By Alex C
United Bank for Africa Plc (UBA) 2013 Financial Year (FY)earnings show an impressive 20% Year-on-Year (YoY) growth in gross earnings; a reflection of its renewed risk appetite. The Bank grew its loan book by 42% or N279 billion in 2013FY; a notable feat when put in the perspective of its 3% Cumulative Annual Growth Rate (CAGR) in loan book over the last four years.
The renewed risk appetite by the Bank reinforces management’s guidance of adopting a three-pronged strategy of customer service, corporate lending and treasury management, with the ultimate goal of increasing its market share in Nigeria, as well as across the African markets.
UBA posted an impressive 20% YoY growth in gross earnings to N264.7 billion. The strong earnings feat reflects the improved quarterly run-rate of interest income (24% YoY). Overall, the Bank posted a modest 8% growth in profit before tax; an appreciable performance when put in the perspective of the tough operating environment.
The higher 17% effective tax rate pressured UBA’s profit after tax by 10% to N46.6 billion (or N1.41 earnings per share). The weakness in Profit After Tax (PAT) reflects the 2012FY base effect of N3.3 billion earnings from discontinued operations.
It will be recalled that UBA divested from non-banking subsidiaries in 2012, resulting into the spin-off of UBA Capital Plc, African Prudential Registrars Plc and Afriland Properties – shareholders of UBA were issued shares in these businesses on a pro rata basis).
All these businesses are waxing strong with compensating value accretion to UBA shareholders. The PAT translates to 22% return on average equity (RoAE), broadly in line with management guidance and an excess return relative to the 20% cost of equity on the Bank.