UBA’s strategy of expanding into Africa and a few regions in Europe, the Middle East, and America is beginning to pay off, as the lender’s subsidiaries have reported a nearly six-fold increase in revenue in just six years.
According to information taken from the lender’s financial statement, revenues from UBA’s operations throughout Africa (apart from Nigeria) and the rest of the world increased to N928.6 billion in 2023 from only N163 billion in 2017, a 469.7 percent increase.
The after-tax earnings from UBA’s global subsidiaries increased by 543.5 percent to N251 billion in 2023 from N39 billion in the previous year, indicating that their operations have also been quite profitable. In 2023, the lender reported an N607.6 billion profit overall. Notably, its subsidiaries, which accounted for 41.4% of the profit, were crucial.
Not only does UBA operate in the United Kingdom, United Arab Emirates, United States of America, and Paris, France, but it is also the second-largest bank in Nigeria in terms of assets.
Even while its subsidiaries are doing well, their share of the group’s revenue is decreasing as a result of the significant increase in earnings from Nigerian activities, which increased by 331 percent to N1.35 trillion in 2023 from N314 billion in 2017.
The remainder of Africa and the rest of the world, which are the lender’s subsidiaries, provided 45% of total revenues in 2023, up from 44% the year before but less than the 46% peak reached in 2021 over the six years under study.
Revenues for the businesses in the rest of Africa came to N767 billion, which accounted for 37% of the group’s N2 trillion in sales in 2023.
sales from activities in the US, France, UK, and UAE were N161 billion, or 8% of the group’s overall sales for that year.
The subsidiaries’ share of the lender’s overall profit in 2023 was 41%, down from 52% in the previous year and 74% in 2020, the year of the COVID-19 epidemic.
The decrease in UBA’s global and African operations share of the bank’s overall profit is more indicative of the rise in profits from the Nigerian operations, which profited from currency depreciation in June of last year.
In terms of profit, the rest of Africa’s contributions to the company for 2023 are reported at 25%, down from 42% the year before and 66% in 2020—the largest profit proportion in six years.
The US, UK, France, and the UAE are examples of non-African nations with a 16 percent profit margin contributing N99 billion to the group’s projected N607 billion for 2023.
By creating subsidiaries, United Bank for Africa hopes to strengthen its position as a transnational bank operating throughout Africa and the world.
This not only solidifies UBA’s position in the rest of Africa and the globe, but it also reduces risk by spreading its revenue across several economic sectors. It’s possible that this tactic worked especially well in the 2020 pandemic.
For the previous six years, UBA’s subsidiaries outside of Nigeria made up the largest profit percentage (74%), maybe due to this risk minimization approach.
The record accomplishment of six UBA subsidiaries winning “Bank of the Year” awards in 2020 served as further evidence of this success. Nevertheless, UBA’s profit from these subsidiaries fell to 25% in 2023. This was likely caused by several variables, including UBA Nigeria’s excellent performance and other subsidiaries’ exposure to foreign currency rate changes.
The remarkable 2023 performance of UBA Nigeria, with N1.3 trillion in revenue and N503 billion in profit, may have outpaced the N928.6 billion in revenue and N251 billion in profit of its subsidiaries. As a result, resources and attention were directed towards the Nigerian market, leaving less for subsidiaries in other regions.
Because the naira was weaker than the currencies of the countries in which UBA subsidiaries operate, these changes in exchange rates, which were at 33.69 percent, reduced the subsidiaries’ profits when converted to naira.
Although the local currency profits of these subsidiaries stayed constant, it reduced UBA’s overall profit from these subsidiaries by converting the profits into a smaller amount in naira.
