JP Morgan, one of world’s renowned investment banks, has said investors taking position on the shares of United Bank for Africa (UBA) Plc now will record a capital gain of about 45 per cent within the next12 months.
UBA closed at N7.66 per share last Friday. However, in its analysis of banks’ shares in the Central and Eastern Europe, Middle East and Africa (CEEMEA) region, JPMorgan said UBA has a 45 per cent upside potential over the next 12 months. “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” JP Morgan said in the report.
The report also noted 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,” they said, adding that the UBA benefits from significant balance sheet liquidity while bank’s loan to deposit ratio of 37per cent as at half year 2013 was the lowest among CEEMEA banks covered by the investment bank.
JP Morgan explained that the bank’s loan to deposit ratio is “conservatively expected to rise gradually to 45 percent by 2016 year end.
The firm added that UBA’s pan-African presence was the strength in its operations as it 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,” they said.
The bank recently released its third quarter ended September 30, 2013 financial results which showed a 26.7 growth in loan portfolio, to N870.4 billion.
“We increased our exposure to the power, upstream oil and gas and telecoms sectors of the economy,” Group Managing Director, UBA, Phillips Oduoza, had said.