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Union Bank Posts Strong HY Earnings Ahead of N50b Rights Issue

By Modupe Gbadeyanka

One of Nigeria’s long-standing and most respected financial institutions, Union Bank of Nigeria Plc, on Thursday, July 27, 2017, announces its unaudited results for the half year ended June 30, 2017.

During the period under review, the lender grew its gross earnings to N73.7 billion from N60.1 billion recorded in the first half of last year, indicating a growth of 23 percent.

Also in the period, its profit before tax went up by 6 percent to N9.5 billion from N8.9 billion in the first six months of 2016.

Similarly, its interest income appreciated by 31 percent to N58.3 billion from N44.3 billion in H1 2016, largely driven by Naira devaluation-fuelled foreign currency loan book growth, while the net interest revenue before impairment rose by 2 percent to N31.7 billion from N30.9 billion in H1 2016, and the net interest margins tightened from 9.1 percent to 7.9 percent.

Union Bank said it remains on course to meet its key 2017 business objectives, including plans to raise up to N50 billion in Tier 1 capital through a rights issue during the third quarter.

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The capital increase supports UBN’s strategy to accelerate business growth and position itself as a leading commercial bank in Nigeria. The rights issue is expected to launch in the third quarter once all regulatory approvals have been secured.

In the financial statements, Union Bank recorded a 19 percent rise in its net interest income, which stood at N26.3 billion against N22.2 billion a year ago, driven by a reduction in impairment charges.

However, its non-interest revenue declined by 2 percent at N15.4 billion versus N15.7 billion in H1 2016.

The cost to income ratio stood at 68.7 percent against 62.4 percent in H1 2016, reflecting increased investments in the brand, continuing technology CAPEX investments and a high inflationary environment.

Also, the gross loans went down 5 percent to N511 billion from N535.8 billion in December 2016, improved foreign exchange availability enabled optimizing of the foreign currency loan book.

Its customers deposits went up 15 percent to N759.3 billion from N658.4 billion in December 2016, affirming the growing confidence of customers in the bank.

Commenting on the results, the Chief Executive Officer of Union Bank, Mr Emeka Emuwa, stated that, “As our centenary celebrations continue and with the launch of our N50 billion rights issue in the second half of the year, 2017 will remain a very busy year for the bank.

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“With our clear focus on enhancing the operational efficiency of the franchise, Gross Earnings grew by 23 percent in the first half of the year to N73.7 billion, from N60.1 billion in H1 2016.

“In a challenged economy, the Group delivered Profit Before Tax (PBT) of N9.5 billion, a 6 percent growth over the corresponding period in 2016.

“Despite stiff competition, our sales strategy and competitive brand continue to provide positive momentum, with Customer Deposits growing by 15 percent from December 2016 to N759.3 billion at the end of the period.

“In the second half of the year, our focus will centre on our rights issue launch; we will remain nimble to take advantage of emerging opportunities and while improving on service delivery to our customers.”

Speaking on the first half numbers, Chief Financial Officer, Oyinkan Adewale, said: “Improved foreign exchange availability enabled us to bring our foreign currency loan book down to 44 percent of total loans, from 50 percent at the end of 2016.

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“Eighteen percent customer deposit growth in the Nigerian bank allowed us to bring Loans to Deposit Ratio down to 65 percent from 82 percent at the end of 2016.

“Sustaining low cost deposit generation momentum, we were able to improve our low-cost deposit base to 69 percent of total deposits, from 65 percent at the end of 2016.

“The Group NPL ratio increased to 8.2 percent. This increase reflects the impact of a 5 percent decline in Gross Loans over the period, without which June 2017 NPL ratio would have been 7.82 percent. With total provision coverage in excess of 185 percent, NPLs remain extremely well covered.

“Going into H2 2017, we will focus on optimising funding costs and continue to keep operating expenses in check, while applying sound risk management practices to minimize impairment costs to ensure we deliver a sustainable financial performance.”

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Modupe Gbadeyanka is a fast-rising journalist with Business Post Nigeria. Her passion for journalism is amazing. She is willing to learn more with a view to becoming one of the best pen-pushers in Nigeria. Her role models are the duo of CNN's Richard Quest and Christiane Amanpour.

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