Preferred entry: ₦38–₦43. Base fair value: ₦60–₦66. Maximum portfolio weight: 5%.
UBA is one of those institutions whose scale arrives before its explanation. More than 45 million customers, operations across 24 countries and a balance sheet large enough to require its own weather forecast. The attraction is obvious: a formidable deposit franchise, continental reach and privileged access to the arteries through which African trade, remittances and government money flow.
But an investor must examine the masquerade from behind as well as from the village square.
FY2025 profit after tax fell 47% to ₦405 billion. Return on average equity dropped from 28.1% to 10.6%, cost-to-income deteriorated to 59.4%, cost of risk climbed to 4.17%, and non-performing loans rose from 5.58% to 7.67%.
These are not accounting mosquitoes to be waved away. They point to weaker asset quality, heavier operating costs and earnings whose dependability has diminished.
Q1 2026 brought some improvement, but not enough to commission a praise singer. Revenue grew, while profit after tax declined 23% year-on-year and operating expenses increased 30%. Annualised return on average equity recovered to 13.7%, still some distance from management’s 20% ambition.
The stock market delivered its verdict like an old secondary-school principal spotting mischief during morning assembly: swiftly, publicly and with no appetite for explanations. While the broader NGX raced ahead by almost 60% in 2026, UBA shuffled forward by roughly 7% and still sat lower over twelve months. Then came the FY2025 results. The shares fell from ₦55 to ₦44.60 in two trading days. A proper caning. Shareholders had recently supplied fresh capital at ₦50 per share, only to receive a ₦0.25 dividend, down from ₦5.00, alongside a 47% fall in profit and worsening bad loans. As Yogi Berra put it, “You can observe a lot by just watching.” Investors watched their money go in, watched the dividend disappear, and watched profitability retreat. They were not objecting to UBA’s grand African ambition. They were tired of paying the school fees while the report card kept returning marked: “Promising, but must do better.”
Then there is the matter of capital. UBA has completed two recapitalisations, including the issuance of approximately 3.16 billion shares at ₦50 in late 2025. The bank now satisfies the CBN’s ₦500 billion capital requirement. This was necessary and sensible.
Yet shareholders are entitled to ask whether the new capital will earn attractive returns or merely provide a larger dining table at which the same meal is served.
The franchise
UBA’s competitive strength rests primarily on distribution, deposits and geography.
Customer deposits reached ₦23.95 trillion in FY2025, with 86% held in current and savings accounts. That relatively inexpensive funding base is the jewel in the compound. It allows the bank to earn spreads through lending, government securities, payments and trade finance without depending excessively on costly wholesale funding.
The African network also offers genuine diversification. However, twenty African flags do not automatically create twenty independent sources of safety. Many of these economies remain exposed to similar ailments: currency depreciation, sovereign borrowing, commodity cycles, regulatory improvisation and governments that occasionally treat banks as convenient fiscal furniture.
UBA therefore possesses a valuable franchise, but not yet an impregnable one. Its advantage is reach rather than demonstrably superior underwriting.
The bank has scale, relevance and a long reinvestment runway. African banking penetration remains low, cross-border trade is cumbersome, digital payments continue to expand, and UBA is positioned to intermediate more of these flows. The question is not whether opportunities exist. It is whether management can convert them into durable growth in earnings and book value per share.
On efficiency, governance and earnings quality, GTCO remains the cleaner institution. There will always be this comparison between the Orange Team and others.
Balance sheet and earnings quality
UBA’s capital position is now strong, and its diversified deposit base provides resilience. Nevertheless, a 7.67% non-performing-loan ratio cannot be treated as an ornamental footnote, though emerging and developing markets often tolerate higher baseline levels, closer to the 5% cap. Nor can a cost of risk, meaning loan-loss provisions as a percentage of gross loans, exceed 4% without demanding serious attention.
The bank must demonstrate that the deterioration is temporary rather than the early appearance of deeper credit problems. Investors should watch exposures to sovereigns, oil and gas borrowers, large corporate groups and countries experiencing currency or fiscal stress.
