Despite the marginal rise in its half-year profits, the United Bank for Africa Plc has declared an interim dividend of 20 kobo per share for the period ended June 30, 2016, writes Goddy Egene
As expected, the challenging operating environment impacted performances of most companies for the half year (H1) ended June 30, 2016. The banks were not left out as some of them recorded lower profits while some ended the period with lower bottom-line. Those that recorded decline in their profits included First Bank, Zenith, Fidelity and Sterling.
However, Guaranty Trust Bank and Access Bank were among the few banks that posted impressive results in spite of the headwinds in the operating environment.
Specifically, Access Bank’s profit before tax (PBT) stood at N50billion, showing 28 per cent increase above the N39billion in 2015. The bank also grew profit after tax (PAT) to N39.5billion, from N31.3billion in 2015.
Guaranty Trust Bank also reported N91.38 billion half-year pre-tax profit, up N63.11billion declared in 2015.
Accordingly, the two banks recommended interim dividend of 25 kobo per share for shareholders.United Bank for Africa (UBA) Plc was the last bank to make its H1 financials available, having announced a delay in releasing the results.
According to its audited accounts, UBA posted a PBT of N40.270 billion, up fromN39.621 billion in 2015 and PAT of N32.621 billion, compared with N31.999 billion in 2015.
Half year results
A closer look at the results showed impressive growth in several key financial indicators. This perhaps explains why the bank’s share price has outperformed the stock market so far this year. UBA’s share price is already up by 31 per cent this year and consensus forecasts are that the share price is still under priced at its current price of N4.32 as at 30 August, 2016.
Though earnings were flat but the bank recorded a significant growth in total assets, rising 20 per cent to N3.3 trillion, crossing the three trillion mark. The bank’s net loan position rose 29 per cent to N1.29 trillion partially boosted by the depreciation in the value of the Naira. UBA also recorded a significant 16 per cent growth in deposits to N2.41 trillion already surpassing the 15 per cent target growth in deposits set at the beginning of the year.
Another positive for UBA was a drop in cost to income ratio to 63 per cent in 2016, compared to 64 per cent in same period of 2015. This implies that the bank leveraged economics of scale to moderate operating expenses, as it achieved a 90 basis point decline in cost-to-income ratio in an inflationary environment. Notwithstanding the external pressure of a 42 per cent depreciation of the Naira and headline inflation rate of 16.5 per cent in the period, the bank kept operating cost in check, declining 1.0 per cent year-on-year during the period.
Also, the bank maintained its strong asset quality, with non-performing loans ratio at 2.4 per cent, well below the CBN set limit of 5.0 per cent for the banking industry.For one of largest lenders in the country, this impressive performance is an evidence of the bank’s diversified business model as well as resilience, particularly when put in the perspective of the challenging macroeconomic environment.
Assessing the impact of Naira devaluation of UBA’s earnings, it is noteworthy that in addition to the N40 billion profit, the bank recorded N56.1 billion in other comprehensive income, made up of N32.4 billion foreign currency translation difference from foreign operations and N23.7 billion fair value change on available for sale investments. These other comprehensive income are unrealised profits and thus do not form a part of the N40 billion profit reported in the bank’s income statement, in line with the International Financial Reporting Standards (IFRS).
This interim dividend is sustenance of the interim dividend payment initiated last year, when the Bank also paid N0.20 interim dividend, before a final dividend declaration of N0.40 per share, following the audit of the 2015 full year results. The interim dividend translates to a 4.5 per cent dividend yield, based on the closing price of N4.45 as at the close of market on Monday, 29 August, 2016.
Commenting on the results, the Group Managing Director/CEO, UBA Plc, Kennedy Uzoka said they were achieved amidst waning economic fundamentals which makes it even more impressive.
“We delivered profit in excess of N40 billion and grew balance sheet by 20 per cent, with our on-balance sheet total assets crossing the N3 trillion mark. Even as Naira depreciation and inflationary pressure increased the cost of doing business in Nigeria, we leveraged our economies of scale, enhanced operational efficiency and Group shared service structure to moderate our cost-to-income ratio by 90bps.”
According to him, UBA’s performance reflects its increased share of the market, even as broad economic activities slowed down in the period, as evident in the GDP contraction in the first quarter and general consensus that the economy may have further contracted in the second quarter of the year.
Uzoka assured that “UBA will sustain its culture of keeping a healthy balance sheet, with strong liquidity and capitalisation, as reflected in the liquidity and BASEL II capital adequacy ratios of 45 per cent and 18 per cent respectively.”
