United Bank for Africa’s (UBA) huge investments in pursuit of its global banking ambition are paying off with a mega balance sheet of N28.3 trillion at its command at the half year.
The global trading financial giant has applied its extensive diversification across geographies to achieve industry-leading growth margins, advancing every year to the topmost circle of Nigeria’s business leadership.
With N184.3 billion invested in subsidiary banking institutions in Africa, Europe and the United States, UBA has diversified the risk of single market concentration, tapping into high growth opportunities across markets.
Large offshore investments supported by naira depreciation now contribute significantly to the bank’s earnings. Contribution from the domestic market segment has seen a sustained decline over the years, as the bank expanded globally.
The proportionate contribution of the domestic market segment to group revenue has dropped from 78.8 per cent in 2015 to 65.3 per cent at the end of 2023 and further to 47.8 per cent at the end of June 2024.
The domestic market share in group after-tax profit dropped from 80.7 per cent in 2015 to 63.9 per cent at the end of 2023 and to 39.2 per cent at the half year in 2024. For the first time in the bank’s operating history, UBA’s offshore subsidiaries in Africa have taken the lead where it generates its profit.
The rest of Africa segment has increased its contribution to group earnings, as the domestic market share declined. The segment’s contribution to gross earnings has expanded from 21.5 per cent in 2015 to 33.6 per cent at the end of 2023 and further to 45.2 per cent at the end of June 2024.
The segment’s contribution to the group’s after-tax profit has similarly expanded from 23.5 per cent at the end of 2023 to 46 per cent at the end of June 2024 – now the bank’s leading market segment by profit generation.
The rest of the world segment also recorded rapid growth in operating numbers and percentage contribution to group earnings. Revenue from the segment has expanded from 1.3 per cent of the group’s gross in 2015 to 5.7 per cent of the gross in 2023 and further to 6.9 per cent at half year in 2024.
The segment’s contribution to the group after-tax profit increased from 2.2 per cent in 2015 to 12.6 per cent in 2023, improving further to 14.7 per cent at half-year in June 2024. The bank’s management recognises this segment as a high-growth area and the great potentials earlier identified are now being realised.
For UBA, the development fulfils the corporate purpose of having the two external market segments increasingly gain market share in the making of Africa’s global bank.
The strategy has helped the bank’s operating stability and growth amid the troubled global economic and financial markets.
The half-year audited financial report of the bank at the end of June 2024 shows that outstanding contributions to earnings by offshore subsidiaries include UBA Ghana, which generated operating revenue of N73.7 billion and made a big recovery from a loss of N6.3billion at the end of last year to an after-tax profit of N17.6 billion.
UBA Burkina Faso, one of the group’s largest offshore subsidiaries with assets of N1.6 trillion at half-year, delivered operating revenue of N68 billion – well over roughly N44 billion for the 2023 full year. Its after-tax profit of N17 billion at the end of June 2024 exceeded the full-year record of N11.6 billion in 2023.
UBA Benin, another major offshore subsidiary with a balance sheet size of over N1 trillion at the half year, exceeded the full-year operating revenue last year at N54.7 billion compared to N47.6 billion. Also, its half-year profit of N14.3 billion surpassed the full-year figure of N10.2 billion in 2023.
Another large offshore subsidiary – UBA Sierra Leone with an asset base of N1.1 trillion at half year, has exceeded the operating revenue for the 2023 full year in six months at N48.3 billion against N46.9 billion. It delivered a bigger profit in six months at N8.4 billion compared to N7.7 billion last year.
UBA Tanzania posted operating revenue of N10.4 billion at the half year against N8.8 billion for the 2023 full year. Profit for the half year is equally ahead at N3.3 billion against N2.1 billion for the entire 2023 financial year.
Half-year operations ended with gross earnings of roughly N1.4 trillion for the group, an increase of 40 per cent year-on-year. Interest income accounts for over N1 trillion or 73.3 per cent of gross earnings with a top record growth of 134.3 per cent.
The cost of funds slowed relative to interest earnings at an increase of 119 per cent year-on-year to about N329 billion at half-year. Cost savings from the interest expenses enabled net interest income to multiply by two and a half times to about N675 billion at the end of June 2024.
A much bigger cost saving came from loan loss expenses that dropped from N144 billion to N58.6 billion over the review period. That led to a five-times jump in net interest income after loan loss charges to N614.4 billion.
On the flip side is a drop in net trading and foreign exchange income and increases in operating expenses – which consumed revenue and led to a slight decline in pre-tax profit from N403.6 billion to N401.6 billion over the period.
A major increase in income tax expenses also lowered the bottom line from N378 billion in the same period last year to N316 billion in the half year. The bank earned N8.90 per share at the end of June 2024, down from N10.95 per share in the same period last year.
UBA’s huge balance sheet consists largely of investment securities of N11.5 trillion, cash and bank balances of over N8 trillion and total loans and advances of about N7 trillion. The assets are built on total deposits of over N23 trillion, an equity cushion of nearly N3 trillion and borrowings of N1.2 trillion.
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