The cost base presents another challenge. A continental network is not maintained with goodwill and frequent-flyer miles. Inflation, technology investment, regulatory compliance and operations across multiple jurisdictions all consume money. Yet scale should eventually produce efficiency. If the cost-to-income ratio remains around 60%, the network risks becoming an expensive map rather than an economic advantage.
Governance and capital allocation
UBA’s expansion across Africa is strategically credible. The institution has been built with ambition, patience and a clear sense of continental opportunity.
That does not remove the need for scrutiny.
The influence of a prominent controlling shareholder, related-party considerations and repeated capital raising deserve careful attention. The relevant measure of success is not how large the balance sheet becomes, but whether value per share rises after accounting for dilution. This becomes even more sensitive in the absence of meaningful dividend payouts, where shareholders are left to rely almost entirely on paper earnings growth. In such situations, the “shareholders on the bench” inevitably begin to ask harder questions about timing, patience, and whether the expansion of capital is truly translating into tangible returns.
The new equity must produce additional earnings sufficient to compensate existing owners. If profits grow while earnings per share stagnate, shareholders will have financed institutional expansion without receiving their proper portion of the harvest.
Valuation: cheap, with explanatory footnotes
At approximately ₦44.50, UBA trades near 0.47 times book value and roughly 4.6 times FY2025 earnings. If 2026 earnings recover as expected, the prospective earnings multiple could fall below three times. The indicated dividend yield is approximately 7%.
On the surface, this looks less like a valuation and more like an apology.
But banks rarely trade below half of book value because the market has misplaced its spectacles. Investors are discounting weak returns on equity, elevated non-performing loans, high credit costs and uncertainty over what the newly raised capital will earn.
Valuation scenarios
Indicative operating outcomes and estimated values.
ROE remains around 11–13%; NPLs and credit costs stay elevated.
ROE recovers to 16–18%; asset quality and efficiency improve.
ROE exceeds 20%; NPLs approach 5.5%; new capital earns its keep.
The base case offers potential capital appreciation of approximately 35–48%, excluding dividends. That is attractive, but it is a recovery proposition rather than a serene compounding story.
UBA must demonstrate that its enormous African machine can turn scale into increasing value per share.
Suggested positioning
UBA is a staged purchase, not a reason to arrive at the market with a brass band.
- ₦36 or below: strong accumulation, up to a 5% portfolio weight
- ₦37–₦43: attractive buying range
- ₦44–₦50: starter position or hold
- ₦51–₦65: await evidence of improving returns and asset quality
- Above ₦70: justified only by ROE above 18% and declining NPLs
At the present valuation, a small position is defensible. Larger purchases should follow evidence that credit costs are falling, operating efficiency is improving and the recapitalised balance sheet is producing stronger earnings per share.
What could break the thesis
The investment case weakens materially if:
- Non-performing loans remain above 7% through FY2026.
- Cost of risk stays above 4%.
- Return on equity fails to recover towards 17–20%.
- Cost-to-income remains close to 60%.
- Another equity raise arrives before the previous capital has improved earnings per share.
- Dividend growth fails to keep pace with the larger capital base.
- Currency or sovereign stress undermines the supposed benefits of geographic diversification.
Conclusion
UBA is a good African bank offered at a price that assumes it may remain merely good. That creates an opportunity, but it does not confer sainthood.
The deposit franchise is valuable. The continental network is difficult to replicate. The valuation leaves room for a meaningful re-rating. But the bank must improve asset quality, control costs and prove that its new capital can earn respectable returns without repeatedly passing the subscription form around the family gathering.
UBA offers greater potential upside than GTCO if its recovery succeeds. GTCO offers stronger efficiency, cleaner earnings and the sounder night’s sleep.
The investor must therefore decide whether he is buying a recovering continental franchise or auditioning for the role of patient relative. At ₦38–₦43, the first interpretation is sufficiently plausible. Above ₦70, patience would have to arrive accompanied by evidence.