LAGOS, AUGUST 31, 2017 – Following a good showing in the last six months, analysts believe the United Bank for Africa (UBA) is poised to stash gains in the near term while consolidating results of the last year since assumption of CEO, Kennedy Uzoka.
Though the bank’s stock price has been up and down in a show of volatility in the last four weeks, the closing price for Tuesday August 28 represents a gain of over 100 per cent at N9.40.
In other words, those who entered the stock early January have doubled their investments since then.
The racy gains by the bank helped it outperform the index in the last six months, returning 90 per cent to investors where the All Share Index (ASI) gained 42 per cent. The story is even better over a longer time horizon with the bank returning 110 per cent while the ASI made 35 per cent.
This publication had forecast investors interest when in reference of the second quarter 2016 results had said that “though the current price is below the target N6.92, a PE ratio of 2.45 times multiple indicate that investors are willing to part with more to own the bank’s stocks.
It’s difficult not to do so since the bank delivered higher Returns on equity, assets and capital in 2015 relative to the 2014 year. ROE was 20.01 compared to 19.29; ROA was 2.13 compared to 1.74 and ROC was 10.53 versus 10.37.”
The stock’s winning streak has had analysts review their position on the bank, forecasting that it would outperform the market going forward with a median price target of N9.74. Even if the projection is only 1.04 per cent over the last price of N9.64, it represents a better position which had made analysts advice holding the stock.
According to the Financial Times, “as of Aug 25, 2017, the consensus forecast amongst 12 polled investment analysts covering United Bank for Africa advises that the company will outperform the market.
This has been the consensus forecast since the sentiment of investment analysts improved on May 19, 2015. The previous consensus forecast advised investors to hold their position in United Bank for Africa.
“The 13 analysts offering 12 month price targets for United Bank for Africa have a median target of N9.74, with a high estimate of N12.96 and a low estimate of 6.14. The median estimate represents a 1.04% increase from the last price of N9.64”.
The outlook remains bright for the pan African group after posting good results for H2 (second quarter) with Gross earnings hitting N222.72 billion or 34.5 per cent over the equivalent quarter when the bank made N165.58 billion.
This is noteworthy against the fact that other competitors are struggling on volume. The rise in earnings pushed net interest income by 58 per cent to N101.4 billion from N64.13 billion.
The racy net interest figure was also due to a healthier interest income level compared to interest expenses.
While Interest income rose 44.3 per cent to N154.95 billion from N107.42 billion, interest expense capped at N53.58 billion, a 23.8 per cent rise from N43.3 billion. The improvement indicates a growing ability to manage interest bearing assets against interest costing assets even as the loan to deposit ratio, which rose to 0.64 compared to 0.60 of the equivalent quarter.
Even if impairment charges rose 38 per cent to N9.44 billion fromN6.82 billion, net interest income after impairment was still at a respectable N91.94 billion from N57.31 billion. The rise also helped to lift pre-tax profits by a robust 65.53 per cent to N57.3 billion from 34.76 billion.
The figures were also helped with rising noon interest income of which forex gains played a major role. The rise in forex returns was as much as 136%.
Net profit followed in the growth trajectory to shore at N42.4 billion from N27.11 billion, raising net profit margin to 19 per cent from 16.4 per cent, more than the 16.1 percent inflation that subsisted for the month of July.
Year on year, the pan-African financial services group with operations in 19 African countries grew revenues 20.29% from 318.94bn to 383.65bn while net income improved 18.43% from N58.60bn to N69.40bn.