Nigeria: United Bank for Africa’s diversification protects it from risks, say analysts

By David Whitehouse

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Posted on December 7, 2021 12:33

Firefox_Screenshot_2021-06-09T09-40-07.196Z © UBA chairman Tony Elumelu in Paris on 30 October 2019. Bruno Levy for JA
UBA chairman Tony Elumelu in Paris on 30 October 2019. Bruno Levy for JA

Reduced dependence on the Nigerian market and a share price valuation that trails peers mean that United Bank for Africa (UBA) shares may offer value, analysts say.

Apathy towards UBA shares is “surprising” as the firm reported the highest nine-month growth in earnings per share (EPS) among banks covered by Chapel Hill Denham, analyst Damilola Olupona writes in a research note.

UBA is Nigeria’s fourth-largest bank, holding 15% of the assets in the domestic banking system at the end of 2020. It bills itself as “Africa’s Global bank” and is present in 20 countries in the continent, with an overall total of 21m customers. Chapel Hill Denham estimates that the bank’s share of pre-tax profit earned from the rest of Africa has increased to 69.2% from 59.1% in 2020. Reluctance to increase Nigerian lending due to increased macroeconomic risk is dampening the Nigerian earnings contribution, the research says.

The shares trade at 0.4 times book value, below both the five-year average of 0.5 times and the average for Nigerian first-tier banks of 0.6 times,

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