Nigeria’s UBA targets 18% ROE with 50% profit focus on African Units

Nigerian lender United Bank for Africa Plc expects its operations in 18 other African countries to account for half of its earnings over the next three years.

The Lagos-based bank injected more than $100 million into its units in the Democratic Republic of Congo, Benin, Ivory Coast, Tanzania and Mozambique to help them expand, UBA Chief Financial Officer Ugochukwu Nwaghodoh said in an April 15 interview in Lagos, Nigeria’s commercial hub. The cash, pumped into the operations over July and August, will start having a “full effect” on income from this year, he said.

UBA expects contributions from its foreign branches to increase from 45 percent last year even as the operations in its home market continue to grow, Nwaghodoh said.

Nigeria’s third-largest lender by revenue raised $500 million selling Eurobonds last year to fund its expansion as the economy of Africa’s biggest oil producer recovered from a 2016 contraction after a slump in crude prices triggered a foreign-currency shortage

It is targeting an improvement in its return on equity, a measure of profit, to 18 percent this year from 16 percent in 2017, the CFO said. UBA will “defend” its net interest margin in Nigeria amid declining interest rates by reducing what it pays depositors for their savings, Nwaghodoh said.

“The loan-to-deposit ratio today is 60 percent, so I have a lot of liquidity, and can dictate the price at which to take deposits,” he said.

In Ghana, UBA is looking to boost its operations and increase the capital beyond the minimum 400 million cedis ($90 million) that regulators require, Nwaghodoh said. It will bolster the buffers by capitalizing earnings, in which it transfers surplus income to its capital holdings, within the unit for 2017 and mid-year 2018, he said.

UBA’s stock rose 3.2 percent, the biggest increase in more than three weeks, to 11.20 naira at the close in Lagos on Tuesday. The shares have gained 8.7 percent this year, compared with a 6.7 percent increase in the 162-member Nigerian Stock Exchange All Share Index.