He also promised that “notwithstanding the current slowdown in economic activities, we see bright spots ahead, especially as we see strong prospect to grow market share across all chosen economies, through our enhanced dedication to customer service.”
Explaining the major drivers behind UBA’s performance, the Group Chief Financial Officer (GCFO), Mr. Ugo Nwaghodoh said: “This impressive performance was driven by increased transaction volume, balance sheet growth and efficiency as well as a disciplined management of operating cost. We achieved a 60bps moderation in funding cost, despite the tighter interest rate environment, as we continue to improve our deposit mix, towards low cost savings and current accounts.”
Nwaghodoh said that UBA’s performance in the period endorses the bank’s resilient ability to profitably grow its business from sustainable core banking offerings.
“Notwithstanding the challenging macro and regulatory environment, we achieved a 17.3 per cent return on average equity in the period even as the total equity of the bank grew 23 per cent to N407 billion.
He explained that the bank’s African subsidiaries continue to record significant milestones in their performance, as two erstwhile loss making subsidiaries are now profitable and having positive contribution to the bank’s bottom line.
“Overall, African subsidiaries, contributed a quarter of the Group’s profit, with an even stronger outlook, as we deepen our penetration of the respective markets,” he added.”
UBA also achieved some significant milestones in the period that further underline its strong performance in the period. For instance, foremost Nigeria rating agency, Agusto & Co. upgraded the credit rating of the bank, from “A+” to Aa-“, reflecting the banks improved capitalisation, strong liquidity and asset quality as well as enhanced profitability of the Group.
On the business front, the African Development Bank (AfDB) approved $150 million line of credit for UBA, strengthening the bank’s commitment to infrastructure and SME finance, including women-owned enterprises in Nigeria and the broader African continent. The U.S. Export-Import Bank also signed a $100 million MoU with the bank to expand trade between U.S. and Africa.
UBA Plc is one of Africa’s leading banking groups with operations in 19 African countries and offices in three global financial centers: London, Paris and New York.
From a single country operation in Nigeria, Africa’s largest economy, UBA has evolved into a pan-African provider of banking and related financial services, to more than 11 million customers, through over 1000 business offices and diverse channels globally.
Oil Rises to $43.76 Despite Falling Oil Demand
Brent Crude Rises to $43.76 Per Barrel on Friday
Oil price extended its gain on Friday despite OPEC and other experts predicting a further decline in demand for the commodity.
The Brent crude oil, against which Nigerian oil is priced, rose from $39.44 per barrel on Tuesday to $43.76 per barrel on Friday before pulling back to $43.42 per barrel.
The oil surged after reports showed that US oil producers were shutting down due to hurricanes and also that crude oil inventories dropped by over 9 million barrels in the week ended September 11, 2020.
The commodity started its bullish run a day after OPEC lowered its demand outlook for the year through the first half of 2021, saying recovery without COVID-19 remained slow.
“Once again, OPEC+ meets against a worrying backdrop of soft global oil prices and an uncertain demand outlook,” Cailin Birch from The Economist Intelligence Unit told CNBC via email on Thursday.
“We maintain our view that Brent crude prices will average just over $42 a barrel in 2020, assuming that OPEC+ partners reconfirm their commitment to output cuts at their September meeting,” Birch said.
Another expert, Tim Bray, a senior portfolio manager at GuideStone Capital Management, through an email said “I do not believe we should expect any material change of course out of the OPEC meeting this week when they review market fundamentals, in part because compliance with previously agreed production cuts has been high,” Tim Bray, senior portfolio manager at GuideStone Capital Management, told CNBC via email.
“It might set the stage for action at future meetings, however,” Bray said.
Coronavirus: European Investment Bank (EIB) Approves € 12.6bn Financing for Transport, Clean Energy, Urban Development and COVID-19 Resilience
€ 3.1 billion for COVID-19 public health and business financing; € 3.5 billion for private sector investment and working capital schemes; € 3 billon for clean energy and energy efficiency investment around the world; € 2 billion for Naples-Bari high speed train link largest loan in EIB history.
The European Investment Bank (EIB) today approved € 12.6 billion of new financing for projects across Europe and around the world.
New financing agreed today includes more than € 3.1 billion of COVID-19-related investment to improve public health, strengthen public services and back investment by companies in sectors hit by the pandemic.
Since the start of the COVID-19 crisis, the EIB has approved € 20.1 billion to enable public and private partners around the world to better tackle health, social and economic challenges.
The EIB Board, meeting by video conference, also backed investment in agriculture, water, housing, telecommunications and urban development across Europe, as well as in Africa, Asia and Latin America.
