United Bank for Africa (UBA) sent shockwaves through the stock market on Monday by announcing a record-breaking interim dividend of N2 per share for its shareholders. This unprecedented payout marks the highest interim dividend among Nigerian banks in the first half of 2024, sparking a surge in investor confidence that drove UBA’s share price up by 9.99% to close at N28.30 per share. The jump positioned UBA at the top of the gainers’ chart on the Nigerian Exchange (NGX) and reflects heightened investor interest due to the bank’s impressive financial performance.
Half-Year Financial Results
According to UBA’s financial results for the first half of 2024, the bank reported N401.5 billion in pre-tax profits, a slight decrease from the N403.6 billion reported in the same period the previous year. However, the bank’s net interest income after impairments surged to N614.4 billion—a staggering 395% increase from the N124.1 billion recorded in the same period of 2023. This impressive performance indicates that UBA’s profits are primarily driven by core banking activities, such as interest income, rather than foreign exchange gains.
Record Dividend Payout
The announcement of the N2 per share interim dividend, which totals N68.4 billion, has thrilled investors. This payout represents a 21.6% dividend payout ratio, setting UBA apart from its peers in the Nigerian banking industry. For comparison:
– Guaranty Trust (GT) reported a 3.3% dividend payout ratio.
– Access Bank posted a 5.7% ratio.
– Zenith Bank declared a 5.4% ratio.
UBA’s decision to declare such a significant interim dividend amid challenging economic conditions underscores its strong financial health and commitment to shareholder returns. The bank had paid a total of N95.7 billion in dividends for the entirety of 2023, a record-breaking payout at the time. However, while the 2023 profits were largely influenced by foreign exchange gains, UBA’s 2024 half-year profits were driven primarily by interest income and fees.
Bank Recapitalization and Strategic Dividend Policy
The massive dividend payout also comes in the context of Nigeria’s ongoing bank recapitalization efforts, which exclude retained earnings from the calculation of share capital. UBA’s N68.4 billion dividend signals that the bank’s profits are well-supported by cash, as opposed to relying on retained earnings—a strategy that may ease concerns among investors who have questioned the relatively modest dividend payout ratios of Nigerian banks despite their strong profit performances.
The Central Bank of Nigeria (CBN)’s recapitalization guidelines, which limit the use of retained earnings as part of share capital, have forced Nigerian banks to reassess their capital allocation strategies. UBA’s decision to distribute a substantial portion of its profits to shareholders suggests the bank is in a strong liquidity position and confident in its ability to navigate these regulatory changes.
Shareholders on UBA’s register by October 14, 2024, will be eligible to receive the dividend, with payments set to be made on October 22, 2024.
Share Price Surge and Market Confidence
UBA’s share price rose by 9.99% to N28.30 per share following the dividend announcement, positioning the bank as the day’s top performer on the NGX. This price surge also brought UBA’s year-to-date (YTD) gain to 10.3%, a testament to the stock’s resilience and investor confidence in the face of broader market volatility.
Over the past 12 months, UBA’s stock has soared by an impressive 68.4%, reflecting sustained positive sentiment around the bank’s financial strength and strategic moves. This remarkable price appreciation further cements UBA’s reputation as one of the best-performing banking stocks on the NGX in recent times, making it a standout choice for investors seeking consistent returns in a volatile market.
Outlook
UBA’s record-breaking dividend payout and the subsequent surge in its share price underline the bank’s solid financial position and its commitment to delivering value to shareholders. As Nigeria’s banking sector continues to navigate regulatory changes and challenging economic conditions, UBA’s strategic approach to capital allocation and profitability will likely keep it at the forefront of investor attention in the near term.
