E-Financial
JP Morgan Recommends UBA Shares over 45% Upside Potential
Investors that take position on UBA shares now have the chance of making as much as 45% return over the next 12 months writes US based Investment banking giant, JP Morgan, in its latest analysis of Nigerian banks.
“UBA offers an attractive 45% upside potential over 12 months, among the highest in CEEMEA banks” according to the JP Morgan report released October 2013.
CEEMEA is an acronym for Central and Eastern Europe, Middle East and Africa. It is used by investment analysts to refer to reports that cover economies or businesses in this region.
“We think UBA’s valuation, despite a strong rally since the beginning of the year, offers an opportunity to buy into probably the deepest valuation discount in CEEMEA banks at current levels” states the JP Morgan Report while explaining the rational for recommending UBA’s shares.
The report also notes that investors may be missing out on the opportunity presented by UBA shares despite improving fundamentals of the bank. “However, consensus is catching up fast – UBA has the best buy, or hold, or sell ratio on Bloomberg consensus.”
The JP Morgan report also explains that UBA benefits from significant balance sheet liquidity noting that the bank’s loan to deposit ratio of 37% as at half year 2013 was the lowest among CEEMEA banks covered by the investment bank.
JP Morgan however forecast that UBA’s loan to deposit ratio is “conservatively expected to rise gradually to 45% by 2016 year end.
JP Morgan notes that UBA’s loan to deposit ratio is “reflected in UBA’s market shares where it is second in Nigeria in deposits with 13% market share, but has lowest lending market share at 8% among the four biggest banks JP Morgan tracks in Nigeria.
UBA pan-African presence is also seen as strength in the bank’s operations. JP Morgan notes that 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.
“This pan-African presence and valuation discount increases the attractiveness of UBA as a potential take-out story, in our view, given our understanding on larger regional banks (e.g. South African banks) for pan-African franchises such as UBA’s.”
Notably, “UBA has the lowest mix of Commission on Turnover (COT) growth in its overall fee income mix when compared with peers. Excluding fee income, we see average Net Interest Income (NII) growth of 15% every year from 2013 to 2016” according to the JP Morgan report.
“UBA’s valuation is an opportunity to buy into what may be the most attractive risk-reward in CEEMEA banks; for a 33% valuation discount versus peers, we estimate UBA offers 23% 2014 year end premium on Return on Equity (ROE) and significantly higher dividend yield of 10% by 2014 year end”
JP Morgan expects that the Nigerian government’s reforms agenda in oil and gas, power, agriculture and infrastructure sectors will drive the future banking growth, the sector which UBA has recently been highly bullish on with new loan growth targeted at these sectors.
UBA only last week released its third quarter 2013 financial results which shows a significant 26.7% growth in loan portfolio, as the bank positions to take advantage of emerging opportunities in the power and oil and gas sectors of the Nigerian economy.
The nine-month results put the bank’s new loan portfolio position at N870.4 billion as at September 2013, representing a 26.7% increase on N687.4 billion loan portfolio for full year of 2012. “We increased our exposure to the power, upstream oil and gas and telecoms sectors of the economy” explained Phillips Oduoza, group managing director.
The bank also announced gross earnings of N188 billion, representing 12.5% increase from N167.1 billion in the same period of last year while interest income rose 18.8% to N133 billion from N112 billion.
There was a significant 28.5% increase in total comprehensive income for the period to N48.74billion, compared with N37.92billion in the same period of last year while the bank closed the first nine months of the year with a profit of N43.4billion.
E-Financial
Lagos State Appoints MoneyMaster as Payment Partner for “Ounje Eko” Programme
“Ounje Eko”, the food price discount initiative of the Lagos State Government, has appointed leading payment service bank, MoneyMaster Payment Service Bank Limited (MMPSB), as its collaborator in the bid to ensure ease of payments at the market.
MoneyMaster is one of the Central Bank of Nigeria-licensed Payment Service Banks (PSBs) to promote financial inclusion across Nigeria.
Under the partnership, MMPSB will apply its cutting-edge payment solution to engender easy payment and reconciliation in order to make the experiences of Lagosians who will be getting their food supplies from the markets pleasurable. Its payment solution is also all-encompassing and ensures real time value to payment destinations.
The mobile bank was appointed as the collection and payment partner for “Ounje Eko” Food Markets programme which is a government initiative serving the five divisions of Lagos State. Consequent on this, MoneyMaster Payment Service Bank will collect payments in 57 LCDAs in the state.
The partnership gives credence to the quality of payment solutions that MoneyMaster is reputed for in its services to its growing business clientele in private and public sectors.
E-Financial
CBN, EFCC Probe Banks, Firms over Alleged Forex Racketeering
Central Bank of Nigeria (CBN), is investigating irregular foreign exchange transactions and forward contracts valued at approximately $2.4 billion.
The inquiry follows an extensive audit by Deloitte, which scrutinized $7 billion in dollar debts accumulated under the bank’s previous leadership.
In the aftermath of the 294th Monetary Policy Committee meeting in Abuja, Yemi Cardoso, governor of CBN, disclosed to journalists that the investigation, supported by the Economic and Financial Crimes Commission, among other security bodies, aims to clarify the legitimacy of these FX allocations identified as problematic by the audit.
“It was determined that a number of these transactions did not qualify…they were outright illegal. The law enforcement agencies are now looking into those transactions that as far as we are concerned, are not valid to be paid,” Cardoso detailed, emphasizing the unlawful nature of these forex deals.
The crux of the investigation lies in the audit findings that a significant portion of the scrutinized transactions lacked proper documentation and, in many instances, were deemed outright illegal.
However, the unfolding investigation has raised concerns within the organized private sector, with some entities contemplating legal action against commercial banks for unresolved forex bids.
Despite these tensions, Governor Cardoso reassures that the foreign exchange market remains open and transparent, inviting stakeholders to address their forex needs through the official channels.
Furthermore, Cardoso clarified the distribution of fertilizers to farmers as a one-off measure and not indicative of a shift back to direct interventions by the CBN, underscoring a commitment to strategic, regulatory governance rather than direct market involvement.
E-Financial
CBN Urges Banks to Expedite Action on Recapitalisation
Central Bank of Nigeria (CBN) has directed deposit money banks in the country to expedite action to increase their capital base from the current ₦25bn.
Olayemi Cardoso, governor of CBN, stated this during the apex bank’s 294th meeting of the Monetary Policy Committee (MPC) on Tuesday in Abuja, when the MPC hiked the interest rate by 22.75% to 24.75%.
The apex bank chief said the MPC examined developments in the banking sector and expressed satisfaction that the industry remained stable. The committee, however, said to guard against risk, commercial banks in the country should accelerate their recapitalisation efforts.
Cardoso said, “The MPC also reviewed developments in the banking system and noted that the industry remains safe, sound, and stable. The committee thus called on the bank to sustain its surveillance and ensure compliance of banks with existing regulatory and macro-potential guidelines.
“The MPC also enjoined the banks to expedite actions on the recapitalisation of banks to strengthen the system against potential risks in an increasingly globalised world.”
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