United Bank For Africa Plc · NSENG:UBA
United Bank For Africa — H1 2009 Earnings Presentation
58 slides from United Bank For Africa's earnings presentation, May 7, 2009
Slide 1: 2008/09 Half Year Results Investor Briefing
2008/09 Half Year Results Investor Briefing Victor Osadolor Executive Director/Group CFO UBA PLC May 7, 2009
Slide 2: Forward looking statements & restatement of prior years
Forward looking statements & restatement of prior years Presentation and subsequent discussion may contain certain forward-looking statements with respect to the financial condition, results of operations and business of the Group. These forward-looking statements represent the Group’s expectations
Slide 3: 1H-Mar 2009 financials at a glance
1H-Mar 2009 financials at a glance Mar-09 Mar-08 % PARAMETERS ACTUAL (N' bn) ACTUAL (N' bn) GROWTH GROSS EARNINGS 108.9 78.1 39% PBT & EXCEPTIONAL ITEMS 25.9 21.9 18% EXCEPTIONAL ITEMS 3.9 1.8 117% PROFIT BEFORE TAX 22.0 20.1 9% BALANCE SHEET SIZE 1,829 1,617 13% ASSETS 1,340 1,137 18% DEPOSITS 1,02
Slide 4: Outline
Outline Executive Summary Detailed Analysis of results Overview of UBA Operating environment Outlook for the remaining quarters Q&A www.ubagroup.com 4
Slide 5: Executive Summary: Operating environment
Executive Summary Operating environment World economy crisis deepens •Recession in many geographies •Sub-prime mortgage crisis remains •Global credit crunch •Decline in equity prices (over 25% shed in 1Q09) •Job losses (51 million jobs to be lost in 2009 – ILO) •etc Nigeria impacted by global
Slide 6: Concerted actions to contain the impact
Executive Summary Concerted actions to contain the impact •Liquidity infused •FX Regime altered •Interest rates pegged •Govt focuses on Agric and Infrastructural development – N1trn earmarked for infrastructure – N171bn released for Roads – N200bn earmarked for commercial agric – N100bn released so
Slide 7: Executive Summary: UBA's performance highlights
Executive Summary UBA’S PERFORMANCE HIGHLIGHTS Growing market share Consistent growth in gross earnings (49% CAGR) Strong deposit base (12.5% of sector deposits) Increased Branch Network (24 in Ghana, 21 in BIB, 613 in Nigeria, 32 in others) Cautious global expansion •Operations in 8 count
Slide 8: Executive Summary: Funding and capital adequacy
Executive Summary Funding and capital adequacy 72% of deposits are cheap funds •Strong retail network •6.6 million customer base Strong deposit growth due to articulated strategy Capital Adequacy Ratio (CAR) of 19% •Well above minimum requirement of 10% Strong liquidity, stable asset quali
Slide 9: Outline
Outline Executive Summary Detailed Analysis of results Strong market share Profitability & Efficiency Risk management & Liquidity Overview of UBA Operating environment Outlook for the remaining quarters Q&A www.ubagroup.com 9
Slide 10: Growing market share
Growing market share Gross Earnings 2007 – 09 (N’ bn) Total Assets plus Contingents (N’ billion) 120 108.9 of 4 9% +13.1% GR 2,000 1,829 CA 1,617 78.1 80 48.9 1,000 40 0 1H08 1H09 0 1H07 1H08 1H09 Deposit Base (N’ billion) Revenue growth driven largely by growth in interest and discount 1,200 +23%
Slide 11: Outline
Outline Executive Summary Detailed Analysis of results Strong market share Profitability & Efficiency Risk management & Liquidity Overview of UBA Operating environment Outlook for the remaining quarters Q&A www.ubagroup.com 11
Slide 12: Stable profitability…
Stable profitability… PBT 2007 – 09 (N’ bn) Interest and non interest Income (N’bn) of 37% 30 AGR 120.0 4% +39. C 22.0 20.1 20 11.7 80.0 10 82.8 53.4 0 40.0 1H07 1H08 1H09 24.7 26.1 Stable PBT despite severe challenges 0.0 Interest & discount incomes up by 55% to 1H08 1H09 N83 bn Interest & Disc
Slide 13: Driven by low cost, growing and diversified funding base
…Driven by Low cost, growing and diversified funding base… Structure of Deposits, by type Deposit Mix: 72% in cheap Time Current and Savings Account 28% Demand Wide distribution network as a 55% catalyst Savings 17% Deposit Liabilities by location 91% of deposits generated in Others Nigeria 9%
