The announcement of an interim dividend of N2.00 per share by United Bank for Africa for the half year ending June 30, 2024, is not only praiseworthy but also indicates promising future opportunities for shareholders.

United Bank for Africa Plc (UBA) has made a historic announcement regarding its first-ever interim dividend, declaring N2.00 per ordinary share of N0.50 each for the half-year period ending June 30, 2024.

This decision is a reflection of the bank's robust corporate earnings, which have significantly bolstered its financial stability and led to an increase in its stock price on the Nigerian Exchange Limited (NGX), achieving a 52-week peak of N34 per share.

The board has put forward this interim dividend of N2.00 per share, marking a substantial rise from the N0.50 per share distributed in the first half of 2023. This translates to a dividend yield of 7.8 percent, based on the last closing price of N25.75 per share as of September 27, 2024.

The total distribution for the N2.00 interim dividend is projected to be N68.4 billion, resulting in a dividend payout ratio of 21.6 percent, one of the highest within the industry.

UBA achieved a remarkable 7.8 percent dividend yield, making it the top performer among listed financial institutions that have announced interim dividend payouts to shareholders on the Exchange.

With a reported profit after tax of N316.36 billion for the first half of 2024, the Group's proposed interim dividend payout amounts to N68.4 billion, enhancing shareholder value.

This results in a dividend payout ratio of 21.6 percent, placing UBA ahead of its competitors. In the 2023 financial year, UBA distributed a final dividend of N2.30 per share, an increase from N0.90 per share in 2022.

The total dividend for 2023, including the proposed final dividend of N2.30 per share and the interim dividend of N0.50 per share paid in September 2023, reached N2.80, compared to N1.10 per share in the previous year.

Capital market analysts have suggested that the interim dividend of N2.00 per share for shareholders in 2024 demonstrates the board and management's commitment to rewarding investors, with expectations of a total dividend payout exceeding N3.00 per share by the end of the financial year on December 31, 2024.

Despite facing challenges such as high inflation, escalating debt levels, rising interest rates, and stricter monetary policies that have exerted considerable pressure on global economies, UBA's H1 2024 audited results revealed resilience.

The Group reported gross earnings of N1.37 trillion for H1 2024, marking a 39.6 percent increase from N981.8 billion in H1 2023, fueled by a remarkable 142.6 percent growth in net interest income and an 85 percent rise in net fees and commissions.

In the profit and loss statement, UBA reported an interest income of N1.004 trillion for the first half of 2024, reflecting a remarkable increase of approximately 134.3 percent compared to N428 billion in the same period of 2023. This growth was fueled by significant gains across all primary revenue streams.

Notably, the group saw a substantial rise in income from investment securities, which grew by 167 percent to N510.21 billion, as well as from loans and advances to customers, which increased by 92.5 percent to N343.76 billion.

Additionally, loans and advances to banks surged by 464.3 percent to N101.67 billion, and income from cash and bank balances rose by 18 percent to N47.92 billion.

This increase in income can be attributed to a favorable yield environment.

In terms of interest expenses, UBA recorded N328.94 billion in H1 2024, marking a 119 percent rise from N150.18 billion in H1 2023.

This increase in interest expenses is primarily due to higher costs associated with customer deposits, which rose by 106.7 percent to N204.49 billion, as well as borrowings that increased by 161.1 percent to N68.65 billion, and deposits from financial institutions, which grew by 142.7 percent to N54.09 billion.

The group experienced a significant increase in net interest income, which rose by 142.6 percent to N674.62 billion in the first half of 2024, compared to N278.1 billion in the same period of 2023.

This growth was driven by a faster rise in interest income relative to interest expenses. UBA's non-interest income reached N367 billion in H1 2024, reflecting a 33.6 percent increase from N553 billion in H1 2023.

Despite the impressive growth in interest income, the decline in non-interest income was offset, resulting in an operating income of N936.59 billion for H1 2024, marking a 19.5 percent increase from N783.96 billion in H1 2023. However, operating expenses surged by 107.9 percent, reaching N40.52 billion in H1 2024, up from N266.37 billion in H1 2023, primarily due to rising regulatory costs and ongoing inflationary pressures.

The group experienced increased expenditures in several areas during the period, including personnel costs, which rose by 92.9% to N133.86 billion; the AMCON levy, which increased by 71.9% to N70.33 billion; fuel, repairs, and maintenance costs, which surged by 218.7% to N47.85 billion; and the NDIC premium, which grew by 102.6% to N23.51 billion.

As a result, the group’s cost-to-income ratio rose to 50.2% during this period, compared to 37.2% in the same period of 2023.

