Following the indication that the eight financial institutions designated as Systemically Important Banks (SIBs) would be required to raise their liquidity ratio, a report has shown that the United Bank for Africa Plc (UBA) has exceeded the likely threshold of 35 per cent for the SIBs.
The Central Bank of Nigeria (CBN) had in a draft document, designated First Bank of Nigeria Limited, Guaranty Trust Bank Plc (GTBank), Zenith Bank Plc, UBA, Access Bank Plc, Skye Bank Plc, Ecobank Nigeria and Diamond Bank Plc as the SIBs owing to the fact that their failure could pose a systemic risk to the banking industry and the larger economy.
But a report showed that UBA’s liquidity ratio in its recently released third quarter 2013 results was approximately 60 per cent, almost twice the likely minimum liquidity ratio for the eight banks.
A US-based investment bank, JP Morgan, in its latest report on the Nigerian banking industry recommended the bank’s shares to investors stating that “UBA offers an attractive 45 per cent upside potential over 12 months.”
The report cited UBA’s “significant balance sheet liquidity” as one of the strengths of the bank which makes its shares a good buy, noting that the bank’s loan to deposit ratio of 37 per cent as at half year 2013 was the lowest among the Central Eastern Europe Middle East and Africa (CEEMEA) banks covered by the investment bank.
“UBA’s valuation is an opportunity to buy into what may be the most attractive risk-reward in CEEMEA banks,” the JP Morgan report stated.
UBA pan-African presence was also seen as strength in the bank’s operations.
UBA has the highest number of subsidiaries in Africa among the top-tier Nigerian banks with positions in 18 African countries outside Nigeria and potential to drive future revenues on rising intra-Africa trade.
Speaking during at the bank’s quarterly investor conference call with analysts, the Group Managing Director/Chief Executive Officer, UBA, Mr.Phillips Oduoza, said loan growth was in line with strategic positioning in power, upstream oil and gas and telecoms sectors of the economy.
“Our bank remains resilient and our focus is on delivering a set of full year results that will be able to adequately reward our shareholders. We are already reaping the benefits of operating an African strategy that is anchored on our in-depth knowledge of every market we operate in,” Oduoza had explained.