An investor who had invested N500,000 in United Bank for Africa (UBA) Plc nearly five years ago now has a market value of N2.374 million, in another tell-tale example of how investing in good stock creates fortunes for investors.

Trading reports at the Nigerian stock market at the weekend indicated that UBA) has delivered about 375 per cent capital gains to investors in nearly five years, outperforming average returns for the market and the entire banking sector.

The reports showed that the pan-African banking group posted average annual return of about 75 per cent over some five years period, underlining UBA’s impressive records as a high-yielding, inflation-hedging stock.

Trading reports for the period between December 31, 2019 and December 06, 2024 showed that UBA recorded cumulative capital gain of 374.83 per cent during the period, representing average annual gain of 74.97 per cent.

This implies that an investor who had invested N500, 000 in the shares of UBA at the year’s opening price for 2020, now has a real, immediate market value of more than N2.374 million, due to accumulated capital gains. This excludes accrued cash dividends over the five-year period.

UBA, which pays dividends twice a year, is reputed as an investors’ friendly stock in terms of consistent and above-average cash dividend payment. It recently paid interim dividend of N2 per share on its first half 2024 results, the highest payout by any bank and one of the three highest yields in the entire stock market.

Such an investor who had invested N500, 000 at the 2020’s opening price would have received cash dividend of some N139, 860 as interim dividend for the 2024 business year, more than a quarter of his initial investment.

UBA is currently offering existing shareholders exclusive opportunities to increase their shareholdings in the bank with its ongoing N239.4 billion rights issue. The pan-African banking group is offering 6.84 billion ordinary shares of 50 kobo each to existing shareholders at N35 per share. The rights issue is pre-allotted on the basis of one new ordinary share of 50 kobo each to every five ordinary shares held as at November 05, 2024. The rights issue is scheduled to close on December 24, 2024.

Shareholders have hailed the rights issue as a deliberate incentive. In a survey, minority retail shareholders, who constitute nearly three-quarters of UBA’s nearly 280,000 shareholders, were excited about the rights issue, with most indicating possibility of applying for more than their pre-allotted shares. Extant rules at the Nigerian market allow shareholders to apply for more shares and also for the company to consider such requests for additional shares. Shareholders can also trade their rights at the stock market.

The three-digit capital gain highlighted UBA as one of the major drivers of the bullish trend at the Nigerian stock market, which has sustained a five years of consecutive positive returns.

The benchmark index for the Nigerian stock market, The All Share Index (ASI)- the value-based common index that tracks all share prices at the Nigerian Exchange (NGX), has shown resilience over the past five years, closing on the top chart for the world’s best performing stock markets.

Average return for Nigerian equities in 2023 stood at 45.90 per cent, among the three world’s best-performing markets. ASI had posted average return of 19.98 per cent, 6.07 per cent and 50.03 per cent in 2022, 2021 and 2020 respectively.

Average year-to-date return for the ASI closed weekend at 31.34 per cent, with the market firmly on course for its fifth consecutive positive return. UBA is ahead of the market with average year-to-date return of 35.26 per cent, more than twice the average year-to-date return of 15.53 per cent for the banking sector.

UBA’s average capital gain so far this year is also considerably higher than several key indices at the stock market. The NGX 30 Index, which tracks the 30 largest quoted companies, closed weekend with average year-to-date return of 32.97 per cent.

The NGX Premium Index, which tracks a group of high-end companies with enhanced corporate governance and financial performance, closed with 30.43 per cent. UBA is listed among the premium stocks. The NGX Pension Index, which measures average return on stocks that meet the special investment criteria for pension funds, has recorded average gain of 33.95 per cent so far this year.

Nigeria’s benchmark interest rate- Monetary Policy Rate (MPR) stands at 27.25 per cent. Inflation rate stands at 33.88 per cent, according to the October 2024 Consumer Price Index (CPI) report by the National Bureau of Statistics (NBS).

UBA’s share price had opened 2020 at N7.15 per share, its closing price for December 31, 2019. It closed weekend at N33.95 per share, 35.26 per cent above its 2024’s opening price of N25.10 per share, its closing price for December 30, 2023.

Shareholders said UBA’s track records of solid financial performance, dividend policy and capital gain were competitive advantages for the pan-African banking group.

Longstanding UBA’s shareholder and Founder of Independent Shareholders Association of Nigeria (ISAN), Sir Sunny Nwosu, said UBA has proven to be dependable and resilient, attributes that have endeared the stock to all cadres of investors.

“The bank is doing well, so also are its subsidiaries. From whatever angle you look at it, UBA is a good buy. And I’m talking as a long-time shareholder. It is one bank that prioritises shareholders’ happiness. Go down the lane and check the bank’s dividend history and critical decisions when it comes to shareholders’ issues. It’s a bank one can rest on, so, I’m advising other shareholders to pick up their rights, it’s an opportunity. We are picking up ours and even asking for more,” Nwosu said.

Another major UBA shareholder and President, Association for the Advancement of Rights of Nigerian Shareholders (AARNS), Dr Faruk Umar described UBA as a “solid bank” with a lot more to offer the shareholders in the future.

“I strongly advise shareholders to pick up their rights as I am very hopeful the price will go up after the rights offer is concluded. All members of our Association are going to buy their rights as we strongly believe in the quality of the board, management, and staff of the bank,” Umar said.

Market analysts are unanimous that share prices are illustrative of the fundamental values of quoted companies.

For the nine-month ended September 30, 2024, UBA reported 83.2 per cent growth in gross earnings to N2.398 trillion, almost a double on N1.308 trillion recorded in third quarter 2023. Operating income rose from N1.02 trillion in third quarter 2023 to N1.54 trillion in third quarter 2024, an increase of about 51 per cent. Profit before tax increased to N603.48 billion compared with N502.09 billion recorded in third quarter 2023. After taxes, net profit also rose from N449.26 billion in third quarter 2023 to N525.31 billion in third quarter 2024. Earnings per share thus improved from N12.93 to N14.78.

Group balance sheet size expanded by 54 per cent to N31.80 trillion by September 2024 as against N20.653 trillion recorded at the end of December 2023. The bank benefitted largely from its technology-led initiatives targeted at improving customer experience over the past few years, with total deposits rising to N26.50 trillion, representing a 52.7 per cent rise from N17.355 trillion at the end December 2023.

Deposit base was driven by increased brand appeal across the retail and corporate markets.

Customers’ deposits had jumped from N14.8 trillion to N22.97 trillion while deposits from banks increased from N2.46 trillion to N3.53 trillion. Loans and advances to customers grew by 46.8 per cent from N5.23 trillion in December 2023 to N7.68 trillion in September 2024. While the paid up share capital remained unchanged at N17.10 billion, total equity jumped by 76.8 per cent from N2.03 trillion in December 2023 to N3.59 trillion in September 2024.

Managing Director, Arthur Steven Asset Management, Mr. Olatunde Amolegbe, said share pricing at the stock market thrives on a concept of “forward-pricing mechanism”, where investors take into consideration the potential future return based on available track records and emerging developments.

Managing Director, HighCap Securities Limited, Mr. David Adonri, said share price is a reflection of the market value for a company, comprising both past performances and future expectations.