Slide 14: … and improved operating efficiency
… and improved operating efficiency Net Interest Margins (NIM) Cost to Income ratio 9% 8.4% 59.9% 60.0% 60% 6.2% 6% 40% 3% 1H08 1H09 20% 1H08 1H09 Cost to Income ratio stable. Return on Total Assets Project 20 and GSS established 3.2% should extract more value from 3% operations and improve effi
Slide 15: Enhanced shareholder value
Enhanced shareholder value Return on Equity Shareholders’ Funds (N’ billion) 30% 24.8% +16.2% 201 19.5% 200 20% 173 150 10% 100 0% 50 1H08 1H09 1H08 1H09 RoE improved by 53 basis points UBA continues to enhance shareholder value Dividend policy is expected to remain consistent with trend www.u
Slide 16: Outline
Outline Executive Summary Detailed Analysis of results Strong market share Profitability & Efficiency Risk management & Liquidity Overview of UBA Operating environment Outlook for the remaining quarters Q&A www.ubagroup.com 16
Slide 17: Good liquidity management
Good liquidity management Structure of Total Assets LR - Liquid Assets to Total Deposits 100% 60% 51% 41% 40% 32.1% 37.2% 40% 75% 25% 20% 22.1% 14.0% 50% 0% 32.0% 33.8% 1H08 1H09 25% 9.1% 9.7% UBA-LR Regulatory-LR 0% 4.7% 5.3% 1H08 1H09 26% above required threshold LR of 25% Cash and S.T. Funds & Ot
Slide 18: Risk management
Risk management NPL Ratio Stable risk asset quality 6% 4.8% 4.9% Margin loan exposure now 4% 5.5% of gross loans and advances 2% 1H08 1H09 Coverage Ratio Net Coverage Ratio 89.7% 98.9% 112.2% 123.6% 100% 120% 75% 90% 50% 60% 25% 30% 1H08 1H09 1H08 1H09 www.ubagroup.com 18
Slide 19: Risk Management: Margin loans (MLs)
Risk Management: Margin loans (MLs) MLs are 5.5% of gross loans. They are of three classes Retail MLs of about 30% Most restructured for 2 years at reduced loan rates And alternative sources of repayment Various levels of provisioning made 40% of MLs to our subsidiaries (capital market ope
Slide 20: Outline
Outline Executive Summary Detailed Analysis of results Overview of UBA Strategy Industry Position ERM and compliance Framework Operating environment Outlook for the remaining quarters Q&A www.ubagroup.com 20
Slide 21: About us
About us Our core Values Who we are z H - Humility United Bank for Africa Plc (“UBA”) is the leading financial services institution in West Africa. Listed on z E - Empathy the Nigerian Stock Exchange, UBA is rapidly z I - Integrity evolving into a pan African full service financial institution z R -
Slide 22: Group Organization Structure
Group Organization Structure UBA’s Organization Structure is one that facilitates speedy decision making, entrepreneurship & effective corporate support BOARD AUDIT BOARD OF DIRECTORS COMMITTEE GMD/ CEO GROUP INTERNAL GROUP EXEC OFFICE AUDIT GROUP STRATEGY OFFICE CORPORATE TRANSFORMATION OFFIC
Slide 23: A true Global Bank…
A true Global Bank… Paris Abu Dhabi USA UK Guangzhou Cayman Island z 690 branches; up from 621 Mali Benin Nigeria z 1,557 ATMs; up from 1,256 Burkina Faso Tchad z 3,769 POS Term.; up from 3,296 Cameroon Senegal z Over 200 banking products; Gambia Uganda up from 145 Guinea S. Leone Kenya z Over 6.6mn
Slide 24: …built on well nurtured strengths
…built on well nurtured strengths • UBA’s market leadership has been built on the following key strengths Financial Financial Size Sizeand and Profitability Profitability (Nominal) (Nominal) Driven, Driven, Strong Strong dynamic, dynamic, brand brand leadership leadership equity equity team team Wid
Slide 25: Overall strategic intent
Overall strategic intent Increase market share to 25% by 2011 Presence in 23 African countries by 2011 …. become the Regulatory approvals have been obtained to leading emerging operate in additional 3 countries … move markets bank into African with global To be top 3 in each business segment
Slide 26: Outline
Outline Executive Summary Detailed Analysis of results Overview of UBA Strategy Industry Position ERM and compliance Framework Operating environment Outlook for the remaining quarters Q&A www.ubagroup.com 26
Slide 27: We lead in distribution channels
