By Dipo Olowookere
Union Bank of Nigeria Plc on Thursday finally released its financial statements for the year ended December 2017.
In the results, the lender grew its gross earnings by 26 percent to N163.8 billion from N126.6 billion achieved in 2016.
During the period under review, the profit before tax marginally went down to N15.5 billion from N15.7 billion in 2016, while the profit after tax declined to N14.6 billion from N15.4 billion in the previous year.
However, the company’s interest income rose by 25 percent to N124.5 billion from N99.7 billion in 2016, driven by the impact of Naira devaluation on the foreign currency denominated loan book, government securities yields and loan book re-pricing.
Furthermore, the net interest income increased by 3 percent to N66.7 billion from N65 billion in 2016 with the interest expense growing by 67 percent to N57.9 billion from N34.7 billion in 2016. This was buoyed by the challenging interest rate environment, as the yield curve remains elevated.
In the results, the bank’s non-interest income went up by 31 percent to N39.3 billion from N29.9 billion in 2016, driven by a combination of improved fee and commission income, trading income and more effective debt recovery machine.
In the period under review, operating expenses (OPEX) increased by 5 percent to N65.1 billion from N62 billion in 2016 despite a double-digit inflationary environment and the impact of devaluation on IT investments.
Also, the gross loans went up 5 percent to N560.7 billion from N535.8 billion as at December 2016, almost entirely due to the impact of Naira devaluation on the foreign currency denominated loan book.
Furthermore, customer deposits went up 22 percent to N802.4 billion from N658.4 billion as at December 2016, continuing its upward trajectory since 2016. The investments in customer-led products and the bank’s alternate channels, along with a strengthened brand, are delivering positive outcomes.
In the financial statements, the Non-Performing Loan (NPL) ratio increased to 19.8 percent from 6.9 percent in 2016, representing a 12.9 percent rise.
Managing Director of Union Bank, Mr Emeka Emuwa, commenting on the bank’s earnings, remained that, “Strengthening our capital base through the Rights Issue was key for the Bank in 2017. Notwithstanding the challenges a tightened economy presented, the rights issue was 20% oversubscribed.
“This overwhelming success is credited to strong shareholder and investor confidence in Union Bank’s immediate and longer-term plans. With sufficient capital buffers, we are now in pole position to execute our growth agenda from 2018 onwards.
“Operationally, we continued to focus on growing our retail customer base and optimising customer experience with simpler, smarter banking solutions.
“We launched an upgraded suite of digital channels including UnionMobile, UnionOnline and our unique USSD banking code *826#, driving an increase in active subscribers above 100% on the mobile app and online banking platforms.
“Union Bank’s alternative banking platform remains the fastest growing in the industry. We continue to attract broad segments of new customers, adding 90% more new-to-bank customers in 2017 compared to 2016.
“Notwithstanding a fiercely competitive environment and reduced consumer purchasing power in the system, our new-to-bank customers and deepening share of wallet with existing customers have driven customer deposits up by 22% to N802 billion.
“Consequently, gross earnings are up by 26% to N164 billion. By the end of the year, our NPL Ratio stood at 19.8%. This reflects the residual effects of devaluation and a post-recession economy on our loan book, particularly in the oil and gas sector as well as a recent high court ruling in respect of a large real estate exposure, which we have appealed.
“While we have sufficient coverage and adequate capital buffers, we are aggressively focused on final resolution of key large exposures, which will have immediate positive impact on the NPL ratio, once resolved.
“In addition, we have strengthened our debt recovery teams with oversight from senior executives, and initiated necessary legal action against recalcitrant debtors. We are confident that this multi-pronged approach will bring the NPL ratio down steadily over the next few quarters.
“For 2018, our focus is on leveraging our capital and investments in talent and technology to accelerate growth across all business segments and improve enterprise value for all our stakeholders.”
“Also commenting, Chief Financial Officer of Union Bank, Oyinkan Adewale, stated that, “We grew our revenues by 26% in 2017, and notwithstanding double-digit inflation and the impact of Naira devaluation on foreign currency denominated costs, Group Cost Income Ratio is down to 61.5% from 65.3% in 2016.
“As a result of our successful rights issue, which was oversubscribed, we ended the year with CAR at 17.8%- well above regulatory requirements.
“Our coverage ratio was adequate at 103%, while our debt recovery efforts yielded good results with an increase of over 350% to N6 billion in the year.
“We continue to tighten our credit risk management and loan monitoring processes while pursuing an aggressive strategy to continue to grow our low-cost deposit base.
We closed the year with the Regulatory Risk Reserve at N71 billion, which exceeds the expected impact of International Financial Reporting Standards (IFRS) 9 adoption in 2018.”
