UBA Outperforms Banking Sector as Return Hits 173%
Amidst strong stock market rerating of banking shares, the United Bank for Africa (UBA) Plc has spun higher return than any of its peers in the banking sector. Its year-to-date return as investors
Based on trading data from the Nigerian Exchange, UBA Plc has gained more than 173% on its opening price from the beginning of the year to date.
As a result of strong buying momentum, the Pan Africa lender market valuation printed above N706 billion. In its equity update, CardinalStone Limited said UBA will likely grow gross earnings by 116.5% to about N1.7 trillion by 2023.
Analysts anchored the estimated expected surge in non-interest revenue to N698.4 billion and a 74.0% accretion in interest income.
Analysts estimated its five-year average of gross earnings at N587.4 billion. The group reported non-interest revenue of N213.1 billion in the financial year 2022.
According to CardinalStone, the expected surge in non-interest revenue should be inspired by the rise in net fair value gains on derivatives recorded in the second quarter of the year – a positive offshoot of the material naira devaluation and associated derivative revaluation, with the bank mainly net long in dollar assets.
Analysts said further deterioration in the Investors and Exporters FX window in the ongoing quarter suggests that there could be scope for more currency-inspired accretion.
Similarly, interest income should be supported by the upward movements in fixed-income yields inspired by material re-ratings at the Treasury and OMO markets, the removal of the cap on the standing lending facility (SDF), and the overall hawkish disposition of the CBN.
The impact of the above drivers will likely remain evident in 2024, analysts said in their report.
CardinalStone expects earnings per share (EPS) of N16.60 in 2023 versus N12.93 in 9M-2023 and N4.80 in 2022, with an associated dividend of N5.00 per share (N1.10 in 2022).
Analysts explained that the final dividend component of the latter which was N4.50 of the projected N5.00 per share dividend suggests a potential dividend income of 21.4% within a few months for investors that prioritise income.
In its estimate, analysts at CardinalStone upgraded 12-month Target Price to N30.03 from N18.60, which is at a 43.0% premium to the stock’s last close price and implies an unchanged BUY recommendation going by its rating system.