Growth and Value Combined: Why UBA is the Best Bank Stock to Own Now

Growth and Value Combined: Why UBA is the Best Bank Stock to Own Now

UBA is good value based on its Price-To-Earnings Ratio (1.2x) compared to the African Banks industry average (4.8x)

Earnings grew by 286.3% over the past year

Trading at good value compared to peers and industry

Analysts in agreement that stock price will rise by 37%

A Top 3 Bank by Profit after Tax in 2023

International diversification separates UBA from the rest

Best performing bank stock with +237% rally in 2023

Many banks are in the market right now and are wooing investors to invest in their public offers or rights issues, however there is only one bank that stands out with a combination of growth and value for investors, which is United Bank for Africa (UBA) Plc.

Africa’s Global Bank, UBA Plc is a growth and value stock combined making it the best bank to own for investors which will provide the necessary upside (Value) as well as the earnings (Growth) that will continue to underpin the stock price rise.

UBA’s growth has been accelerating in recent years as the vision of a pan Africa lender begins to increasingly crystalize.

In the first quarter of 2024, UBA recorded the fastest profit growth in a decade, an outstanding performance that makes it appealing to value investors.

The Bank’s Profit Before Tax rose significantly by 155% to N156.34 billion in Q1 2024; from N61.7 billion in Q1 2023, while Profit After Tax jumped from N53.5 billion to N142.5 billion, representing an impressive rise of 165% year-on-year.

Earnings Per Share or EPS rose to N3.96 in the First Quarter, up from N1.47 in 1Q 2023. Profit margin came in at 36% (up from 30% in 1Q 2023). The increase in margin was driven by higher revenue.

Over the last 3 years on average, UBA Plc earnings per share (EPS) has increased by 70% per year but the company’s share price has only increased by 53% per year, which means it is significantly lagging earnings growth, a signal of value in the shares.

At the end of the 2023 financial year, UBA recorded an impressive leap in gross earnings, as it grew to N2.07 trillion from N853.2 billion recorded at the end of 2022; representing a strong 143 percent growth; total assets also rose remarkably by 90.22 percent, to close at N20.65 trillion up from N10.86 trillion in 2022.

UBA was the top performing Bank Stock on the NGX in 2023. Source NGX, MoneyCentral

Profit before tax, also grew exponentially by 277 percent, to close at N758 billion, up from N200.88 billion recorded in 2022; while profit after tax (PAT) grew by 257 percent from N170.2 billion in 2022, to N607 billion.

The impressive performance recorded over the past years and especially in 2023, culminated in the payout of N78.7 billion as final dividends for the 2023 financial year.

UBA Plc Group Chairman, Mr. Tony Elumelu, appealed to shareholders to participate fully and re-invest their dividends in the bank’s recapitalisation drive as this will ensure that they continue to enjoy even higher returns from their investments.

He said, “I call on you shareholders to re-invest a substantial part of your dividends in our rights issues which will be announced soon, as we will be giving you the first opportunity to own a share in all the countries where we operate, I am advising shareholders, as you get your dividends, reinvest a significant part of it. As for my board members and I, we would be investing 100% of the dividends we get, because If we don’t do so, it means we would be leaving food on the table for others who did not labour for it,” Elumelu said.

UBA’s main banking ratios better than peers

UBA Plc, is good value based on its Price-To-Earnings Ratio of (1.2x) compared to the African Banks industry average (4.8x), according to data from simply Wall Street.

UBA’s African subsidiaries contributed over 55% to the bank’s profit last year (the highest among banks with International presence), while Return on Equity (ROE) was one of the highest in the industry and closed 2023 FY at 41.20 per cent from 19.70 per cent reported in 2022.

Source: Company financials, MoneyCentral

UBA is set to emerge as the most profitable Nigerian bank by the end of 2024, according to Muyiwa Akinyemi, Deputy Managing Director, UBA Plc.

“UBA will become the top bank by profit from this year. There is nothing stopping us from being number-one,” Akinyemi said in an interview at a Lagos media event to celebrate the bank’s 75th anniversary.

Analysts at Chapel Hill Denham Limited say plans to roll out a special financing initiative through the company’s 3-year partnership programme with Africa Continental Free Trade Area (AfCFTA) is business accretive.

UBA Plc grew its earnings by 286.3% over the past year, while a dividend yield of 11.67% is one of the highest among bank peers, a sign of the attractiveness of its shares as well as the banks’ ability to reward investors.

In 2023, UBA Plc was a top-3 bank in terms of after-tax profit. The Group’s cost-to-income ratio dropped to 37.2 percent, making it the second most efficient lender in the industry.

Tier-one lender United Bank for Africa (UBA), also emerged as the best performing bank stock with +237% rally in its share price in 2023. UBA exceeded the NG Banks industry which returned 31.3% over the past year.

UBA is more efficient in generating profit for their owners than peer rivals

For instance, data gathered by MoneyCentral Intelligence shows UBA recorded a return on average equity (ROAE) of 41.20 per cent at the end of 2023, making it the number 2 bank in the entire industry.

Innovation key to future growth for UBA after milestones in past 75 years

With innovation and commitment to excellence that defined UBA since inception it has since evolved from its modest beginnings to expand to 20 African countries and global nerve centres such as New York, London, Dubai and Shanghai with 25,000 staff and over 35 million customers.

All its subsidiaries are profitable, responsible for more than 50% of profit.

UBA was the first bank to offer an IPO in Nigeria in1970. First to be listed on NSE and the only bank in Sub Saharan Africa with a deposit taking license in the USA. The year 2023 was one with big FX moves as the bank balance sheet saw significant accretion which was largely one-off.

It was the first Bank in Nigeria to install an ATM. First to open a campus branch, first to open a subsidiary in Africa, and first bank to have a female Chairperson in Nigeria.

Mobile Banking was first introduced by UBA in Nigeria, it also deployed the first chatbot in the country. Some 33% of CEOs in UBA’s 20 African countries of operation are also women.

In 2023, females in the total workforce increased to 46 percent, with females in senior management positions at 31 percent, according to the Bank’s sustainability report on the NGX website.

In line with its usual custom of rewarding loyalty, UBA Plc launched the “UBA Legacy Promo” as part of activities to mark its 75th year anniversary.

The UBA Legacy Promo which will run for a period of six months beginning from July 2024, will see the bank doling out of N200m in cash prizes as well as other consolidation prizes to its teeming customers from various categories.

This promo is open to several categories of Account holders including Bumper Account holders, Savings account, Kiddies & Teens Account holders as well as Nextgen account holders.

United Bank for Africa (UBA) was the designated receiving bank for Nigeria’s series one domestic dollar bond that raised $900 million.

UBA has demonstrated financial strength, a testament to robust fundamentals and is committed to creating value for stakeholders. The bank is positioned as the payment bank for capital flows between Africa and the rest of the world.

It recently signed an agreement with the African Continental Free Trade Area Afcfta where UBA is putting out $6bn.

UBA stock traded at N23.95 (on Tuesday September 17, 2024) and a price to book ratio 0.32 times. This means a valuation closer to book value will see the shares trading at N75 per share.

The average 1-year target price by 6 Analysts that follow UBA Stock is N32.84 per share, more than 37% higher than the current share price.

United Bank for Africa (UBA) Plc, is Africa’s leading financial institution with presence in 20 African countries, as well as in the USA, United Kingdom, France, and the United Arab Emirates.

UBA serves as a vital link between Africa and the global financial markets, offering a range of banking services tailored to meet the needs of individuals, businesses, and institutions.