UBA Seeks to Raise Additional Capital Soon - Oliver Alawuba

The management of the United Bank for Africa (UBA) has revealed that, with an excess of N2 trillion in shareholder funds, it intends to raise additional capital when the time comes, in compliance with the Central Bank of Nigeria's guidelines.

Oliver Alawuba, UBA's group managing director and chief executive officer, confirmed this during the 2023 financial year investors and analysts conference call.

It was stated that after reporting N922.1 billion in 2022, the pan-African bank closed the 2023 financial year with N2.03 trillion in shareholder funds. Retained earnings finished 2023 at N919.87 billion, which signifies an increase of 1114.2% from N429.53 billion reported in 2022. Share capital and share premium stayed unchanged at N17.1 billion and N98.71 billion, respectively. 

Alawuba stated that to create significant value for shareholders through its digital banking business, the financial institution would keep pushing the boundaries of innovation and technology adoption in 2024.

"UBA will sustain its focus on the 'Customer' with unique value propositions that align with the ideals of our "Customer First" (C1st) Philosophy.

"We will also continue to leverage our diversified global operations and actively manage our balance sheet in response to rapidly changing macroeconomic conditions across our various markets."

He commented on the UBA's 2023 performance: "Against a backdrop of challenging and volatile geopolitical and economic conditions, your Bank delivered another year of record earnings. Our gross earnings and profit before tax reached their highest levels in history.

"Gross earnings grew year-on-year (y-o-y) by 143.3% to N2.1 Trillion, and our profit before tax increased by 277.2% to N757.7 billion, asserting UBA's position as a leading financial institution.

"This growth was fuelled by a significant increase in net interest income due to a combination of a strong expansion in the loan portfolio, higher net interest margins, and a substantial contribution from foreign exchange operations. The FX operations benefited from increased business activity and improved profit margins."

According to him, the bank was actively involved in various initiatives designed to improve its performance. He also emphasised that management divided these initiatives into three broad categories: People, Process, and Technology.

The Executive Director Finance and Risk Management, Ugo Nwaghodoh, in a presentation, said, 

"We're guiding a full-year deposit growth of about 20%, loan growth of about 20%, cost of risk of about 3.8%, non-performing loan ratio of about 4.5%, return on average equity of about 30%, return on assets of about three percent, capital adequacy ratio of about 30%, cost to income ratio of about 45%, and net interest margins of about 7.5%."

He noted that UBA's 2023 return on equity closed at 41.1% and capital adequacy ratio at 32.6%.

"The NPL slipped from 2.95% to 5.85% largely because of major classifications in some markets, like Nigeria, Cameroon, and Congo DRC. That's why we have that at 5.85%. And included in the profits for the 2023 full year is the valuation gain coming from the valuation of our derivative portfolio, which was about N457 billion," he explained.

Nwaghodoh noted that part of the growth UBA reported on certain lines of its balance sheet depended on the Naira's valuation.

Additionally, advances and loans increased by 61% to N5.5 trillion. Real growth on deposits was 56%, while real growth on loans and advances was 15%.

"Shareholders' funds now stand at N2.1 trillion, up from N922 billion. We saw significant moderation in our cost-to-income ratio, from 59% to 37.2%. The cost of risk also rose from 0.63 percent to 3.09 percent.

"The rise in the cost of risk was largely due to the fact that we feel that the portfolio impairment that we should carry should reflect the weakening in a number of economies and the impact of devaluation and removal of fuel subsidies, etc., on customers' businesses.

"And that has led to a potential heightening of credit risk for us, which has meant that we needed to reserve much more for portfolio impairment. So, we expect that there might be some defaults somewhere down the lane, and we are reflecting all of that in the impairment numbers," he added.