If last year’s UBA record-breaking N607 billion profit seemed like a fluke, the bank’s 2024 numbers suggest it’s the real deal. United Bank for Africa has just posted a post-tax profit of N766.5 billion, the highest in its corporate history and investors have taken notice.
Since the Central Bank of Nigeria fired the starting pistol for a new round of banking recapitalization in Q4 2023, UBA’s stock price has raced ahead.
From around N21 per share at the time of the announcement, the stock has surged to N38.45 a gain of over 83%. Sprinkle in a mouth-watering N5.00 dividend (N2 interim and N3 final) and the bank’s shareholders are laughing all the way to, well, the bank.
Nairametrics’ analysis puts UBA’s total shareholder return (TSR) at over 50% based solely on 2024’s capital appreciation and dividends declared— a sizeable feat in today’s volatile equity markets. This makes it one of the top-returning stocks on the Nigerian Exchange and possibly one of the best capital gains stories for a PAN African multinational this year.
For perspective: between 2020 and 2023, UBA paid a total of N2.60 in dividends. In 2024 alone, it has nearly doubled that. Clearly, the payout party is in full swing.
But it’s not just the size of the return — it’s the quality too. UBA’s 2024 results showed a diversification strategy paying off. For the first time in its history, its African operations outside Nigeria contributed a majority — 51.1% — of group pre-tax profit.
From Dakar to Nairobi, the bank is steadily building a robust hedge against naira depreciation and the vagaries of Nigerian macroeconomics. It’s a shrewd move, and one that also aligns with Africa’s gradual push towards intra-African trade and payments integration under AfCFTA.
Still, there’s a dose of caution hiding under the euphoria. While profits were up in nominal naira terms, they were less impressive when adjusted for currency depreciation. The naira lost over 40% of its value in 2024, and UBA’s earnings, though large, reflect an economy where inflation, devaluation, and FX scarcity are constant headwinds.
Moreover, foreign exchange gains which had inflated 2023 numbers played a far less prominent role in 2024. Net trading and FX gains dropped from N659.2 billion in 2023 to N181.7 billion in 2024, a sign that the bank is reducing its reliance on currency arbitrage.
That’s a good thing as no investor wants a bank’s earnings to be powered by windfall FX gains instead of core operations. We have also not seen bank-related ratios, which more cautious investors rely on the gauge a bank’s health beyond the allure of paper profits.
But the real kicker? UBA is still trading at a price-to-earnings ratio of just 1.7x even though it is higher than the likes of GTCO which is yet to release its FY numbers. For context, that’s bargain-bin territory—less than what investors pay for loss-making startups in some markets.
So why hasn’t the share price moved closer to what the fundamentals suggest? One reason lies in the structure of Nigerian bank stocks themselves. Most have an unusually high free float—tens of billions of shares in public hands.
This makes them highly liquid and easy to trade, a double-edged sword. While it allows for efficient entry and exit, it also means rallies are often short-lived. Investors can come in quickly—and leave just as fast—creating a revolving door effect that keeps prices in check and valuations depressed.
In UBA’s case, a modest re-rating to just 4x earnings would imply a share price of nearly N80, more than double where it currently trades. But until liquidity is matched with long-term institutional holding or more sticky capital, the market may continue to undervalue even its best performers.
Still, with recapitalization in full swing, UBA is also moving to bolster its war chest. Its N239.4 billion rights issue part of the N500 billion capital raise target set by the CBN shows it’s not just rewarding shareholders, but preparing for an even bigger future, which many indicate will be a competitive banking landscape.
The question now is whether this is peak UBA or the beginning of a long-term rerating. If the bank can keep earnings strong, continue to reduce reliance on volatile FX gains, and leverage its pan-African footprint, there may be more room to run.
For now, UBA shareholders are right to be giddy. But once the excitement fades, all eyes will be on sustainability. High returns are nice but durable ones are even better. UBA seems to be tilting towards the latter.
