Union Bank: Sustaining growth in key financial parameters amid challenges
By Kayode Tokede
Union Bank of Nigeria Plc maintained growth in key financial parameters in its half year (H1) ended June 30, 2021 result and accounts submitted on the Nigerian Exchange Limited (NGX) last week.
The bank in the period grew key financial parameters in the profit & loss figures and balance sheets to underline the management prudential management.
One of the oldest bank in the Nigeria reported modest increase in loans & advances and deposits to drive total assets by 0.9 per cent.
The 0.9 per cent growth in total assets was driven by 5.6per cent increase in Customer loans & advances to N778.1billion as at June 30, 2021 from N736.7 billion reported in 2020 FY, while Customer deposits rose by 3.6 per cent to N1.17trillion as at June 30, 2021 from N1.13 trillion reported in 2020 FY results.
However, Union Bank of Nigeria’s shareholders funds dropped by 2.3 per cent to N258.1billion as at H1 ended June 30, 2021 from N264.3billion reported in 2020 FY.
The solid financial performance for the period affirms Union Bank of Nigeria as one of the industry leadership position in ratios, and consistency in achieving its strategic objectives despite the challenging business environment.
The Banking subsidiaries reported average liquidity ratio of 34.3 per cent in H1 2021 from 40.9 per cent reported in 2020 FY . The liquidity ratio reported in the period under review is above 30 per cent minimum requirement of the Central Bank of Nigeria.
Non-Performing Loans closed H1 2021 at 4.3 per cent from 4.0 per cent reported in full year ended December 31, 2020.
In addition to ratio, Union Bank’s banking subsidiaries reported 16.1 per cent capital adequacy ratio in H1 2021 from 17.5 per cent reported in H1 2020.
However, extract from the bank’s profit & loss figures showed 5.6 per cent drop in gross earnings to N75.4billion in H1 2021 from N79.9billion reported in H1 2020.
Given a low-yield environment, the bank also reported interest income that dropped to N47.75billion in H1 2021 from N57.36billion reported in H1 2020 as interest expenses also dropped to N27.26billion in H1 2021 from N29.10billion reported in H1 2020.
Consequently, Net-interest income depreciated by 27.4 per cent to N20.4billion in H1 2021 from N28 billion reported in H1 2020.
The bank, however, grew Non-interest income by 27.3per cent to N27.7 billion in H1 2021 from N N22.7billion reported in H1 2020.
Meanwhile, the bank in its H1 2021 reported Net interest income after impairment charge for credit losses at N20.34billion in H1 2021 from N24.02billion in H1 2020.
Operating expenses of the banking subsidiaries rose by nearly four per cent to N36.8billion in H1 2021 from N35.4billion reported in H1 2020
The breakdown of Operating expenses revealed that Personnel expenses closed H1 2021 at N14.74billion from N15.57billion reported in H1 2020, while Depreciation and amortization moved from N2.15billion in H1 2020 to N3.75 billion reported in H1 2021.
In addition to operating expenses of the banking subsidiaries, Other operating expenses moved from N16.8billion in H1 2020 to N18.4billion in H1 2021.
The bottom-line performance showed that, Profit before income tax from continued operations rose by 1.4 per cent to N11.5billion in H1 2021 from N11.3 billion reported in H1 2020.
Also, Profit for the year from continued operations closed H1 2021 at N11billion, 1.7 per cent increase over N10.8billion reported in H1 2020.
The bank offers its clients a wide range of corporate, investment, business and personal banking products and solutions. It is one of the biggest and most profitable banks in Nigeria.
Union Bank of Nigeria’ Earnings per share closed flat at N0.37k per the second consecutive year.
Reactions on H1 2021 results
Commenting on the results, Emeka Okonkwo, CEO said: “I am pleased that our business has remained resilient in the face of a persistently challenging economic environment. The Bank delivered a 1.4per cent growth in Profit Before Tax (PBT), recording N11.5 billion in H1 2021 compared to N11.3 billion in H1 2020.
“This steady performance reflects our successful efforts in turbo charging transaction volumes, which have delivered higher net fees and commission income, as well as a concerted focus on debt recoveries.
“While the industry continues to be impacted by lower interest rate environment, we have reinforced our branches and the network to aggressively mine opportunities and value across our entire geographic footprint.
“This is part of a deliberate shift towards being closer to the customer. Consequently, we have seen our Retail loan book and revenues grow by 14 per cent and 10per cent respectively and expect to continue to see robust growth across all business segments as this new structure becomes further entrenched.
“In June, we launched the ‘Save & Win Palli Promo,’ a nationwide campaign to reward new and existing customers with up to N55 million. During the promo period (June to December), customers who save a minimum amount of N10,000 monthly will be eligible to win cash prizes and gifts to encourage a savings culture even in the current economic climate.
“The campaign also provides an opportunity for the Bank to bring some relief to customers who have been impacted by the economic hardship brought on by the COVID-19 pandemic.
“Looking ahead to the second half of the year, we will continue to focus on driving productivity across the entire network to deliver our business objectives.”
Speaking on the H1 2021 numbers, Chief Financial Officer, Joe Mbulu said: “Our focus on efficiency has helped drive growth in Profit Before Tax to N11.5 billion.
“Non-interest income increased by 22 per cent during the period, driven by recoveries which grew by 226 per cent to N8.6 billion from N2.6 billion, while net income from other financial instruments rose by 139 per cent to N4.5 billion from N1.9 billion.
“These achievements counteracted the impact of the low interest rate environment seen in the market and its impact on net interest margins for the period. Deposits increased by four per cent to N1.2 trillion while our risk assets also grew by six per cent to N 778.1 billion compared to year-end 2020.
“Our capital position remains strong with a Capital Adequacy Ratio of 16.1 per cent and non-performing loan ratios at 4.3per cent. Furthermore, our coverage ratio remains robust at 166per cent. We continue to sustain our strong foundation as we move into the second half of the year.”
