United Bank for Africa (UBA) Plc at the weekend laid out the path to its N500 billion minimum capital requirement as shareholders unanimously endorsed the bank’s plan to raise new equity funds.
The bank plans to undertake three-step capital raising including rights issue, public offer and private placement to raise additional equity capital ahead of the March 31, 2026 deadline for the recapitalisation of banks.
The CBN had in its circular on review of minimum capital requirement for commercial, merchant and non-interest banks, increased the new minimum capital for commercial banks with international affiliations, otherwise known as mega banks, to N500 billion; commercial banks with national authorisation, N200 billion and commercial banks with regional license, N50 billion.
Others included merchant banks, N50 billion; non-interest banks with national licence, N20 billion and non-interest banks with regional licence will now have N10 billion minimum capital.
While UBA Group’s shareholders’ funds had risen by 120 per cent from N922 billion in 2022 to N2.0 trillion 2023, the bank, like other banks, will need to raise additional equity capital, because of the CBN’s definition of the new minimum capital base as addition of share capital and share premium. UBA’s share capital and share premium stands at N115.815 billion.
Shareholders at the annual general meeting of the bank in Abuja approved a multi-tranche, multi-instrument capital raising programme that allows UBA to substantially raise more than necessary to surpass the new minimum capital base.
Shareholders approved increase in the bank’s share capital from N17.1 billion of 34.2 billion ordinary shares of 50 kobo each to N22.5 billion of 45 billion shares through the creation of 10.8 billion new ordinary shares of 50 kobo each.
The broad mandate by the shareholders empowered the board to create additional shares, determine appropriate combination of instruments and markets, underwrite the offers and waive the rights of shareholders in offering unallotted shares to new investors.
Chairman, United Bank for Africa (UBA) Plc, Mr. Tony Elumelu, said the bank was confident of meeting the required minimum capital for its international license.
He outlined three options UBA is considering to shareholders including rights issue which gives existing shareholders the first chance to buy new shares at a discounted price, private placement directly to a small group of investors and public offer to the general investing public.
He urged shareholders to participate in the rights issue, highlighting the benefits of maintaining their ownership stake in the bank. He also plans to reinvest all his own dividends back into UBA.
“We democratise prosperity. We like everyone to share it. So I’m requesting, advising shareholders, as you get your dividend, if you can, reinvest significant part of it. My group and I, we will reinvest 100 per cent in the dividend we get. Because if we do not do so, we are leaving food on the table for others who did not labour for it.
“You know, we could have been sharing dividends over the years, that by today, our shareholders would have made N1 trillion. We would have shared N1 trillion to all of you. That additional money we have to bring to the table would have been brought from your earnings, from your dividends. But because we have been prudent and conservative, we felt no need to do so. Let’s keep banking. We need all the capital we can get. Let’s keep investing. And so we conserve.
“We want to raise the rights in series. Next year, we’re going to finish all that. So we’re doing this to give shareholders the opportunity to raise money from at least your own investments to be able to reinvest. You know, three stages-rights, private placement, and public offer. I doubt that you get the public offer. I doubt it. Because we’ll be selling the shares at giveaways.
“The reason we have it in one of the resolutions is that today, UBA is no longer a Nigerian bank, We’re a pan-African bank, we operate in different jurisdictions. So, we want to use this opportunity to create access for people from across Africa in particular. Especially in the present context we are operating to invest in UBA.
“So, every country will have the opportunity. We allocate like $10 million to $20 million. Ghana, raise people who want to invest up to that, Tanzania, Kenya, etc. So, if what we don’t take by rights is, well will almost be taken out by our customers and friends. UBA remains a conservative bank,” Elumelu said.
Group Managing Director, United Bank for Africa (UBA), Oliver Alawuba expressed confidence in continued growth, emphasizing the bank’s strong financial foundation and commitment to expanding its market share across Africa.
Executive Director, Finance and Risk, United Bank for Africa (UBA), Ugo Nwaghodoh, acknowledged the challenging economic conditions but highlighted UBA’s prudent risk management and conservative approach to safeguarding its assets.
He said UBA aims to maintain sustainable growth and adhere to robust compliance and risk management practices as it navigates through the next phase of its expansion.
Key extracts of the audited report and accounts of UBA for the year ended December 31, 2023 showed significant growths across all key performance indicators. The results showed an increasingly profitable and stronger bank, with both actual figures and underlying ratios recording strong growths.
Gross earnings rose by 143 per cent from N853.2 billion in 2022 to N2.08 trillion in 2023. Profit before tax jumped by 277 per cent to N758 billion in 2023 as against N201 billion in 2022. Profit after tax grew by 257 per cent from N170 billion in 2022 to N608 billion in 2023. Earnings per share thus rose by 262 per cent from N4.84 in 2022 to N17.49 in 2023. The top-line performance was driven by three-digit growths across the interest and non-interest incomes as well as growths in the Nigerian and other markets where the bank operates. Interest income rose by 93 per cent while non-interest income grew by 314 per cent. The results showed a banking group with diverse and supportive market growths, thus its resilience to specific market shocks. While the Nigerian business grew by 149 per cent, the “rest of Africa” rose by 135 per cent and contributions from the “rest of the world” jumped by 234 per cent. All the business segments also reported significant improvements in profitability.
The bank’s balance sheet also emerged stronger. Total assets rose remarkably by 90.22 per cent, doubling the N10 trillion mark, to close 2023 at N20.65 trillion, up from N10.86 trillion in 2022. This is a milestone in the history of the group. Consequently, UBA Group’s shareholders’ funds rose from N922 billion to N2.0 trillion, an impressive growth of 120.2 per cent. Notably, UBA recorded a 61.3 per cent growth in loans to customers, moving up to N5.5 trillion in 2023, whilst customer deposits improved by 90.31 per cent to N14.9 trillion, compared to N7.8 trillion recorded in the corresponding period of 2022. The bank attributed this to increased customer confidence, enhanced customer experience, successes from the ongoing business transformation programme and the deepening of its retail banking franchise.
Beyond the surface, the bank’s ratio were stronger. Group cost-to-income ratio dropped from 59.2 per cent in 2022 to 37.2 per cent in 2023, underlining improvement in overall corporate efficiency. Capital adequacy ratio (CAR) improved from 29.6 per cent to 32.6 per cent, more than a double of the regulatory limit of 15 per cent. Investors’ returns were also remarkable. Return on assets doubled from 1.8 per cent to 3.9 per cent. Return on equity also doubled from 19.7 per cent to 41.2 per cent. The dividend yield is above 10 per cent, within the top bracket for high-yielding stocks.
Also, the first quarter results showed that the bank started off the new business year on a strong footing with three-digit growths across all major performance indicators.
The results for the three-month period March 31, 2024 showed that gross earnings rose by 110 per cent while pre and post profits grew by 155 per cent and 165 per cent respectively.
Gross earnings doubled from N271.1 billion in first quarter 2023 to N570.2 billion in first quarter 2024. The top-line performance was driven by strong growth in the core banking operations with interest income rising by 130 per cent to N440.7 billion. Operating income doubled by 115 per cent from N175.7 billion to N378.59 billion. Profit before tax jumped by 155 per cent from N61.7 billion in first quarter 2023 to N156.34 billion in first quarter 2024. Profit after tax leapt by 165 per cent from N53.5 billion to N142.5 billion.
The balance sheet of the bank further expanded within the three months. Total assets grew by 23 per cent to N25.4 trillion in March 2024. Customer deposits also rose by 23 per cent to close the period at N18.4 trillion, largely attributed to growth in current accounts and savings accounts.”
