By Dipo Olowookere
On Tuesday, Union Bank of Nigeria announced its audited financial statements for the year ended December 31, 2018.
In the results, the lender grew its profit before tax by 33 percent to N18.5 billion from N13.9 billion, while the profit after tax went up by 39 percent to N18.1 billion from N13 billion.
However, the gross earnings during the year went down by 11 percent to N145 billion from N168 billion in 2017.
Union Bank has continued to position itself to continue executing key business priorities in 2019 especially with the successful execution of its debut local currency bond issue to raise N13.5 billion and the tightening up of its loan portfolio.
It was observed that the decline in the revenue in the year was as a result of the 8 percent drop in the bank’s loan book as the NPL ratio reduced to 8.7 percent from 19.8 percent.
A further analysis of the results showed that the net revenue after impairments moved up by 16 percent to N93.5 billion compared with N80.64 billion in 2017, while customer deposits rose to N857.6 billion from N802.4 billion, with the operating expenses increasing from N66.7 billion in 2017 to N75.0 billion.
Commenting on the results, the MD/CEO of Union Bank, Mr Emeka Emuwa, said, “Our priorities in 2018 were three pronged; enhancing our productivity across board; tightening up our loan portfolio (especially resolving key large exposures which drove NPLs up significantly at the end of 2017); and optimizing the bank’s capital and funding base.
“I am pleased to report that we made significant strides in each focus area. Notwithstanding a depressed economic environment and a challenging operating landscape, our efforts to optimise productivity delivered results.
“Union Bank’s Group Profit Before Tax (PBT) is up 33% to N18.5 billion in 2018 from N13.9 billion in 2017. As consumer confidence in the brand continues to grow, customer deposits also continue to grow, up 7.3% to N857.6 billion in 2018 from N802.4 billion in 2017.
“Our Net Revenues After Impairments are also up 16% to N93.5 billion compared with N80.6 billion in 2017 with significant contribution from growth in retail transaction volumes across our channels.
“Through an aggressive focus on recoveries and recognising fully provisioned loans on our books, we successfully reduced the bank’s NPL ratio, which is now down to 8.1% in 2018 from 20.8 percent at the end of 2017, in line with guidance provided at the start of the year.
“In 2019, we will continue to maintain focus on recoveries while prudently rebuilding our loan book and maintaining a conservative risk profile.
“On the funding side, we successfully initiated the first tranche of our oversubscribed local currency bond programme to raise N13.5 billion.
“We are encouraged by the market and investor community response to the bond issue and subsequent listing on the FMDQ platform as we continue our drive to optimize the bank’s capital and funding structure.
“In 2019, we will double-down on our productivity efforts to deliver our financial targets. We are harnessing synergies across our business segments to ensure we maximize opportunities across entire value chains, while centralising key business and operational functions for better efficiency, and prioritizing customer experience across all our touch points.
“We are also pleased to be introducing our women focused initiative, αlpHer, which will provide a portfolio of financial and non-financial services to women across customer segments in Nigeria.
“Lastly, we have commenced the Long-Term Efficiency Acceleration Programme (LEAP), a comprehensive transformation effort to embed cost discipline across the bank.
“We believe LEAP will deliver significant cost savings in 2019 and entrench a culture of efficiency across all areas of the bank.”
Also commenting, the Chief Financial Officer, Mr Joe Mbulu, said, “Gross revenues declined by 11% to N145.5 billion in 2018 from N163.8 billion in the previous year as a direct consequence of the loan book clean-up and resolution of key exposures.
“Notwithstanding significant investments to execute our strategy including expanding our agency banking footprint and aligning compensation with market for our entry to mid-level employees (which increased operating expenses by 12% from N66.7 billion in 2017 to N75.0 billion as at December 2018), we are pleased that our core business delivered a 33% growth to our topline PBT. Through LEAP, we will ensure that operating expenses in 2019 remain within the bank’s targets.
“Our Return on Tangible Equity (ROTE) improved to 9.6% from 6.2% in 2017 demonstrating long-term shareholder value enhancement.
“In addition to our successful fund raising activities during the year, we will further support future growth and creation of high quality risk assets in 2019 through a Tier II capital raise.
“This will boost our Capital Adequacy Ratio, which is currently at 16.4% and remains above the regulatory limit.”
