020.25
PAT                 77,132,000,000              81,628,000,0005.51
TOTAL COMP INCOME                 90,522,000,000              81,990,000,00010.41
Statement of Financial Position
Total Assets           7,059,797,000,000        4,960,895,000,00042.31
Total Liabilities           6,404,470,000,000        4,405,367,000,00045.38
Net Assets               655,327,000,000           555,528,000,00017.96
Property Plan & Equipment               143,033,000,000           120,953,000,00018.26
Retained Earnings               234,823,000,000           212,249,000,00010.64
Total Deposits           5,602,016,000,000        3,540,393,000,00058.23
Total Loans and Advances           2,450,043,000,000        1,985,213,000,00023.41
  • At the end of the 2020 third-quarter, Total Assets is valued at N7.05 trillion, same as 42.31% above the N4.96 trillion stated in its 2019 third quarter.
  • Total Liabilities equally fared better than comparable period of last year by 45.38% to stand at N6.40 trillion versus N4.40 trillion in 2019.
  • Net Assets is valued at N655.32 billion, as against N555.52 billion posted at the end of the corresponding quarter.
  • Total Deposit received through 2020 nine-month is estimated at N5.60 trillion, 58.23% above the N3.54 trillion of 2019.
  • Total Loans and Advances stood at N2.45 trillion, 23.41% higher than the N1.98 trillion posted in 2019
  • See the above table for details

Financial Strength/Solvency Ratios

  • Debt Ratio, which compares Total Assets to Total Liabilities, stood at 90.72% as against 88.80% in the corresponding quarter. Note that higher debt ratio is typical of financial institutions.
  • Total Debt for the nine-month can replicate equity 9.77 times, as against 7.93 times in the previous nine months. This is because of, as noted above, the deposit taking nature of the financial institutions.
  • Equity Ratio, which compares Equity to Total Assets stood at 9.28%, as against 11.20% in the corresponding quarter.
  • Estimated Beta value for UBA at the time this report was compiled stood at 1.10x, better than market beta, though it is fairly below industry average as at the time this report was compiled.
Financial Strength/Solvency Ratio
Debt Ratio90.72%88.80%2.16
Total Debt to Equity Ratio (MRQ)                                       9.77                                   7.9323.24
Equity Ratio9.28%11.20%17.11
Beta Value                                       1.10                                   1.110.90

Profitability Ratios

  • Pre-Tax Margin dropped by 13.16% to 19.92%, as against the 22.94% estimated at the end of 2019 third quarter financial numbers.
  • Interest Expenses to Gross Earnings dropped by 10.95% to 28.90%, as against the previously estimated 32.46% in the corresponding nine months.
  • Return on Average Equity through the quarter was 11.77%, as against 14.96% in 2019
  • See below table for detailed profitability ratios and comparison:
PRE-TAX MARGIN19.92%22.94%13.16
EFFECTIVE TAX RATE14.65%16.90%13.32
IE TO GE28.90%32.46%10.95

Efficiency Ratios

  • Operating Expenses for the period is estimated at 39.30% of Gross Earnings, which is 12.18% above the 35.03% of the corresponding period.
  • Gross Earnings is same as 6.43% of the Total Assets valuation at the end of the quarter, which is 25.55% below the 8.63% estimated in 2019.
  • It was equally established that 43.74% of the total deposits for the period was given out a loan, representing 22.00% drop from the previously reported 56.07% of deposit.
OPEX TO GE39.30%35.03%12.18
GE TO TA6.43%8.63%25.55
Capex/Share                                       1.07                                   0.5884.96

Investment/Valuation Ratios

  • At the end of the quarter, N2.26 was earned on each unit of UBA shares, a decline from the N2.39 reported in the same period of 2019.
  • Our nine months adjusted P/E Ratio stood at 1.25x, as against 0.80x in the corresponding quarter of 2019.
  • The EPS is same as the 26.69% yield of the price of UBA Plc on the exchange when the result was released to the investing public, a lower yield than the 41.87% recorded in 2019.
  • Estimated Book Value per shares of UBA Plc is currently N19.16, same as 17.96% above the N16.24 estimated at the end of 2019 third-quarter.
  • Thus, Price to Book Value stood at 0.44x as against 0.35x, which simply implies that the stock currently sells below its book value on the NSE.
Investment/Valuation Ratios
Earnings Yield26.69%41.87%36.26


While trying to place a fair value on shares of UBA Plc shares, we considered the average of two valuation models. FCFE Stable Growth Model valued the stock at N13.48 while H-Model placed the price at N11.40. We, therefore, arrived at an average value of N12.44 for each unit and have Rated UBA shares a BUY.