November 21, 2025/Cordros Report
We have updated our assumptions for UBA, reducing our year-end TP to NGN49.15/s (previous: NGN58.28/s) and maintaining our “BUY” rating on the stock. The decline in our TP stemmed from (1) the reduction in our 2025E gross DPS to NGN3.75/s (previous: NGN5.10/s), and the lowering of our core and non-core income growth estimates to +10.7% y/y and -21.9% y/y, respectively (previous: +19.9% y/y and +12.6% y/y). We also reduced our OPEX growth estimate to +5.1% y/y (previous +13.5% y/y). Consequently, we now model a 2025E EPS of NGN20.27 compared to our previous estimate of NGN21.74. Our gross DPS forecast of NGN3.75/s translates to a dividend yield of 10.1% based on the stock’s last closing price of NGN37.00/s. On our estimates, UBA is trading at a 2025E P/E of 1.8x and P/B of 0.3x.
PAT to inch up slightly: We revise our forecasts for UBA to reflect changes in key operating assumptions. We now expect core earnings to grow by 10.7% y/y in 2025E, lower than our previous estimate of 19.9% y/y, as we cut our projections for loan growth to 5.2% y/y (previous: 6.8% y/y) and investment in government securities to 11.2% y/y (previous: 14.2% y/y). Nonetheless, still-elevated interest rates and steady contributions from international operations should nonetheless support top-line resilience. We further reduced our cost of risk estimate to 1.0% (previous: 2.0%) as the bank has been largely conservative in provisioning likely due to reduced forbearance pressures. That said, impairment charges are now forecast to taper by 64.6% y/y (previous: -41.2% y/y). Further down, we forecast non-interest income to decline by 21.9% y/y (previous: +12.6% y/y), buoyed by sizeable derivatives maturities. Operating income and OPEX are now projected to grow by 3.9% y/y and 5.1% y/y, respectively, resulting in a cost-to-income ratio of 55.3% for 2025E (2024FY: 50.9%). Consequently, we expect PBT to grow by 2.3% y/y, while PAT increases marginally by 0.1% y/y. Overall, EPS is projected at NGN20.27/s (-6.7% y/y), reflecting the impact of the higher share base.
Slow credit creation tempers operational efficiency: UBA cost savings initiatives spurred commendable results in 9M-25 with declines in the group’s occupancy (-43.5% y/y), contract (-25.4% y/y), communication (-83.8% y/y), printing (-50.8% y/y), and subscription (-50.8% y/y) costs, causing the other operating expenses line to decline by 11.0% y/y to NGN399.02 billion. However, the slower than forecasted growth in earning assets (+4.0% y/y) undermined the improved cost efficiency and lower loan loss provisioning in the period, causing PBT to decline 4.1% y/y to NGN578.60 billion. Looking ahead, we now project UBA’s asset yield to settle at 10.3% in 2025E (previous: 11.0%), ultimately leading to a marginal 0.1% y/y increase in profit after tax to NGN767.48 billion, and translating to an EPS of NGN20.27 (2024FY: 21.73) based on a weighted average outstanding shares 37.86 billion units.
Valuation: Our year-end target price is NGN49.15/s, derived from a blend of the Dividend Discount Model (60.0%), Gordon Growth Model (30.0%), relative P/E (5.0%) and relative P/B (5.0%) valuation methods. Assuming a 28.7% CoE and a forecasted dividend payout ratio of 18.5%, our DDM TP amounted to NGN45.60/s. For GGM, we maintained CoE at 28.7% and utilised an average RoE of 15.1%, deriving a TP of NGN55.06/s. On relative P/E, we utilised the tier-1 forward average P/E of 2.1x and applied it to our 2025E EPS estimate of NGN20.27/s to derive a TP of NGN42.07/s. Lastly, for relative P/B, we estimated forward book value per share of NGN120.23/s – tier 1 peer average P/B of 0.5x – and derived a fair value estimate of NGN63.42/s.
