Union Bank to Boost 2021 Earnings, Cuts NPL Ratio to 4.0%

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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.”

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