- Declares final dividend of N0.52 per share and pay-out ratio of 12%
Charles Abuede
The United Bank for Africa (UBA), in its recently released audited financial statements and its subsidiaries for the year ended 31 December 2020 reported a 27.7 per cent growth in its annual profits to N113.77 billion in full-year 2020 from N89.08 billion in the previous year. The increase in annual profit implies a positive return on average equity (ROAE) of 23.3 per cent, ahead of the bank’s historical guidance of 18-20 per cent.
According to the statement by Africa’s global bank filed to the Nigerian Stock Exchange, the bank’s profit for the year was attributed to the 26.8 per cent growth in the bank equity holders fund which rose to N109.3 billion in 2020 from N86.2 billion in the year before. Also, UBA recorded an 18.5 per cent year on year surge in its profit before tax to N131.86 billion during the year, positively driven by a 42 per cent year on year rise in pre-provision profit. The double-digit growth in pre-provision profit was mainly underpinned by solid non-interest income growth of 133 per cent year on year; thanks to foreign exchange revaluation gains of N6.2 billion in 2020 compared with a loss of -N10.2 billion in 2019 and an 85 per cent year on year growth in trading gains on fixed income securities.
Further analysis from the audited financial statement shows that funding income also advanced by 17 per cent year on year. Following the robust growth in revenues, UBA’s 2020 cost-to-income ratio (ex-provisions) declined by 140 basis points year on year to 61.3 per cent. Further down the Profit and Loss for the year, the group’s profit after tax (PAT) after other comprehensive income (OCI) for the year and minority interest was up 45 per cent year on year. In terms of balance sheet trends, customer loans and deposits expanded by 7 per cent and 9 per cent between the final two quarters of 2020 respectively.
An evaluation of the impact of the pandemic which has caused disruptions to global economic and social activities during the period ended 31 December 2020; brought about a direct impact in our markets and was experienced in the second quarter of the interim reporting period, by way of reduction in social interactions and disruptions in economic activities” the bank said in its statement.
“The Group has reviewed the current uncertainty as a result of this pandemic and nothing has come to the attention of the Directors to indicate that the Group will not remain a going concern for at least twelve months from the date of this statement. The Group responded as appropriate by activating its Business Continuity Plans across the different entities to ensure continuous service to its stakeholders. The Group has also assessed on a line-by-line basis the impact of Covid-19 on the amount presented on the statement of financial position and concluded that no further adjustment will be required in the financial statement. Whilst the Group continues to monitor the situation as more new information becomes available and necessary adjustment will be reflected in the appropriate period,” it stated.
Further afield, a total of 6.95 billion units of UBA shares were traded on the Nigerian Stock Exchange (NSE) in 2020, representing 20.3 per cent of the shares outstanding. The UBA share price gained 21 per cent, closing the year at N8.65 (from N7.15 as of 31 December 2019); whilst the NSE banking sector index gained 10.1 per cent during the year ended December 31, 2020. The bullish run in the Nigerian equities market was driven by attractive valuations amidst increased systemic liquidity and low fixed income yields.
Meanwhile, Year-to-date, UBA shares have underperformed the index. The shares have shed -7.5 per cent since the start of trading in 2021 compared with the -2.2 per cent return on the NSE ASI. Thus, the banking group recorded impairment for credit losses which increased by 34 per cent year on year, following a 10 basis points year on year increase in the cost of risk. On a full-year basis, the cost of risk was up 20 basis points to 1.3 per cent.
Following the results, UBA management has proposed a final dividend of N0.35 per share which substantially lower than the final dividend per share of N0.80 in the previous year. Having paid an interim dividend of N0.17 in 2020, the final dividend proposed implies a total dividend of N0.52 per share and payout ratio of 12 per cent as against the 28 per cent in 2019.
