United Bank for Africa (UBA) has demonstrated remarkable performance in the Nigerian stock market, delivering substantial returns for its shareholders. Over the nearly five-year period from December 31, 2019, to December 6, 2024, UBA’s share price surged, resulting in a cumulative capital gain of approximately 375%, translating to an average annual gain of about 75%. This exceptional growth underscores UBA’s position as a high-yielding investment option and a potential hedge against inflation. Investors who held onto UBA shares during this period reaped significant rewards, with a N500,000 investment in 2020 potentially growing to over N2.374 million by the end of 2024, excluding dividends. This substantial increase in market value highlights the bank’s consistent growth trajectory and its ability to generate value for its investors.
UBA’s share price appreciation reflects its strong financial performance and positive market sentiment. Starting at N7.15 per share in 2020, the price climbed to N33.95 by December 6, 2024, marking a 35.26% increase from its N25.10 opening price in 2024. This upward trend indicates investor confidence in UBA’s future prospects and its ability to deliver sustained growth. The share price movement is indicative of the bank’s underlying fundamental value and its potential for future earnings. This remarkable performance is further reinforced by market analysts who emphasize the forward-pricing mechanism in share valuation, where investors consider both historical track records and emerging developments.
Capitalizing on this momentum and its positive market outlook, UBA launched a substantial rights issue aimed at empowering existing shareholders to further increase their stake in the bank. The N239.4 billion rights issue offered 6.84 billion ordinary shares at N35 per share, with an allocation ratio of one new share for every five existing shares held as of November 5, 2024. This strategic move allowed shareholders to capitalize on the bank’s robust performance and enhance their investment portfolio. The rights issue, scheduled to close on December 24, 2024, provided a valuable opportunity for existing investors to reinforce their commitment to UBA’s growth story.
Market experts emphasize that stock prices are inherently reflective of a company’s fundamental value, encompassing both past performance and future expectations. According to Olatunde Amolegbe, Managing Director of Arthur Steven Asset Management, the stock market operates on a forward-pricing mechanism, where investors project future returns based on established track records and emerging trends. This perspective highlights the importance of considering not only past performance but also the potential for future growth when assessing a company’s share price. Similarly, David Adonri, Managing Director of HighCap Securities Limited, notes that share price embodies the market’s assessment of a company’s value, integrating both historical data and future projections. These expert opinions underscore the connection between share price movements and the overall health and prospects of a company.
UBA’s robust financial results further substantiate its strong performance and justify the positive market sentiment. For the nine months ending September 30, 2024, UBA reported an impressive 83.2% surge in gross earnings, reaching N2.39 trillion, nearly double the N1.31 trillion recorded in the same period of 2023. This remarkable growth in earnings is a testament to the bank’s successful strategies and effective operations. Profitability also witnessed significant improvement, with profit before tax rising to N603.48 billion from N502.09 billion in the third quarter of 2023, and profit after tax increasing to N525.31 billion from N449.26 billion in the corresponding period of the previous year. These strong financial indicators further bolster investor confidence and reinforce the bank’s positive trajectory.
The bank’s balance sheet also expanded significantly, reaching N31.80 trillion by September 2024, a 54% increase from N20.653 trillion at the end of December 2023. This growth reflects the bank’s strategic initiatives, particularly its technology-led approach to enhancing customer experience. This focus on technology has contributed to a significant increase in customer deposits, which rose to N26.50 trillion, a 52.7% jump from N17.355 trillion at the end of December 2023. This growth in deposits further strengthens the bank’s financial position and underscores its ability to attract and retain customers. The combined effect of strong financial results, expanding balance sheet, and growing customer deposits reinforces UBA’s position as a leading financial institution and supports its continued growth trajectory.
