GCR Ratings has affirmed United Bank for Africa Plc’s (UBA) long-term national and international scale ratings at AA+(NG) and B, respectively, with a stable outlook. The national scale short-term rating has also been affirmed at A1+(NG), reflecting the bank’s solid creditworthiness.
The rating agency highlighted UBA’s robust competitive position, fortified by its extensive presence across 20 African countries and international offices in the UK, USA, France, and the UAE. This strong foothold, coupled with a solid capital base, a good risk profile, and adequate funding and liquidity, balances against the challenging operating environments in key African markets.
UBA’s balance sheet as of September 30, 2024, totaled N12.9 trillion (USD 8.1 billion), representing significant shares of Nigeria’s banking industry assets, loans, and deposits. The bank’s operating revenues have grown at a three-year cumulative average rate of 51.2%, reaching N1.5 trillion (USD 961 million), with net interest income contributing the majority.
A positive shift was noted in Q3 2024, with market-sensitive income’s contribution to operating revenues decreasing significantly, reflecting improved yields on interest-earning assets. GCR anticipates the bank’s competitive profile will be sustained in the foreseeable future.
Shareholders’ funds saw a notable increase of 76.6% to N3.5 trillion (USD 2.2 billion) by September 2024, driven by internal capital generation and gains from currency devaluation. However, the GCR core capital ratio fell to 22.9% from 26.5% at the end of 2023, due to faster growth in Risk-Weighted Assets (RWA).
GCR projects that increased earnings and planned capital injections could elevate the core capital ratio above 25% within the next 12–18 months. Concerns were raised about loan loss reserve coverage, which declined to 58% due to a rise in impaired loans.
UBA’s gross loans and advances grew by 69.9% to N8.1 trillion, influenced by naira devaluation and organic growth. However, asset quality has suffered, with the non-performing loan (NPL) ratio rising to 7.2% from 6.2% in December 2023, driven by poor credit migration in general commerce and economic pressures.
Despite these challenges, UBA has made significant recoveries, reducing the credit loss ratio to 1.8% in September 2024. The bank maintains a well-diversified loan portfolio, with no sector exceeding 20% and low counterparty concentration.
Foreign currency loans comprise 65.6% of gross loans, with associated risks mitigated through natural hedges. GCR expects that the bank’s stringent underwriting and recovery efforts will support asset quality over the coming months.
UBA’s funding and liquidity profiles are strong, anchored by a stable customer deposit base, which grew by 54.2% to N23.0 trillion (USD 14.3 billion) by Q3 2024. This growth is attributed to a robust retail franchise and the effects of naira devaluation.
GCR anticipates stability in UBA’s funding and liquidity profile, with the stable outlook reflecting expectations of a GCR core capital ratio above 25% and a sound funding structure over the next 12–18 months.