Economy
Union Bank to Boost 2021 Earnings, Cuts NPL Ratio to 4.0%
By Dipo Olowookere
Shareholders of the Union Bank of Nigeria (UBN) have been assured of more value for their investment in the financial institution.
This assurance was given by the outgoing Managing Director of Union Bank, Mr Emeka Emuwa. The banker will cease to head the lender from Thursday, April 1, 2021.
A few days ago, the bank released its audited financial statements for the year ended December 31, 2020, and in the period, it recorded sustained growth in key income lines and significantly improved fundamentals despite the constrained operating environment largely due to the impact of the COVID-19 pandemic.
Reason for good performance
Union Bank attributed this sterling performance to its investments in technology and progressive work culture over the past eight years.
The lender said these strategies enabled a swift response to the pandemic that allowed its workforce to transition to remote working while maintaining the productivity required to deliver this strong set of results in 2020.
Mr Emuwa assured that in 2021, shareholders should expect improved results as “the bank will focus on enhancing revenues and shareholder value by revving up customer acquisition, engagement and transactions through seamless customer journeys and an optimized service delivery platform.”
CEO on Union Bank 2020 Results
Commenting on the performance of the company in the previous financial year, Mr Emuwa, who has led the lender for eight years, stated that, “The bank has delivered a strong set of results notwithstanding the impact of COVID-19 on our operations and the wider economy, enabling the board of directors to continue to return value to shareholders with a proposed dividend payment for the second year in a row.
“This demonstrates the strong foundations we have built, as we continue to deliver against our target of becoming a leading financial institution in Nigeria.”
“For the full year, we grew across key income lines. Net income after impairments grew 8.3 per cent from N95.5 billion to N103.4 billion and translated into 2.8 per cent growth in profit before tax to N25.4 billion from N24.7 billion.
“The core of this performance is driven by the growth in our loan book, with a 23.8 per cent increase in gross loans to N736.7 billion from N595.3 billion in 2019.
“The pandemic accelerated trends in customer behaviour and we have seen a rapid increase in digital adoption with a 38 per cent year-on-year increase in active users on our UnionMobile channel with total active users now at 2.9 million.
“Our UnionOne and Union360 platforms for businesses grew by 11 per cent from 25,000 users to 27,700 users and 94 per cent of transactions in the bank are now done digitally, up from 89 per cent in 2019.
“We also aggressively grew UnionDirect (our agent network) by 6x from 3,100 to 18,100 in line with our focus on our retail business. With our investments yielding positive results, we are well-positioned as a strong leader in the retail and digital space.”
Concluding, he said, “As I retire, following eight years of rebuilding and repositioning this storied institution, I am convinced that with the excellent management team and a clear strategy in place, Union Bank is well-positioned to continue to compete and deliver value to its shareholders.”
Dividend recommended
In the period under consideration, Union Bank recommended the payment of 25 kobo as a dividend and this has spurred interest in the company’s equities at the stock market.
CFO speaks
In his reaction to the results, the Chief Financial Officer of Union Bank, Mr Joe Mbulu, expressed satisfaction with the “top and bottom-line performance in 2020, in light of the impact of the pandemic and economic challenges.”
According to him, “Significant inflationary pressures and the translation of currency depreciation drove growth in our cost base.
“However, we maintained strong control, limiting operating expense increase to 10 per cent (N77.9 billion from N70.8 billion), well below the rate of inflation. Consequently, we saw a marginal increase in our cost to income ratio to 75.4 per cent from 74.1 per cent.
“Our customer deposits hit a milestone during the year, crossing the N1 trillion mark to N1.131 trillion from N886.3 billion in FY 2019, an increase of 27.1 per cent.
“Low-cost deposits were up by 17 per cent, constituting 68 per cent of total deposits helping to push the cost of funds down by 1.4 per cent.
“We continued to proactively manage our growing risk asset portfolio and recorded better asset quality, with our NPL ratio improving from 5.8 per cent to 4.0 per cent. This achievement, combined with solid capital adequacy at 17.5 per cent and continued top-line growth, provides the platform for strong growth going forward.
“We will continue to grow our loan portfolio in 2021, which we expect to be a significant driver of growth, combined with our value chain synergies across our business which will drive customer and transaction growth during the year and beyond.
“Our UBUK subsidiary remains classified as Available for Sale as the sale process continues albeit delayed due to the pandemic-induced lockdowns.”
By Adedapo Adesanya
The Naira weakened against the United States Dollar by N4.75 or 0.35 per cent to N1,364.89/$1 from N1,360.14/$1 in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Tuesday, August 11.
In the same vein, the domestic currency slumped against the Pound Sterling in the official market during the session by N4.11 to trade at N1,842.61 compared with the previous day’s N1,838.50/£1, and against the Euro, it lost N4.41 to sell at N1,575.50/€1 versus Monday’s N1,571.09/€1.
But it was a different scenario at the GTBank FX desk, where the Naira gained N4 against the US Dollar yesterday to close at N1,367/$1, in contrast to the previous day’s N1,371/$1, and appreciated by N5 in the parallel market to quote at N1,395/$1 compared with the preceding session’s N1,400/$1.
Interbank FX turnover, according to data from the Central Bank of Nigeria (CBN), fell sharply by 86 per cent to $29.1 million, down more than 86 per cent from $213.9 million a day earlier, with the number of settled interbank deals down to 47 from 182.
The decline in Dollar trading was attributed to weaker bank bids from customers seeking foreign exchange payments, while tight market liquidity continued to weigh on the Naira.