Furthermore, the Group reported a profit before tax of N401.58 billion for H1 2024, a slight decrease from N403.65 billion in H1 2023.

Ultimately, the Group's profit after tax fell to N316.36 billion in H1 2024, down from N378.24 billion in H1 2023, largely due to a significant increase in income tax expenses, which rose by 235.3% to N85.22 billion.

Balance sheet position on resilience growth

UBA's performance as of June 30, 2024, reflects a robust growth in total assets, bolstered by its resilient operations across 20 African countries. The Group reported total assets of N28.34 trillion, marking a significant increase of approximately 37.2% from N20.65 trillion for the financial year ending December 31, 2023.

Key drivers of this asset growth include a 26.1% rise in loans and advances, which reached N6.99 trillion as of June 30, 2024, up from N5.55 trillion in 2023. Additionally, customer deposits surged by 33.7%, climbing to N23.2 trillion from N17.4 trillion recorded for the full year ending December 31, 2023.

The financial institution noted that customer deposits continue to play a pivotal role in the Bank’s funding structure, accounting for 82% of its total funding. This underscores the Bank's strategic efforts to enhance its wallet share across Corporate, Commercial, and Retail segments.

“Low-cost deposit instrumental to achieving a modest cost of funds,” the Bank added.

The organization’s shareholders’ equity remained robust, increasing by 47% from N2.03 trillion in December 2023 to N2.99 trillion, demonstrating its substantial capacity for internal capital generation.

Key ratios

UBA's Capital Adequacy Ratio (CAR) was recorded at 28.3 percent at the conclusion of the first half of 2024, a decrease from the 32.6 percent reported in December 2023. Meanwhile, the liquidity ratio increased from 64.1 percent in 2023 to 65.8 percent as of June 30, 2024.

Additionally, the Non-Performing Loan (NPL) ratio rose to 6.2 percent as of June 30, 2024, up from 5.8 percent in 2023, primarily due to the reclassification of certain exposures.

Conclusion

The Group Managing Director/CEO of UBA, Mr. Oliver Alawuba, remarked on the results by highlighting that the economic landscape in the first half of 2024 continued to pose challenges in the various regions where the bank operates.

He noted that UBA achieved robust double-digit growth in high-quality and sustainable revenue streams during this period.

“This performance reflects our disciplined execution of strategic goals, focusing on balance sheet expansion, transaction banking, and digital banking businesses across our markets,” he said.

He mentioned the goal of creating an improved banking institution, “We continue to invest in building a better bank through improvements in People, Processes, and Technology.”

He revealed that the Pan-African financial institution recognised that people are its greatest asset and this year alone, it has promoted over 2,000 employees and paid the 2023 bonus to eligible staff across Nigeria and UBA Africa (ex-Nigeria). He also said the group has improved on its process amid its smart automation initiatives simplifying service delivery.

“For instance, our website now offers self-service options for BVN and NIN linkage, account updates, card blocking, and more. Additionally, a comprehensive review of our procurement processes has led to significant cost optimization.”

He further commented on investments in technology, “Our ongoing investments in technology are enabling us to deliver superior customer experiences, drive operational efficiency, and unlock new growth opportunities.”

He affirmed that UBA's strategic alliances continue to be pivotal to its growth strategy.

“In 2024, UBA was one of six banks to sign a Memorandum of Understanding(MoU) with the Pan-African Payment Settlement System (PAPSS), enhancing cross-border trade and financial integration across Africa. We successfully deployed instant payment systems in five African countries, with more to follow.

“Our collaborations with telco partners have also expanded, with funds under management now exceeding $1 billion. These partnerships enable us to deliver impactful solutions such as micro-lending and savings products, enhancing financial inclusion.”

Moving forward, he further stated that, “We enter the second half of 2024 from a position of strength. Our proven resilience, strong capital position, and market-leading capabilities position us to continue our growth trajectory. Execution will remain our driving force as we focus on market leadership and delivering excellent customer experiences at every touchpoint.”

In the meantime, analysts at Cordros Research presented a report on UBA’s H1 2024 results and accounts, “We like the sturdy growth in the group’s core income line, as the elevated interest rate environment underpinned interest income growth.

“The preceding was enough to offset the lower non-funded income and surge in operating expenses amid the 60.9per cent decline in loan impairment charges.

“Looking ahead, we expect the group to close the year positively, as the high-interest rate environment and improved risky asset creation will remain a catalyst for earnings growth.

“Investors have reacted very positively to the result, with the stock currently trading at limit up. YTD, UBA is up +10 per cent, compared to the NGX Banking index (+4.1per cent) and the broader All-Share index (+31.7per cent).”