We lead in distribution channels Branch Network, Top Banks ATMs Deployed, top ten banks UBA UBA UBA controls over 20% of sector distribution channels www.ubagroup.com 27
Slide 28: Solid balance sheet…
Solid balance sheet… Total assets + contingents, Nigerian Banks (N’billion) UBA 11.4% UBA has 11.4% market share of total assets Others 88.6% www.ubagroup.com 28
Slide 29: …still undervalued at the Equity market
…still undervalued at the Equity market P/B Ratio, largest banks (31Mar09) P/E Ratio, largest banks (31Mar09) 1.2x 9.0x 0.9x 0.8x 6.0x 4.1x 0.4x 3.0x 0.0x 0.0x UBA UBA Good valuations (Time to Buy) Div. Yield, largest banks (31Mar09) P/B less than 1 ( 0.9x ) 15% 13.5% 10% P/E of 4.1x despite pos
Slide 30: Outline
Outline Executive Summary Detailed Analysis of results Overview of UBA Strategy Industry Position ERM and compliance Framework Operating environment Outlook for the remaining quarters Q&A www.ubagroup.com 30
Slide 31: Group Risk Management Structure
Group Risk Management Structure CEO Subsidiary Risk Heads GCRO Risk Credit Chief Credit Compliance Market Op Risk IT Risk Measurement Risk Credit Collections/ & Risk Management Officer recoveries Fin Crime Policies & Group Traded IT Infra- Economic Frameworks Group Group Loss Credit Market structure
Slide 32: Enabled by…
Enabled by… www.ubagroup.com 32
Slide 33: UBA Principal Risks
UBA Principal Risks Capital risk Compliance risk Concentration risk Credit recovery risk Credit default risk Currency risk Equity or investment risk in banking book Interest-rate risk in banking book Liquidity risk Market risk (position risk) in the trading book Process risk Reputational risk Inform
Slide 34: Economic capital framework ensures adequate capitalization
Economic capital Framework ensures adequate capitalization for all risks Expected loss T1 capital maintained above economic capital requirement to ensure UBA is adequately capitalized for principal risk unexpected losses at 99.9% confidence level. Probability Unexpected loss % of RWA Loss Provision
Slide 35: Risk Appetite/Stress Testing framework
Risk Appetite/Stress Testing framework Financial volatility risk appetite is used to limit stress scenario impacts. Business as Usual 1 in 7 Stress • PBT must be at least 3 times • We must be able to maintain dividend level expected loss (provisions) • Free cash flow must be able to fund planned bal
Slide 36: Outline
Outline Executive Summary Detailed Analysis of results Overview of UBA Operating environment World Economy Sub Sahara Africa Economy Nigerian Economy The Banking Sector Outlook for the remaining quarters Q&A www.ubagroup.com 36
Slide 37: Global recession deepens…
Global recession deepens… World GDP growth, 2000 - 2008 S&P 500 vs. Barclays Govt. Bond Index 6.0% 5.3% 4.9% 5.2% 5.0% 4.8% .Equity return 4.7% 4.0% 3.8% 3.0% 3.0% 2.7% 2.0% 2.2% .Debt return 1.0% 0.9% 0.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009f World Bank reduced its 2009 global Equ
Slide 38: with decline in world stock markets…
with decline in world stock markets… Performance of selected world stock markets in 2008 USA-Dow Jones Saudi Arabia South Korea Hong Kong Singapore Germany Australia UK-FTSE Nigeria Japan China Russia Qatar Egypt India UAE 0% -20% -30.0% -31.3% -33.8% -40% -39.7% -40.4% -40.7% -41.4% -45.8% -47.5% -
Slide 39: …and drop in Oil prices
…and drop in Oil prices Oil price trend, last one year (US$/barrel) www.ubagroup.com 39
Slide 40: Continued downward interest rate adjustments and financial stimulus
Continued downward interest rate adjustments and financial stimulus; to boost spending Monetary Policy actions by regulatory authorities in 2008 www.ubagroup.com 40
Slide 41: Outline
Outline Executive Summary Detailed Analysis of results Overview of UBA Operating environment World Economy Sub Sahara Africa Economy Nigerian Economy The Banking Sector Outlook for the remaining quarters Q&A www.ubagroup.com 41
Slide 42: Prospects in SSA better than Europe and LatAm
