United Bank for Africa Plc - Financial Results for the 15 month period ended 31st December 2009.
DELIVERING ROBUST GROWTH IN CHALLENGING TIMES

United Bank for Africa Plc (UBA) experienced strong growth in 2009 despite the economic challenges arising from the global financial crisis and capital market downturn.

Highlights of the group’s results are:​

◦ Gross Earnings up 46% to N246.725bn

◦ Net Interest Income up 57% to N118.189bn

◦ Fees and Commissions up 18% to N50.075bn

◦ Operating Income up 46% to N187.066bn

◦ Profit Before Tax and After Exceptional Items of N13.66bn

◦ Profit After Tax of N2.38bn

• Capital Adequacy ratio of 16.3%

Exceptional Items include net charge of N38bn for diminution in assets value following stress tests by the Central Bank of Nigeria.

The Directors have recommended a dividend of 10 kobo per share and a bonus share issue of 1 new share for every 5 held.

Group CEO, Tony Elumelu stated that the results reflect the bank’s solid foundations, strong capital base (risk weighted capital adequacy ratio of 16.3%) and focus on risk management and corporate governance.

The Group’s AFRICAN expansion play continues to be a significant differentiator and source of future growth. UBA commenced operations in A FURTHER 8 African countries during the year, BRINGING TOTAL AFRICAN PRESENCE TO 16, as it seeks to diversify its earnings stream and open up considerable prospects for the distribution of its product suite. Revenues from African operations (ex-Nigeria) grew by 330% during the period and now represent 7.2 % of the group’s gross earnings. The Group expects EVEN stronger growth and more material contribution from its ex-Nigeria operations in 2010



Zenith Bank 15 month Results

Zenith Bank became the first quoted Nigerian bank to publish its December 2009 results, by announcing its audited results for the 15 month period ended December 31, 2009.

The bank is also the first of the 24 banks to release its common year end books. The publications of the books are expected to show the exact health of the banks.

The Central Bank is expected to go through these books and check compliance to international financial reporting standards, before they are finally approved for public consumption.

Most awaited results

The release on Monday of one of the most awaited common year end results in the banking sector after the Central Bank of Nigeria's special audit last year, draws the attention of finance experts.

Renaissance Capital, a finance and research firm, said given the operating environment, it views the result as satisfactory.

Kato Mukuru, Director, Head of African Research, Equity Research, said the figures published are in summary form only and as such, the firm's comments will be limited to the big picture.

"For the 15 months to December, its profits before tax (PBT) was N35billion versus our estimate of N36billion. The reported profit after Tax (PAT) over this period was N21billion versus our forecast of N27billion, but this is probably explained by one-off taxes. Additionally, we highlighted that the group announced a proposed dividend of N0.45 per share and a one for four (1 for 4) bonus issue. We were forecasting a dividend of N0.54 per share."

In a further breakdown of the results, RenCap noted three big positives - a strong top-line growth on higher margins, strong growth in risk assets, and the maintenance of a solid capital position.

"Gross revenues of N277.3billion came in 11 percent ahead of our forecasts and were up 31 percent year on year on a like-for-like basis. Notably, group net interest income (NII) was up 28 percent since Financial Year 08 and since assets over the period were down seven percent, we believe that margins must have improved notably over the period."

Performance

In a detailed analysis of the bank's report made available to NEXT, Mr. Mukuru noted that the Zenith's net loans as at December 2009, was N698billion up 57 percent from the 2008 levels and eight percent ahead of forecasts.

"Although the CBN's requirement to bring Commercial Papers (CPs) and Bankers Acceptance (BAs) on-balance sheet would have contributed significantly to this growth, the improved leverage of the Zenith Balance sheet is very encouraging.

"Although Zenith's December 2009 Capital Adequacy Ratio (CAR) (29 percent) is below its September 2009 levels (36 percent), it remains well above the regulatory minimum of 10 percent. Additionally, we would note that Zenith Bank continues to be ranked as one of the most liquid banks, with a liquidity ratio of 57 percent, more than double the minimum requirement of 25 percent," Mr. Mukuru said.

Concerns remain

Mr. Mukuru noted that provisions in the bank's books were higher in past quarter, which was rather disappointing. "As presented today, it would appear that its exceptional provisions increased to N40billion at December 2009 (from N26billion in September). Although we did expect to see more market-related provisions on the back of the weaker markets, we were also hoping to see some recoveries in this quarter. Although this is mildly disappointing, we note that the group's Non Performing Loan (NPL) ratio only increased to six percent in December (from four percent in September).

"On the back of these results, we would like to hear a clear message from the management with regard to their earnings outlook and provisions in tomorrow's conference call. We reaffirm our target price of N26 per share on the back of the very strong top-line growth; which, if added to stable costs and significantly lower provisions in 2010, should result in strong profit recovery," he said.

