UBA’s Devil’s Alternative: Lend More Or Shrink Deposits?

By Augustine Adah

The United Bank for Africa is faced with the crunch test of deciding between significantly increasing its loan portfolio or shrinking its deposit funds towards meeting the Central Bank’s 60% loan to deposit ratio, its half-year report just released has shown.

UBA grew by identifying itself as one of the country’s leading retail banks. However, the failure to translate the deposits into loans to grow the economy may have now turned into a snare.

The results released show a loan to deposit ratio of 50%, which is significantly less than the regulatory bank’s 60%.

Though the half year report showed the bank to be in a strong capital position with capital adequacy ratio put at 20%, it would seem as if the bank’s capacity to reap from its huge deposit base is itself becoming a snare.

The bank is now faced with the difficult option of either sharply increasing its loan portfolio or causing its marketers to lessen their drive for deposits in a way towards meeting the loan to deposit ratio set for banks at 60%

The report released last week showed the bank recorded a Profit After Tax, PAT, of N56.7 billion, a 29.6 percent growth compared to N43.8 billion achieved in the corresponding period of 2018.

According to its results filed with the Nigerian Stock Exchange, NSE, UBA recorded a 14 percent year-on-year rise in top-line, with gross earnings of N293.7 billion, compared to N257.9 billion recorded in the corresponding period of 2018.

As at June 30, 2019, the Bank’s Total Assets grew by 4.8 percent crossing the N5 trillion mark to N5.10 trillion.

Customer deposits also rose by 4.8 per cent to N3.51 trillion, compared to N3.35 trillion as at December 2018. This growth trajectory may underscore UBA’s market share gain, as it increasingly wins customers through its revitalized customer service culture coupled with innovative digital banking offerings.

The bank’s Shareholders’ Funds remained strong at N542.5 billion, reflecting its strong capacity for internal capital generation.

Following the impressive performance and   with the bank’s culture of paying both interim and final cash dividend, the Board of Directors of UBA Plc declared an interim dividend of N0.20 per share for every ordinary share of N0.50 each held by its shareholders.

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