Business
Reasons Behind Huge Interests In UBA’s Planned Jumbo Rights Offer
seen in different quarters as a very intentional commitment to rewarding investors
United Bank for Africa (UBA) – the pan-African financial services group catering to the needs of over 45 million customers across 20 African countries, as well as the United Kingdom (UK), United States of America (USA), France, and the United Arab Emirates (UAE) – is preparing to announce a “Jumbo Rights Offer,” and it is attracting heightening interest.
Checks revealed that the increasing anticipation of the expected announcement from the lender, which has transformed into a Pan-African financial powerhouse in 75 years of operations – with consistent profitability – is coming from both within and outside the business community.
The increasing interest is despite the revelation that the financial services group, which continues to defy economic turbulence to post double-digit growth in revenue and profit, will make the Jumbo Rights Offer to existing shareholders.
The 75th-year anniversary celebration of the financial institution, which recorded a 143% increase in gross earnings from N853.2 billion at the end of 2022 to close at N2.08 trillion on December 31, 2023, is ongoing.
The Jumbo Offer is seen in different quarters as a very intentional commitment to rewarding investors who continue to keep faith with the financial services group, with one of Africa’s leading investors and philanthropists, Tony Elumelu, as Chairman.
Among other enriching gains, it provides investors with the chance to increase their ownership stake at a discounted share price – below the prevailing market value.
Given UBA’s history of unceasing dividend payments, irrespective of prevailing economic challenges, the Jumbo Offer gives income-focused investors an opportunity to enjoy both short-term (immediate gains) and long-term benefits (the opportunity to earn more in long-term prospects).
Additional information reveals that the upcoming Jumbo Offer is also enhancing market sentiment regarding UBA’s confidence in its shareholders – and the shareholders’ faith in UBA – in the face of a challenging economic situation.
Industry watchers say the move, which is expected to boost the balance sheet of the financial powerhouse with additional capital and place it in a vantage position to increase dividend payouts, is seen as a positive signal to the market.
Expected to enable shareholders not just to protect themselves against “dilution” (a decrease in existing shareholders’ ownership percentage as a result of the issuing of new equity), the Jumbo Offer would further boost the bank’s liquidity position and place it on a stronger pedestal to seize strategic opportunities.
Also tied into the emerging conversation about the expected Jumbo Offer of the bank, with a broad base of shareholders in and out of the business circle, is the gain that comes with the move regarding regulatory requirements, particularly the Central Bank of Nigeria’s (CBN) increasing capital adequacy rules.
The Central Bank of Nigeria has pegged the new minimum capital requirement for banks at N500 billion. The UBA Jumbo Rights Issue would add to the bank, with Oliver Alawuba as Group Chief Executive Officer, staying “well-capitalized.”
“Above all, in the long run, the targeted funds from the Jumbo Rights Issue are expected to boost the bank’s operations, enable more growth, and allow expansion into new markets. Generally, the move would put the bank in a better position to provide improved profit for shareholders, with the added value of having more say in how things are done due to increased ownership afforded by buying the offer,” is the consensus of opinion in the heightening interest in the about-to-be-announced move by UBA.
