United Bank for Africa’s (UBA) Plc’s profit growth amid a severe credit crunch caused by failed fiscal and monetary policies has validated the Buy Ratings placed on the lender by sundry analysts.
For the first nine months through September 2016, the bank with 19 branches spread across the continent recorded a 7.64 percent increase in net income to N52.26 billion, as against N48.55 billion the previous year.
Other comprehensive income surged by 781.31 percent to N68.83 billion in the period under review, thanks to a 230.12 percent upsurge in foreign exchange translation differences to N21.52 billion.
Such resilience amid credit challenges and a slow growing economy is responsible for Arqaam Capital’s buy ratings on UBA.
Banks in Africa’s largest oil producer after Angola are struggling with the devaluation of the naira, rising non performing loans (NPLs) and falling oil prices.
The ratio of non-performing loans to total credit rose to 11.7 percent at the end of June from 5.3 percent at the end of 2015, according to the CBN website. The NPL is above the 5 percent threshold set by the Abuja-based bank.
Moody’s Investors Service said on Monday that Nigeria’s five biggest banks share common credit challenges related to the economic slowdown. Moody’s expects non-performing loans to increase to about 12 percent over the next 12 months.
UBA’s has a total assets of N3.48 trillion as at September 2016 while share holder’s fund stood at 433.38 billion the same period.
The lender’s share price was up 1.22 percent to N4.20 1:30 pm on the floor of the NSE while market capitalization stood at N148.74 billion.
Nigeria’s banking industry is experiencing a “full-blown financial crisis” as failed fiscal and monetary policies lead to a credit crunch, according to Arqaam Capital.