Management's response

Jim Ovia, the outgoing Group Managing Director and Chief Executive of Zenith Bank, in a statement made available to NEXT, said he is delighted that the bank produced this resilient result in very challenging times.

"We remain vigilant on asset quality, and pride ourselves on our risk management infrastructure, as we do on our continued drive to reduce costs and our resilient capital position, one of the strongest in the industry," he said.

Godwin Emefiele, group chief executive designate and currently Deputy Managing Director, Investment Management and Stockbroking, said "the global economic and financial downturn experienced over the period had a negative impact on performance as a whole, and this translated to a 40 percent decline in the total revenue for the division through reduced activity in the capital markets of our existing clients."

He added, "However, in absolute terms, our number of clients did not reduce and this will be key to us in regaining a leading position as the markets recover. We have set a target to grow our gross earnings back to 2008 levels by continuing to reduce our overall cost of funds. Business development in investment banking, insurance and registrar mandates are identified areas for growth."

Peter Amangbo, Executive Director of Corporate and Retail Banking, also said the strategy in going forward is to continue its branch expansion programme on a cautious note, which will increase the bank's footprints across Nigeria, and leverage on the drive to mop up cheap deposits and channel the funds to large corporate clients, while striving to increase the value add of services to clients.

Future growth

RenCap believes that strong capitalisation combined with low leverage is key to the bank's successful navigation of the financial crisis.

Capital adequacy stands at 29 percent and the bank maintains one of the largest capital reserves in the industry at N335 billion, as such deemed more than adequate to support future expansions as well as business risks and contingencies.

The group's loan to deposit ratio of 59 percent is well within the regulatory guideline of 80 percent; likewise its liquidity ratio of 57 percent and capital adequacy ratio of 29 percent, are well above the regulatory requirements of 25 percent and 10 percent respectively.


GTBank 12 Month Results

Guaranty Trust Bank Plc (GTB) has posted a high turnover and low profit in its financial results for the year ended December 31, 2009.

The bank financial statement, which was presented to the Nigeria Stock Exchange (NSE) on Tuesday, shows a record of 61.57 per cent increase in turnover and 16.35 per cent decline in profit after taxation. The first two banks, Zenith Bank and United Bank for Africa, whose results were released few weeks ago, had also recorded high turnover and low profit.

GTB audited result shows gross earnings of N162.550 billion as against the N100.605 billion recorded in 2008. Profit before taxation stood at N27.963 billion compared with N35.329 billion in the preceding year, representing a 20.85 per cent decline. Also, the profit after tax recorded stood at N23.686 billion compared with N28.315 billion in the previous year.

Meanwhile, the company’s board of directors has recommended a dividend of 75 kobo per share and a bonus share issue of 1 new share for every 4 held. The proposed date of closure of register for the bank’s shareholders is April 20, while dividend payment date is May 5.

The NSE recently listed GTB’s 13.5 per cent Fixed Rate Senior Unsecured Non-Convertible Bond valued at N13.165 billion issued through a Book Building process.

The bond, which is the first tranche of the bank’s N200 billion Debt Issuance Programme, has a five-year tenor with 13.5 percent Coupon and semiannual interest payment fixed for June 18 and December 18. The success of the bond would further boost the bank’s turnover in the next financial result.

Analysts reaction

Commenting on the result, analysts at Proshare Nigeria Limited, an investment advisory firm, in a statement, said, “GTB added momentum to the market appreciation” recorded on Tuesday as the bank in its common year gave dividend and bonus to its investors.

“Expectedly, there were positive reactions/responses to the returns declared by the bank (GTB) as the shares of the bank recorded 5 per cent price appreciations at the end of trading session today (on Tuesday),” they said.

However, Proshare analysts said while more market performance growth is expected in the days ahead, “the impressions that not many banks would be able to give returns to investors may slow down investors’ patronages in some banking stocks, especially banks that are considered likely to declare more loan loss at the end of the day.”

According to them, “In the light of this, we enjoin investors to look before they leap and not be carried away by the euphoria of the present moment, but rather invest on fundamentals and not mainly on speculations.”

Also, stock dealers at Afrinvest West Africa said, “A positive reaction trailed the full year results released by GTB, subsequently trading at the upper end of the market; though last minute sales however suggests that the rally might be short-lived.”

They noted that the banking sector remained bullish with more gains than losses at the end of the first trading session of the week.

Meanwhile, equity research analysts at Renaissance Capital, said the financial results so far released by the three banks are “encouraging.” The experts said activities at the stock market this week will “favour non-financials that are yet to catch up with the recent rally in the market.” Adding: “We also note the momentum from the positive response to recent earnings releases and expectations of upcoming earnings releases in the banking sector. Conversely, we remain sellers of the distressed banks, as well as banks that we think look ripe for profit-taking.”