Union Bank records ₦15.5bn profit before tax for year ended 2017

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Union Bank, one of Nigeria’s longest standing and most respected financial institutions, has announced its audited financial statements for the year ended 31st December 2017.

Union Bank Group Financial Highlights are as follows:

  • Gross earnings: up 26% to ₦163.8bn (₦126.6bn in 2016).
  • Profit before tax: largely flat at ₦15.5bn (₦15.7bn in 2016).
  • Interest income: up 25% to ₦124.5bn (₦99.7bn in 2016), driven by the impact of naira devaluation on the foreign currency denominated loan book, government securities yields and loan book re-pricing.
  • Net interest income: up 3% to ₦66.7bn (₦65.0bn in 2016).
  • Interest expense: up 67% to ₦57.9bn (₦34.7bn in 2016): due to the challenging interest rate environment, as the yield curve remains elevated.
  • Non-interest income: up 31% to ₦39.3bn (₦29.9bn in 2016); driven by a combination of improved fee and commission income, trading income and more effective debt recovery machine.
  • Operating expenses (OPEX): up 5% to ₦65.1bn (₦62.0bn in 2016) despite a double-digit inflationary environment and the impact of devaluation on IT investments.
  • Gross loans: up 5% to ₦560.7bn (₦535.8bn as at Dec 2016), almost entirely due to the impact of Naira devaluation on the foreign currency denominated loan book.
  • Customer deposits: up 22% to ₦802.4bn (₦658.4bn as at Dec 2016); continuing its upward trajectory since 2016. The investments in customer-led products and our alternate channels, along with a strengthened brand, are delivering positive outcomes.

Speaking on the Group’s results for the year, Union Bank CEO Emeka Emuwa said:
“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 ₦802 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.

Union Bank Chief Financial Officer, Oyinkan Adewale, commenting further on the 2017 results said:
“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 ₦6 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.”

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