“Fighting climate change and tackling the COVID-19 pandemic must go hand in hand to achieve a green recovery. The EU Bank is working around the world to help mitigate the impact of the pandemic on lives, jobs and businesses; and to ensure that investment focuses on sustainability, innovation, and on reducing the devastating impact of climate change. The 12.6 billion Euros of new EIB financing approved today show how we are working with thousands of local partners to make a long-term difference to people’s lives during these challenging times”, said Werner Hoyer, President of the European Investment Bank.
Largest ever EIB loan to transform travel in southern Italy
Passengers travelling between Rome, Naples and Bari will from 2027 benefit from reduced journey times, a quicker and environmentally friendly alternative to car transport, and improved connections thanks to the largest loan the EIB ever approved.
The EIB board gave the green light for a EUR 2 billion loan to support the construction of the new high-speed train link that will cut journey times by 1 hour and forty minutes between Naples and Bari. More than 2000 jobs will be created during construction and 200 once construction of the high speed line across a European cohesion region is complete.
The new green transport link, part of the Italian government’s “Unlock Italy” decree, will increase the competitiveness of raid transport, reduce carbon emissions and support social and economic development in southern Italy. It is part of the Scandinavia-Mediterranean Trans-European Network (TEN).
€ 3.6 billion to help businesses to better withstand COVID-19 challenges
Ensuring that entrepreneurs and employers can continue to invest and adapt to new challenges posed by COVID-19 is crucial.
Companies in the Baltics, Benelux, Cyprus, France, Italy, Spain, Ukraine, Moldova and Georgia as well as East Africa, Morocco, the Middle East and the Pacific will benefit from new targeted COVID-19 financing initiatives approved by the EIB today.
The new schemes, managed by local financial partners and banking intermediaries, will help reduce economic shocks, unlock new investment and enable targeted financing for sectors most vulnerable to COVID-19 uncertainties.
€ 3 billion for renewable energy and energy transition
Today’s board meeting agreed to support energy investment that will reduce energy use and increase generation of clean energy across Europe and around the world.
€ 1.6 billion will be used to finance small-scale local climate action projects in France, Italy and across the EU, managed by experienced financing partners.
Financing to support construction of new windfarms off the Dutch coast and in Bosnia, improve energy efficiency in Austria and Ukraine, renovate hydropower in Georgia, roll out smart meters in Lithuania and modernise electricity networks in Madeira and Hungary was also approved.
Millions of people across Africa and Latin America will be able to access reliable clean energy for the first time following EIB support for new off-grid solar schemes and energy transition.
€ 2.9 billion to improve urban and national sustainable transport
Rail transport in Italy is set to be transformed by EIB backed investment to upgrade rolling stock on the national network, alongside today’s approval of EUR 2 billion financing for the new high-speed line between Naples and Bari.
The EIB Board also agreed to support new investment to upgrade public transport in Sarajevo and Krakow, and to help improve a key motorway link in Bosnia and Herzegovina.
Improving urban development and social housing
Thousands of families will benefit from new large-scale social housing investment across France and in Germany under new financing programs approved today.
The EIB Board also agreed to support the New Slussen urban development project that will transform of the heart of the Swedish capital Stockholm.
Hospital patients will benefit from EIB support for construction of a new regional hospital in Tournai and approval of a national scheme to improve mental health facilities across Belgium.
A new scheme to support long-term healthcare investment in French regions underserved by medical services was also agreed.
Crude Oil Rises Despite Demand Concerns as Hurricane Sally Disrupts Further Production
Oil Prices Surge as Hurricane Sally Disrupts Oil Production
Oil prices rose on Wednesday despite weak demand after strong hurricane sally threatens to disrupted operations of US oil producers amid a big drop in oil inventories.
Brent crude oil, against which Nigerian crude oil is measured, rose from $39.34 barrel on Tuesday to $41.58 per barrel on Wednesday.
Accordingly, the US West Texas Intermediate crude oil gained 1.8 percent to $38.96 per barrel.
American Petroleum Institute (API), a weekly oil projection report, on Tuesday reported that US crude oil inventories declined by 9.5 million barrels in the week ended September 11, 2020. This, experts at ING Research said if close to the real number due later today, could provide support for global oil prices.
The experts said, “If we see a number similar to the drawdown the API reported overnight, it would likely provide some immediate support to the market.”
This coupled with the fact that with reports that 25 percent of US offshore oil and gas output was halted and export ports were shut as the storm crawled offshore along the US Gulf Coast bolstered oil prices on Wednesday.
Oil prices gained despite OPEC lowering demand for the year, saying weak global recovery amid rising cases of COVID-19 will impact demand for the commodity through the first half of 2021.
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