United Bank for Africa (UBA) Plc has outperformed all of its rivals in the banking industry in terms of return amid a robust stock market rerating of banking shares. The investors’ year-to-date return. According to trade statistics from the Nigerian Exchange, UBA Plc has increased its starting price by almost 173% since the start of the year.
The Pan Africa lender market valuation printed above N706 billion due to robust purchasing enthusiasm. CardinalStone Limited stated in its equity report that UBA’s total earnings by 2023 are expected to increase by 116.5%, or over N1.7 trillion.
Analysts anticipated that there would be a 74.0% increase in interest income and a jump in non-interest revenue of N698.4 billion.
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.
CardinalStone claims that the increase in net fair value gains on derivatives seen in the second quarter of the year—a favorable consequence of the significant devaluation of the naira and the related revaluation of derivatives—should serve as the catalyst for the anticipated spike in non-interest revenue. The bank is primarily net long in dollar assets.
According to analysts, there may be room for further currency-inspired accretion if the Investors and Exporters FX window continues to deteriorate over the current quarter.
In a similar vein, increases in fixed-income rates spurred by significant re-ratings in the Treasury and OMO markets, the lifting of the cap on the standing lending facility (SDF), and the CBN’s general hawkish stance should benefit interest income.
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.
