-as UBA stock now best performing on the exchange
Fitch International, one of the foremost global rating
agencies has affirmed United Bank for Africa (UBA) Plc’s viability rating at
“B”, as the pan-African banking group continue to sustain its benchmark asset
quality and strong profitability amidst industry and macroeconomic challenges.
UBA is one of the few banks with strong risk management
framework, which has helped keep non-performing loans ratio at a moderate level
of 1.74% as at the end-March 2016, as against industry average of over 6%, as
reported by Fitch in its recent report on Nigerian banks.
Fitch also upgraded UBA’s outlook to stable from Negative,
thus reinforcing the strong outlook on the Bank, especially as its diversified
network across eighteen other African countries make it relatively immune
against the potential cyclical volatilities in any of its country of
operations.
Also, the foremost local rating agency in Nigeria, Agusto
& Co, at its rating review of UBA Plc, upgraded the Bank’s rating
from “A+” to “Aa-“, with a stable outlook. According to Agusto & Co, “the
rating of United Bank for Africa Plc (UBA) is upheld by the Bank’s improved
capitalization, good liquidity and large pool of stable deposits, strong
domestic presence supported by the Bank’s extensive branch network and growing
alternative banking channels.
"We note improvement in profitability and the Bank’s good
asset quality. The Rating takes into cognizance the weak macroeconomic climate
on the banking industry’s asset quality, which we do not expect UBA to be
excluded. Nonetheless, we note positively its diversified geographical reach,
which will cushion to an extent the impact of the weak Nigerian economic
climate," Agusto & Co stated in its credit rating report.
Just as the credit rating agencies are strong on the
fundamentals of UBA Plc, equity analysts have also affirmed the asset quality,
profitability and broad investment case of the Bank, particularly as UBA has
maintained an average return on equity of over 20% in the past three years,
bucking the challenging economic environment and dwarfing peer performance
track.
Following the strong financial performance of UBA in the
first quarter of 2016, improved transparency and disclosure, which is now seen
as benchmark for Nigerian banks, analysts at Renaissance Capital and CSL
Stockbrokers (a part of the FCMB Group) upgraded the rating on UBA stock to
“Buy,” with target prices of N9.40 and N7.21 respectively.
Reflecting investors’ conviction in the strong fundamentals
of the Bank and the appetite for the stock, the share price has gained 39% thus
far in 2016 to rank as the best performing banking stock on the Nigerian Stock
Exchange. Closing at N4.70 on Wednesday, 13 July, 2016, UBA still trades at
significant discount to analysts’ consensus valuation of the shares, which is
put at N8.50 for the 2016 calendar year.
The Bank paid N0.20 interim and N0.40 final dividend in 2015
financial year and should currently be auditing its 2016 half year results in
line with the Group’s governance culture of auditing results twice in a year.
UBA is audited by PricewaterhouseCoopers, one of the global big-4 audit firms,
which subjects clients to a rigorous international best audit practice.
United Bank for Africa Plc (UBA) is the third largest lender
in Nigeria and a leading provider of financial services across 19 African
countries, and with presence in New York, London and Paris. The Bank serves
almost 11 million customers across expansive brick and mortal branches as well
as diversified alternative electronic banking channels.
UBA has a diversified shareholder base of over 270,000, with
some of the greatest global fund managers as well as multilateral institutions
like the International Finance Corporation (IFC) and African Development Bank
(AfDB) being shareholders of the Bank.
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