UBA stuns investors with record breaking N2 per share Interim Dividend, share price surges 9.99%

United Bank for Africa (UBA) stuned the stock market on Monday with the announcement of a record-breaking N2 per share interim dividend for its shareholders.

This development, which marks the highest interim dividend payout among Nigerian banks in the first half of 2024, immediately ignited investor confidence, leading to a significant surge in UBA’s share price.

The stock climbed by 9.99% to close at N28.30 per share, positioning it at the top of the gainers’ chart on the Nigerian Exchange (NGX). This strong performance reflects heightened investor interest and is directly tied to the stellar dividend payout underpinned by the half-year financial results posted by the bank.

Half year results: According to the bank’s H1 2024 financial results, UBA reported an impressive N401.5 billion in pre-tax profits compared to the N403.6 billion reported a year earlier.

• The bank’s impressive profit position was supported by a robust N614.4 billion in net interest income after impairments.
• This represents a 395% increase compared to the N124.1 billion reported in the same period in 2023, indicating that the quality of its half-year profit was driven by core business fundamentals and not forex gains.

Record dividend

Investors are particularly buoyed by UBA’s commitment to rewarding shareholders with a N2 dividend, representing a total payout of N68.4 billion. This translates to a 21.6% dividend payout ratio, one of the highest in the industry.

• For context, other major banks such as Guaranty Trust (GT), Access, and Zenith Bank reported significantly lower dividend payout ratios for the same period—3.3%, 5.7%, and 5.4% respectively.
• UBA’s decision to declare such a substantial interim dividend despite prevailing economic challenges underscores its robust financial health and strong earnings for the period​.
• UBA paid a total dividend of about N95.7 billion in the whole of 2023 a record dividend payout following a blistering profitability.
• But while the 2023 profits was induced by forex related gains, the half year profits declared in 2024 was mostly driven from interest income and commission and fees respectively.
• This move is expected to further bolster investor confidence and maintain UBA’s stock momentum in the near term.

The significant dividend payout by UBA also comes against the backdrop of the ongoing bank recapitalization in Nigeria, which excludes retained earnings from the calculation of share capital.

Analysts suggest that UBA’s large dividend payout, amounting to N68.4 billion, indicates that the bank’s profits are well-supported by cash, rather than relying on retained earnings.

• This stands in contrast to the common perception among investors, who often express concern that despite the impressive profits posted by Nigerian banks, their dividend payout ratios remain relatively modest.
• The Central Bank of Nigeria’s (CBN) recapitalization guidelines, which exclude retained earnings from being counted as share capital, have pushed banks to be more strategic with their capital allocations.
• UBA’s move to distribute a substantial portion of its profits signals a strong liquidity position and a willingness to reward shareholders amidst these regulatory changes.

Shareholders who are on the bank’s register as of October 14, 2024, will qualify to receive the dividend​, which will be disbursed on October 22, 2024.

Share price surge

The stock surged by 9.99% to close at N28.30 per share, positioning it at the top of the gainers’ chart on the Nigerian Exchange (NGX).

• This impressive rally pushed UBA’s year-to-date (YTD) gain to 10.3%, highlighting the stock’s resilience and investor confidence despite broader market volatility.
• Over the past year, UBA’s share price has surged by an astounding 68.4%, reflecting sustained positive sentiment around the bank’s financial performance and strategic initiatives.
• The substantial price appreciation highlights UBA’s ability to deliver consistent value to its shareholders, making it one of the best-performing banking stocks on the NGX in recent times.