Nigeria’s United Bank for Africa (UBA.LG) (UBA) has given pause to an aggressive expansion across the continent as it consolidates its existing operations in 19 different countries and meets commitments to fund large power projects at home, its chief executive said on Monday.
Phillips Oduoza also told the Reuters Africa Investment Summit that UBA’s stronger 2013 profits had been largely driven by a 25 percent surge in deposits to 2.2 trillion naira ($13.41 billion), from 1.8 trillion over the year, and an expansion of risk assets by 40.5 percent.
UBA’s pretax profit last year rose 7.8 percent to 56.1 billion naira, it announced at the end of last month.
“We were expanding very rapidly and we initially thought we would expand further in Africa, but we’ve decided to stop and focus on consolidation,” Oduoza said, adding that this was also why a proposed $500 million Eurobond had been shelved.
“We have 700 branches. That’s a very large network. We’ve covered the major economies in sub-Saharan Africa.”
Moves to consolidate included getting existing branches to function more efficiently and continuing to lower its cost income ratio – it had already fallen to 60.9 percent last year, from 64 percent the previous year, Oduoza said.
An exception was Angola, for which UBA was still waiting for a banking license. “If we get the license we’ll definitely look at setting up,” he said.
But UBA’s non-Nigeria African business would still grow in size in the coming years, as consolidation improves margins. Africa outside Nigeria is currently a fifth of UBA’s business, but within the next three years it would be half, Oduoza said.
UBA has turned its focus to African power projects over the past year, with plans to invest up to $2 billion, more than half of it reserved for newly privatized plants and distribution companies in power-starved Nigeria.
“We are playing in some high growth areas like infrastructure and power, which require long term funding,” Oduoza said. But for now, mushrooming deposits were enough to achieve this, without seeking equity or debt financing, he said.
UBA had put $500 million into power stations, all off its own balance sheet.
Phase two of expansion would be into smaller but still potentially profitable economies like Malawi and Rwanda, Oduoza said, but that would come at a later date. UBA also has plans to set up an office in China to take advantage of growing Sino-African trade, he said.
Hurdles included the impact of currency volatility on cross-border transactions and a chronic skills shortage in many African countries, Oduoza said.
Source: Reuters 9by Tim Cocks)
