United Bank for Africa (UBA) Plc recorded significant improvements in the cost of operations and assets quality as it grew its loans book by 42 per cent last year while reducing the number of non-performing loans to one of the lowest in the industry.
Analysis of the audited report and accounts of the bank for the year ended December 31, 2013 showed that the ratio of non-performing loans dropped to 1.19 per cent in 2013 compared with 1.90 per cent in 2012. The results also showed a significant drop in cost-to-income ratio to a low of 60.9 per cent as against 64.8 per cent in the previous year.
The increase in loans portfolio and reduction in deficient loan assets underlined improvement in the credit risk management of the bank.
Besides, the bank’s net interest margin improved to 5.9 per cent in 2013 as against 5.8 per cent in 2012, an indication that the bank is making more money from every naira lent out.
UBA’s liquidity ratio stood at a healthy 55 per cent, well above the regulatory minimum of 25 per cent, a strong indication that UBA remains largely liquid despite the increase in the Cash Reserve Ratio (CRR) for public sector deposits to a high of 75 per cent by the Central Bank of Nigeria (CBN).
This confirms the position of many analysts, including Renaissance Capital, that UBA will not significantly be negatively impacted by the increase in CRR on public sector deposits.
The report also indicated that the bank kept to its projection to increase lending support to critical sectors of the Nigerian and African economy. UBA has business operations in 18 other African countries outside Nigeria.
The bank’s loan to deposit ratio stood at 44.3 per cent, a major achievement that gives it strong headroom to keep expanding its lending portfolio. The financials also showed a healthy liquidity position with a liquidity ratio of 55 per cent in 2013, substantially above the regulatory minimum of 25 per cent.
Key extracts of the report also showed appreciable improvements in the top-line, operational efficiency and customer’s confidence. The board of the bank has recommended a dividend of 50 kobo per share.
The report indicated that gross earnings rose from N220.1 billion in 2012 to N264.7 billion in 2013. The top-line performance was largely driven by a growth of 40.4 per cent in loans and advances as well as a 25 per cent growth in the bank’s total deposits.
Consequently, the bank’s loan-to-deposit ratio improved from 38.7 per cent to 44.3 per cent. It also enhanced its operational efficiency and productivity with the cost-to-income ratio improving by four percentage points from 64.8 per cent to 60.9 per cent.
Profit before tax grew by 7.8 per cent to N56.06 billion in 2013 as against N52.01 billion in 2012. This indicated a return on equity of 21.8 per cent. The bank’s balance sheet expanded to N2.64 trillion while total deposit base closed the year at N2.22 trillion.
The significant increase in lending had a positive impact on the bank’s released financials with interest income rising significantly by 23.8 per cent to N186 billion while fee and commission based income rose 5.1 per cent to N50.01 billion.
Group Managing Director, United Bank for Africa (UBA) Plc, Phillips Oduoza, said the bank committed $700 million in funding to the power sector privatisation exercise in Nigeria , financing different investors to acquire the power assets put on sale by the Federal Government of Nigeria last year.
Some of the major deals UBA actively participated in the power sector include taking up $120 million, N19.44 billion, of the financing in respect of Transcorp Ughelli Power Plant.
The bank also acted as mandated lead arranger, underwriting the entire facility of $122 million, N20 billion, for Kann Utilities’ acquisition of the Abuja Electricity Distribution Company, financing the payment of 75 per cent acquisition of 60 per cent equity stake in Ikeja Electricity Distribution Company.
The bank was also involved in Aura Energy’s acquisition of Jos Electricity Distribution Company, acting as the lead arranger for N9.6 billion to finance the payment of 75 per cent of Aura’s 60 per cent equity stake in the electricity distribution firm.
UBA also arranged debt financing of $68 million as well as secured equity investment from a strategic and technical investors for the acquisition of the Shiroro Hydroelectric Power Plc by North South Power Company Limited.
“UBA had a good performance for full year 2013. This performance puts us in a position to continue to pursue our goal to achieve Industry leadership in the medium term.
We were also able to gain considerable strides in our project Alpha initiatives by improving customer service delivery and leveraging our balance sheet to participate in emerging growth sectors of the economy,” Oduoza said in a comment on the 2013 performance.
According to him, the performance for last year was due to prudent cost management policies, enhanced efficiency of the bank’s network and the impact of other productivity initiatives.
“Our bank achieved a good result despite a challenging operating environment, demonstrating the strength and resilience of our people and their dedication to implementing our growth plans in 2013,” Oduoza said.
According to him, the bank’s customer-focused, corporate banking and treasury led business model drove success for the year. Also, in line with its African focus, the bank shared the responsibility of empowering African businesses through its network, capital and commitment to excellent service delivery.
Oduoza assured that the UBA Group has the capacity to continually evolve and come up with new ways to provide high end and value adding products and services to its customers to enable it to thrive in a tough economic environment.
He noted that the bank’s management remain committed to achieving set targets for the year by maintaining a disciplined approach to the execution of agreed strategic initiatives.
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