PROSPECTS IN SSA BETTER THAN EUROPE AND LATAM, and COMPARES WELL WITH ASIA-IMF • IMF reviewed growth expectation for SSA by 160 bpts to 4.6% in Jan’09 • Growth expectation for Asia slightly higher at 4.8% (6.3% in Apr’08) • Inflation rate of 6.5% expected (4.6% in Apr’08) www.ubagroup.com 42
Slide 43: Exports and Growth in SSA
Exports and Growth in SSA • SSA exports grew by almost 8% in 2008 • Export growth consistent with output growth www.ubagroup.com 43
Slide 44: Outline
Outline Executive Summary Detailed Analysis of results Overview of UBA Operating environment World Economy Sub Sahara Africa Economy Nigerian Economy The Banking Sector Outlook for the remaining quarters Q&A www.ubagroup.com 44
Slide 45: Overview of Nigerian economy
Overview of Nigerian economy Reduced capital inflows Most FDIs are going into Oil & Gas Selected macro economic data GDP growth (Dec, 2008) 6.77% Decline in global oil prices Inflation rate (Feb, 2009) 14.6% $147/barrel as at July 2008 External Reserves (Jan’ 2009) $50.9 bn Now $50/barrel
Slide 46: CBN initiates expansionary policy measures, stabilises exchange rate
CBN initiates expansionary policy measures, stabilises exchange rate Benchmark rate reduced by 175 bpts to 8.0% Cash Reserve Ratio reduced progressively from 3 % to 2% and now 1% Liquidity Ratio reduced from 40% to 30% and now 25% Set the Maximum Deposit and lending rates at 15% and 24% resp
Slide 47: Outline
Outline Executive Summary Detailed Analysis of results Overview of UBA Operating environment World Economy Sub Sahara Africa Economy Nigerian Economy The Banking Sector Outlook for the remaining quarters Q&A www.ubagroup.com 47
Slide 48: Overview of the Banking sector
Overview of the Banking sector Upside Downside Relatively strong capital base at Equity market exposure N3 trillion estimated at 10% of total loans improving risk management and (N700bn – N1trillion) corporate governance Exposure to downstream awareness petroleum segment Improving disclosu
Slide 49: Outline
Outline Executive Summary Detailed Analysis of results Overview of UBA Operating environment Outlook for the rest of the year Conclusion Q&A Appendices www.ubagroup.com 49
Slide 50: Outlook for the rest of the year
Outlook for the rest of the year Global growth forecast to remain weak; from 2.5% to 0.9% Nigeria’s GDP growth to stabilise at about 4.5% N3.1tr expansionary budget for 2009 N200bn Agric fund will drive growth (Agric is 46% of GDP) N1trillion earmarked for infrastructure spending in 2009
Slide 51: Outlook for the rest of the year
Outlook for the rest of the year Stability in Inflation levels (14-15%) Fee based income shrinkage to continue Softening of liquidity squeeze Increased Provisioning for Margin Loans etc Stock Prices will remain soft (Time to buy?) Increased consolidated regulation and surveillance Impr
Slide 52: Outline
Outline Executive Summary Detailed Analysis of results Overview of UBA Operating environment Outlook for the rest of the year Conclusion Q&A Appendices www.ubagroup.com 52
Slide 53: Conclusion
Conclusion UBA’s fundamentals remain very solid Strong liquidity (50%) Solid Capital Adequacy Ratio (19%) Adequate NPL coverage (123%) Strong earning capacity (ROA 3.2%) Appealing Enterprise Value (P/E 4.2x, PB 0.9x) Pan African Expansion strategy (15 countries) Increased disclosure st
Slide 54: Thank you
Thank you www.ubagroup.com 54
Slide 55: Q&A
Q&A www.ubagroup.com 55
Slide 56: Appendices
Appendices www.ubagroup.com 56
Slide 57: Brief history of UBA
Brief history of UBA 1949 French & British Bank Limited (“FBB”) commences business 1961 Incorporation of UBA to take over the banking business of the FBB 1970 IPO on the NSE 1984 Establishment of NY branch 1998 GDR programme established 2004 Establishment of UBA Ghana 2005 Merger with Standard Trust
Slide 58: Loan portfolio: local distribution
Loan portfolio: local distribution Net Loans by industry segment Oil & Gas 28.1% Oil and Gas sector Personal & Prof. 27.1% accounts for 28.1% of Real Estate 12.5% loans Manufacturing 11.6% General Commerce 9.8% UBA has a strong retail Telecommunications 4.5% and corporate lending Banking & Fin S
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