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GCR Ratings (GCR) has upheld the long-term national and international scale ratings of United Bank for Africa Plc (UBA) at AA+ (NG) and B, respectively, with a Stable Outlook. Simultaneously, GCR affirmed the national scale short-term rating at A1+ (NG).
The ratings, centered on the creditworthiness of UBA Group, strike a balance between the Group’s strong competitive position, robust capitalization, favorable risk profile, adequate funding, and liquidity, despite the challenges posed by the operating environments in major African countries where the Group operates, as highlighted by GCR.
UBA, ranking among the top five banks in Nigeria by total assets, boasts a robust Pan-African franchise spanning twenty African countries. The Group’s global presence extends to the United Kingdom, the United States of America, France, and the United Arab Emirates, with a balance sheet size of NGN 7.4 trillion or USD 16.4 billion as of December 31, 2022.
GCR acknowledges UBA’s significant market share in Nigeria, controlling 12.3%, 12.7%, and 10.0% of the Nigerian banking industry’s total assets, gross loans, and customer deposits, respectively.
The rating agency underscores UBA Group’s strength in franchise, supported by a diverse customer base of approximately 35 million, featuring a balanced mix of retail and corporate customers. The Group’s digital platforms and an extensive branch network contribute to its resilience.
Over the past years, UBA has sustained a positive trajectory in operating revenues, boasting a 3-year cumulative average growth rate (CAGR) of 35.5% to NGN 1.0 trillion or USD 1.3 billion as of September 30, 2023. The return on equity and return on assets stood at 25.3% and 1.6%, respectively, at the Group level during the same period.
Earnings are primarily derived from stable net interest income, constituting an average of 66.2% over the last three years. However, market-sensitive income surged to 42.2%, driven by increased trading and revaluation gains in the first nine months of 2023.
GCR anticipates the sustained strength of UBA Group’s competitive profile in the coming months, affirming positive evaluations of capital and leverage.
In the 2023 financial year, shareholders’ funds experienced a notable spike of 94.3% to NGN 1.7 trillion or USD 2.2 billion as of September 30, 2023. The GCR core capital ratio remained robust at 26.3%, providing substantial headroom for potential losses.
Risk assessment remains positive, reflecting UBA’s strong asset quality metrics, prudent underwriting standards, and effective risk management. Gross loans and advances grew by 15.9% to NGN 3.2 trillion as of December 31, 2022, and further increased by 60.8% to NGN 5.2 trillion as of September 30, 2023.
Despite a credit losses ratio of 4.6% as of September 30, 2023, driven by the weak macroeconomic environment, UBA’s well-diversified loan book and asset quality metrics are expected to outperform the market average.
GCR Ratings also lauds UBA Group’s sound funding and liquidity, supported by a stable funding structure dominated by customer deposits, accounting for 82.9% of the funding base as of September 30, 2023.
Customer deposits, reflecting a 48.6% growth to NGN 11.6 trillion or USD 15.1 billion in the first nine months of the financial year 2023, contribute to a moderate cost of funds of 2.6%.
The funding base is well-diversified, and the Group’s liquidity position is considered adequate, with liquid assets covering wholesale funding 11.7 times.
GCR maintains a stable outlook, anticipating UBA’s sustained sound asset quality metrics, internal/external capital generation, and continued adequacy in funding structure and liquidity position over the next 12-18 months.
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