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Pan-African lender, United Bank for Africa (UBA) Plc, overstated the amount reported to regulators and investing public as profit by more than N4.6 billion in the financial year 2020, its recent audited report shows. This has resulted in the restatement of the year’s audited result.
An audited financial statement is expected to be restated if it contains material inaccuracy resulting from mistakes, non-compliance with provisions, fraud, misrepresentation etc.
Some analysts however think restatement could cast aspersion on the group accounting statement, and there will be a possible effect on earnings forecast. Securities Exchange Commission could also punish the issuer for misrepresenting its earnings position.
According to the audited result for 2021, UBA had inflated the group’s profitability performance by more than N4.6 billion following covid-19 induced pressures on earnings performance.
The restated report was reviewed by one of the big four accounting firms, Ernst & Young. An error related to foreign exchange movement in key African franchise countries slipped through audit processes.
Meanwhile, UBA did not verbally inform shareholders it overstated its profit, as the group raised its dividend payout for 2021. The bank’s 2021 audited result shows that the Pan African lender reported a profit level higher by N4.6 billion above the actual result for the period.
The group was noted to have raised gain on foreign currencies transactions, thus making the performance appear competitive, healthy and comparable with peers in the period.
However, after reconciliation in line with a request, the inflated amount calls for a restatement of the previous year’s audited result. Thus, invalidated previous earnings per share that was declared to regulators and investing public.
Earnings per share, a metric that signals the portion of profit the group paid to shareholders thus declined following the financial statement adjustment. UBA had informed the investing public and the Nigerian Exchange that its profit for the financial year 2020 was N113.765 billion.
However, the actual profit figure for the year was N109.162 billion, with an inflated portion amounting to N4.603 billion. Some analysts said N4.6 billion above the actual result at the period was material to the group profit statement and could mislead investors to buy UBA Plc shares.
While the group presented a higher profit, its available cash and capital position were not strong enough, thus cutting back the amount of profit shared with shareholders. The group board of directors cited the need to boost capital position.
The group’s dividend payout was reduced to 35 kobo per share in the year, and the decision sparked ire of anger in the Broadstreet; resulting in selloffs in the bank stock at the local bourse.
Though the group result was restated to effect the change, the audited statement pointed out that the group’s big markets were affected by accounting inadequacies.
UBA hints in the audited report that the group identified an error in the prior period’s foreign exchange income to the tune of N4.6 billion.
Notes to the account indicated that the error was due to movement in exchange rates on some assets in its Ugandan and Kenyan operations during the 2020 financial year.
It said the N4.6 billion impacted the Other Assets line on the statement of financial position and Foreign Exchange income recorded for the period. READ: Ecobank Share to See 21% Upside, Gets Buy Rating
This has been corrected by restating the foreign exchange income for the year 2020 and the underlying assets which were reported as part of other assets”, UBA said in the note to the account.
UBA Uganda’s performance turned negative, with a loss after tax printed at N592 million after the account was reconciled. Tanzania, Congo DRC delivered a positive contribution to the group’s bottom line.
But UBA UK’s loss for the period printed large at N1.41 billion while the group offset its retained earnings by N33.173 billion dividend paid in the financial year 2020. Late in 2021, UBA issued a $300 million Eurobond at a yield of 6.75% to fund growth.
The Eurobond was placed with global investors with a subscription rate of 1.7 times the offer size. At the time, Nigerian big lenders were raising funds to provide extra buffers to support their operations.
