Q3-17: Union Bank Suffers Profit Loss Despite 16% Rise in Earnings

By Modupe Gbadeyanka

One of Nigeria’s long-standing and most respected financial institutions, Union Bank Plc yesterday announced its unaudited results for the nine months ended September 30, 2017.

However, the lender suffered a profit loss during the period, posting N12.4 billion profit after tax in the period under review compared with N13 billion in the same period of last year.

Also, its profit before tax went down by 2 percent to N13 billion from N13.3 billion a year ago, while the net Income is appreciated by 7 percent and the operating expenses increased by 10 percent.

In addition, the interest income rose by 22 percent to N88.5 billion from N72.3 billion in the first nine months of 2016). This was driven mostly by the 23 percent growth in average gross loans from N412 billion for 9M 2016 to N507 billion for 9M 2017.

Furthermore, the net interest income after impairment appreciated by 16 percent to N40.9 billion from N35.2 billion in 9M 2016.

Impairment went down by 53 percent to N6 billion from N12.9 billion recorded 12 months ago with the coverage ratio strengthened to 203 percent as at September 30, 2017, from 182 percent as at December 2016.

Non-interest revenue declined by 6 percent to N21 billion from N22.5 billion in 9M 2016; excluding nonrecurring Naira devaluation gain of N4.7 billion in 9M 2016, 9M 2017 improved by 18 percent.

Operating expenses went up by 10 percent at N49 billion from N44.6 billion in 9M 2016; with the increase driven largely by double-digit inflation amid continued capital investments in technology and Naira devaluation.

Also, the gross loans went down by 5 percent to N508.6 billion from N535.8 billion in Dec 2016, while customer deposits increased by 17 percent to N767.9 billion from N658.4 billion in December 2016).

These initiatives boosted its gross earnings, which went up by 16 percent to N109.5 billion N94.8 billion in 9M 2016).

According to the lender, this was driven by a customer-centric product suite, a revamped digital platform and the launch of a new advertising campaign, which delivered 63 percent YTD increase in new-to-bank customers in 2017.

Union Bank said it remains on course to deliver on its key objectives in 2017.

As previously announced, the bank’s plans to raise N50 billion in tier 1 capital through a rights issue formally opened on September 20 and closed on October 30.

The capital increase supports the Bank’s short to medium term growth objectives as it looks to re-position itself as one of Nigeria’s leading commercial banks. The new capital will also ensure the bank maintains a strong buffer above regulatory capital adequacy requirements.

Commenting on the results, the Chief Executive Officer (CEO) of Union Bank, Mr Emeka Emuwa, remarked that, “We remain encouraged by the results of our customer acquisition strategy, as customers continue to respond to our targeted market offerings and increased brand awareness, following the debut of a new advertising campaign to support the launch of Union Bank’s new digital platform, including our revamped mobile banking app and *826#, our SMS banking platform.

“Customer deposits are up 17 percent from December 2016 to close the period at N767.9 billion. Group Gross Earnings, at N109.5bn, reflect a 16 percent growth compared to the period ended September 30, 2016.

“However, a challenging macro-operating environment, characterised by double-digit inflation, continues to create headwinds for businesses, constrict consumer purchasing power and pressure operating expenses as well as portfolio quality.

“Consequently, core pre-tax earnings for the period were marginally lower at N13 billion compared to N13.3 billion in 9M 2016.

“With the N50 billion capital raise underway, we remain focused on our strategic priorities and expect this new capital to deliver the momentum needed to accelerate the pace of our business growth.”

Speaking further on the numbers, Chief Financial Officer of the bank, Oyinkan Adewale said, “The Group’s net interest income after impairments improved significantly by 16 percent from N35.2 billion to N40.9 billion compared to the period ended September 30, 2016.

“Non-interest income is down by 6 percent compared to 9M 2016, which included one-time revaluation gains.

“With our continued focus on early problem recognition and prudent provisioning, our coverage ratio has strengthened to 203 percent as at September 30, 2017, from 182 percent as at December 2016.

“The impact of Naira devaluation, coupled with the inflationary environment, has pressured our cost-to-income ratio, especially as we continue to make investments in technology critical to our long-term business strategy.

“We are confident that these investments will deliver the expected cost benefits in the medium term. We also expect improved capital adequacy and higher revenues, fuelled by N50 billion of new capital.