Nigeria’s gross external reserves rose by $83.81 million to $52.14 billion.
Meanwhile, the cryptocurrency market rebounded, with Dogecoin (DOGE) going up by 2.8 per cent to $0.0721 and taking its weekly gain to over 3 per cent, while Bitcoin (BTC) slipped by 0.3 per cent to $63,769.69.
Investors are focused on Thursday’s US Consumer Price Index (CPI) report and Middle East tensions, as lower inflation and a potential Fed pivot could fuel a relief rally in risk assets even as rising oil prices threaten to push inflation higher.
Binance Coin (BNB) grew by 2.2 per cent to $612.49, TRON (TRX) rose by 1.1 per cent to $0.3350, Ripple (XRP) increased by 0.9 per cent to $1.02, Ethereum (ETH) advanced by 0.8 per cent to $1,889.60, and Solana (SOL) jumped by 0.5 per cent to $76.24, while Cardano (ADA) lost 0.6 per cent to end at $0.1867, with the US Dollar Tether (USDT) and the US Dollar Coin (USDC) flat at $1.00 apiece.
By Adedapo Adesanya
Oil was up by 1 per cent on Tuesday as doubts about a potential United States-Iran peace deal fueled concerns that Middle East supply disruptions would persist.
As a result, Brent futures rose by $1.19 or 1.4 per cent to $88.91 a barrel, while the US West Texas Intermediate (WTI) futures expanded by $1.07 or 1.3 per cent to $83.20 per barrel.
Both contracts had jumped about 5 per cent on Monday as hopes for a peace deal between the US and Iran started to fade.
It looked worse on Tuesday when Iran said the Strait of Hormuz will remain closed unless the US ends the war and meets Iran’s conditions, raising the bar for a deal that would restore more oil traffic through the key waterway. About 20 per cent of global oil supply passed through the strait before the start of the Iran war on February 28.
Mr Mohsen Rezaei, secretary of Iran’s Supreme National Security Council, said it has also delivered additional conditions to the US through mediators.
US officials had suggested last week that negotiations involving Iran and Oman were making progress toward allowing more vessels through Hormuz.
Shipping traffic through the Strait of Hormuz fell sharply on Monday as tensions continued to disrupt maritime activity across the Middle East.
Shipping data showed that only six vessels passed through the strategic waterway on Monday, below the 10-day average of about 11 vessels. Before the conflict, daily traffic through the strait averaged between 125 and 140 vessels.
The disruption comes amid heightened security concerns across key regional shipping routes.
In the Bab el-Mandeb, Yemen’s Iran-aligned Houthis attacked a Saudi vessel carrying military equipment, according to the Houthi-run Saba news agency.
Separately, Reuters reported a missile attack on a container ship off Pakistan in what was suspected to be a US strike, further underscoring the security risks facing commercial shipping in the region.
The disruption to regional maritime traffic has also raised concerns about the recovery of oil production in the Middle East.
The US Energy Information Administration (EIA) said on Tuesday that some oil producers in the region could struggle to restore output to pre-conflict levels by the end of 2027, even if shipping and trade patterns return to normal by early next year.
The outlook highlights the potential for prolonged disruptions to global oil supplies despite a possible normalisation of trade flows in the coming months.
In Libya, a member of the Organisation of the Petroleum Exporting Countries (OPEC), renewed violence in the strategic city of Zawiya has disrupted the oil industry, with state oil firm the National Oil Corporation saying it could declare force majeure if drone attacks on energy assets in the city continued.
In Europe, the Ukrainian military said on Tuesday it attacked an oil refinery in the Russian city of Orsk, the second-largest city in the Orenburg region and an important industrial hub.
The combination of Ukraine’s attacks on Russian energy infrastructure and the Iran war has limited global supplies and boosted global energy prices.
By Aduragbemi Omiyale
African leaders have been advised to focus on economic integration through industrialisation, as this would make the continent a formidable force in the global market.
This charge was given by the Minister of State in the Tanzanian President’s Office responsible for Planning and Investment, Prof. Kitila A. Mkumbo, during a visit to the Dangote Petroleum Refinery and Petrochemicals in Lagos.
“Africa now needs economic liberation, and that can only come through industrialisation,” he said, describing Mr Aliko Dangote as Africa’s leading industrialist whose investments are increasingly extending beyond Nigeria to support development across the continent.
He added that Tanzania looks forward to working with Dangote Group as part of a broader vision of accelerating Pan-African industrialisation and strengthening regional manufacturing capacity.
The Minister also highlighted the importance of local refining capacity in improving Africa’s energy security, particularly in light of recent disruptions in global oil markets.
Referring to the impact of tensions around the Strait of Hormuz on global fuel prices, he said increased refining capacity from facilities such as the Dangote Petroleum Refinery would help cushion African economies against external shocks.
According to him, affordable and reliable energy remains one of the most important drivers of economic development, noting that expanded refining capacity across the continent would contribute significantly to lowering energy costs and improving the quality of life for millions of Africans.
The Tanzanian delegation was in Nigeria to follow up on discussions held earlier this year between President Samia Suluhu Hassan and Mr Dangote regarding the expansion of Dangote Group’s investment footprint in Tanzania.
The East African nation reaffirmed its commitment to deepening economic cooperation with Dangote Group, expressing strong interest in attracting new investments in fertiliser production, energy and industrial infrastructure to support the country’s long-term development agenda.
“We have come here to make a follow-up on what they deliberated with our President in terms of further Dangote investments in Tanzania,” Mr Mkumbo said.
