•Hedges high inflation, interest
Outperforming the average returns at the Nigerian stock market and the entire financial services sector, the share value of United Bank for Africa (UBA) Plc has delivered an impressive 375 per cent capital gains to investors in nearly five years.
Data from the Nigerian Exchange Limited (NGX) at the weekend indicated that investors in UBA have continued to earn an average annual return of about 75 per cent over some five-year period, highlighting UBAs impressive records as a high-yielding, inflation-hedging stock.
Nigeria’s benchmark interest rate- Monetary Policy Rate (MPR) stands at 27.25 per cent. The inflation rate stands at 33.88 per cent, according to the October 2024 Consumer Price Index (CPI) report by the National Bureau of Statistics (NBS).
Basically, analysis of trading reports for the period between December 31, 2019, and December 06, 2024, indicated that UBA recorded a cumulative capital gain of 374.83 per cent during the period, representing an average annual gain of 74.97 per cent.
Putting this into perspective, this implies that an investor who had invested N500,000 in the shares of UBA at the year’s opening price for 2020, now has a real, immediate market value of more than N2.374 million, due to accumulated capital gains.
This excludes accrued cash dividends over the five years.
With an average year-to-date return of 35.26 per cent, UBA is ahead of the market by more than twice the average year-to-date return of 15.53 per cent for the banking sector. Also, UBA is ahead as the average year-to-date return for the benchmark index, the All-Share-Index (ASI) of equities on NGX which closed the weekend at 31.34 per cent.
UBAs share price had opened 2020 at N7.15 per share, its closing price for December 31, 2019. It closed the weekend at N33.95 per share, 35.26 per cent above its 2024s opening price of N25.10 per share, its closing price for December 30, 2023.
The three-digit capital gain highlights UBA as a major driver of the bullish trend in the Nigerian stock market, which has sustained five years of consecutive positive returns.
As an investor-friendly stock in terms of consistent and above-average cash dividend payment, UBA is reputed to pay dividends twice a year, an interim dividend and a final dividend.
It recently paid an interim dividend of N2 per share on its first half of 2024 results, the highest payout by any bank and one of the three highest yields in the entire stock market.
Such an investor who had invested N500,000 at the 2020s opening price would have received a cash dividend of some N139,860 as an interim dividend for the 2024 business year, more than a quarter of his initial investment.
UBA is currently offering existing shareholders exclusive opportunities to increase their shareholdings in the bank with its ongoing N239.4 billion rights issue. The pan-African banking group is offering 6.84 billion ordinary shares of 50 kobo each to existing shareholders at N35 per share.
The rights issue is pre-allotted on the basis of one new ordinary share of 50 kobo each to every five ordinary shares held as at November 05, 2024. The rights issue is scheduled to close on December 24, 2024.
Shareholders have hailed the decision on a rights issue as a deliberate incentive. In a survey, minority retail shareholders, who constitute nearly three-quarters of UBAs nearly 280,000 shareholders, were excited about the rights issue, with most indicating the possibility of applying for more than their pre-allotted shares. Extant rules in the Nigerian market allow shareholders to apply for more shares and also for the company to consider such requests for additional shares. Shareholders can also trade their rights on the stock market.
Shareholders said UBAs track records of solid financial performance, dividend policy and capital gain were competitive advantages for the pan-African banking group.
Speaking, a longstanding UBAs shareholder and Founder of the Independent Shareholders Association of Nigeria (ISAN), Sir Sunny Nwosu, said “UBA has proven to be dependable and resilient, attributes that have endeared the stock to all cadres of investors.
“The bank is doing well, so also are its subsidiaries. From whatever angle you look at it, UBA is a good buy. And I’m talking as a long-time shareholder. It is one bank that prioritises shareholders’ happiness. Go down the lane and check the bank’s dividend history and critical decisions when it comes to shareholders’ issues.
“Its a bank one can rest on, so, I’m advising other shareholders to pick up their rights, it’s an opportunity. We are picking up ours and even asking for more.”
Another major UBA shareholder and President, Association for the Advancement of Rights of Nigerian Shareholders (AARNS), Dr Faruk Umar described UBA as a solid bank with a lot more to offer the shareholders in the future.
“I strongly advise shareholders to pick up their rights as I am very hopeful the price will go up after the rights offer is concluded. All members of our Association are going to buy their rights as we strongly believe in the quality of the board, management, and staff of the bank,” Umar said.
Market analysts are unanimous that share prices are illustrative of the fundamental values of quoted companies.
For the nine-month ended September 30, 2024, UBA reported 83.2 per cent growth in gross earnings to N2.398 trillion, almost a double of N1.308 trillion recorded in the third quarter of 2023. Operating income rose from N1.02 trillion in the third quarter of 2023 to N1.54 trillion in the third quarter of 2024, an increase of about 51 per cent. Profit before tax increased to N603.48 billion compared with N502.09 billion recorded in the third quarter of 2023. After taxes, net profit also rose from N449.26 billion in the third quarter of 2023 to N525.31 billion in the third quarter of 2024. Earnings per share thus improved from N12.93 to N14.78.
Group balance sheet size expanded by 54 per cent to N31.80 trillion by September 2024 as against N20.653 trillion recorded at the end of December 2023. The bank benefitted largely from its technology-led initiatives targeted at improving customer experience over the past few years, with total deposits rising to N26.50 trillion, representing a 52.7 per cent rise from N17.355 trillion at the end of December 2023.
The deposit base was driven by increased brand appeal across the retail and corporate markets. Customer deposits had jumped from N14.8 trillion to N22.97 trillion while deposits from banks increased from N2.46 trillion to N3.53 trillion. Loans and advances to customers grew by 46.8 per cent from N5.23 trillion in December 2023 to N7.68 trillion in September 2024. While the paid-up share capital remained unchanged at N17.10 billion, total equity jumped by 76.8 per cent from N2.03 trillion in December 2023 to N3.59 trillion in September 2024.
Managing Director, Arthur Steven Asset Management, Mr. Olatunde Amolegbe, said share pricing at the stock market thrives on a concept of forward-pricing mechanism, where investors take into consideration the potential future return based on available track records and emerging developments.
Managing Director, of HighCap Securities Limited, Mr. David Adonri, said share price is a reflection of the market value for a company, comprising both past performances and future expectations.
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