By Dipo Olowookere
One of the old generation financial institutions in the country, Union Bank of Nigeria Plc, has recorded a 17 percent growth in its profit after tax in the first quarter of 2018.
In its audited financial statements for the quarter ended March 31, 2018 announced on Thursday, the lender said its PAT appreciated to N5.3 billion from N4.5 billion in the corresponding period of last year, just as the profit before tax closed at N5.4 billion as at March 31, 2018 in contrast to N4.7 billion in Q1 2017.
Also, the gross earnings went up by 15 percent to N39.5 billion from N34.3 billion in Q1 2017, driven by improvement in net interest margins from 7.1 percent to 8.7 percent and 18 percent increase in non-interest income due to enhanced trading income and increased volumes on alternate banking channels.
Furthermore, interest income increased by 14 percent to N31.7 billion from N27.7 billion in Q1 2017 buoyed by improved yields on loans and government securities.
In addition, the firm’s net interest income before impairment rose by 22 percent to N17.8 billion from N14.6 billion in Q1 2017, driven by 14 percent increase in interest income and a lower 6 percent increase in interest expense.
It was also revealed in the statements that the non-interest income went up by 18 percent to N7.8 billion from N6.6 billion in Q1 2017, driven by a combination of trading income and alternate channel revenues, while the net operating income increased by 11 percent to N23.3 billion from N20.9 billion in Q1 2017.
Furthermore, the operating expenses jumped by 10 percent to N17.9 billion from N16.3 billion in Q1 2017, largely due to regulatory levies from the NDIC and AMCON.
However, the gross loans went down by 12 percent to N495.5 billion from N560.7 billion as at December 2017 as a result of collection efforts and the write-off of some non-performing loans.
During the period under review, the customer deposits of Union Bank went down by 5 percent to N759.1 billion from N802.4 billion in December 2017 as the lender optimised the deposit book towards lower-cost deposits.
It was observed that there was a 68 percent increase in new-to-bank accounts when compared with Q1 2017, highlighting customer acceptance of new products and increasing brand penetration.
There was also a 90 percent increase in volume of funds transfer transactions on Union Bank’s alternate channels, highlighting efficiencies gained from technology investments, which are driving increased customer adoption.
Commenting on the results, the chief executive of Union Bank, Mr Emeka Emuwa, stated that, “In 2018, we renewed our focus on driving efficiency and productivity across the entire organization.
“The objective is to ensure we fully leverage our resources including human, technology and new capital in order to maximize our bottom line.
“While we are just in the early stages of this drive, we are already starting to see positive results. In the first quarter, our Profit Before Tax grew by 16 percent compared to the same quarter in 2017. Gross earnings, bolstered by improved asset yields, strong treasury trading and revenue from our alternate channels, which is steadily seeing increasing customer adoption, are also up by 15 percent to N39.5 billion against N34.3 billion Q1 2017.
“Our Group Non-Performing Loan Ratio is down to 14.9 percent from 19.8 percent at the end of 2017.
“We continue to maintain aggressive focus on our impaired loans and we expect to resolve some large exposures in the course of the year, which will further drive down the ratio. We are pushing strongly on debt recovery efforts across board including initiating or continuing legal action where necessary.
“For the first half of the year, we will continue to hone initiatives around our productivity drive, focusing our people on targeted opportunities across regions and optimising our technology and digital platforms to deliver operational efficiency and improved customer service.
Also speaking on the Q1 2018 numbers, Chief Financial Officer of the bank, Oyinkan Adewale said, “The first quarter numbers reflect the adoption of International Financial Reporting Standards (IFRS) 9, which came into effect at the start of 2018. We are pleased that the Bank’s regulatory risk reserve was adequate to absorb the impact of the new accounting rules.
“Our Capital Adequacy Ratio (CAR) remains robust at 17.9 percent in spite of the impact of IFRS 9 on impairments. Liquidity ratio is at 39.4 percent, well above the minimum requirement, while Net Interest Margin improved to 8.73 percent from 7.14 percent in Q1 2017.
“Profit After Tax (PAT) rose 17 percent to N5.3 billion compared to N4.5 billion recorded in Q1 2017. Notwithstanding a 19 percent and 27 percent increase in our AMCON levy and NDIC premium respectively, our operating expenses increased by only 10 percent given the continued focus on optimising operating costs.
“We continue to proactively in managing the risks in our business as we pursue targeted opportunities identified for growth.”
Adedapo Adesanya