" /> Unity bank profit plunges again, faces tough times  | Hallmarknews
Published On: Mon, Aug 15th, 2016

Unity bank profit plunges again, faces tough times 

Unity Bank, one of Nigeria’s oldest lenders, is battling for its life as it strives to remain profitable in the face of multiple challenges.

This becomes more worrisome, when a storm of financial uncertainty is blowing across the industry and the economy in general.

At a moment of these mounting challenges, Mrs Tomi Somefun, the new Managing Director of the bank is expected to navigate the affairs of a deeply ailing laggard out of trouble.

However, business experts believe that tough times define good business leaders around the world, a concept popularized by Robert Schiller, in his book When the going gets tough the tough get going.

For Mrs. Somefun, what could be more daunting than the job of turning red numbers to black and giving shareholders something to cheer in a technically recessed economy.

Like the overall economy, the bank may be swimming against the tide as profit after tax just went down by 70% in the first half of 2016. With the economy expected to end the year in negative GDP growth, prospect for the bank can only be dire.

Unity bank Plc vision is to be the retail bank of choice. But neither the bank’s operating structure nor its strategies align with this.  The bank recently got a new chief executive officer, after its erstwhile Chief resigned from taking the bank into the future. Though, the future is close enough, if not here already as technologies permeate major banking operation, the bank is in race against time.

Unity bank balance sheet size stood at N443.32 billion at the end of financial year 2015 coming from N373.93 billion in 2011. This means that the bank has been growing at 3.46% on the average of the five years. In 2015, its profit before tax went down by 83% from N13.64 billion to N2.34 billion. The profit was achieved by efforts of two MD/CEOs in a of ratio seven to five months at least.

Meanwhile, the bank total asset leaped to N467.57 billion at the end of first half in 2016. The increase in size was on the back of support garnered from 5% growth in loans and advances in the first half of 2016.

Very well, the bank is obviously trying to do some clean up as spotted in its result. There is possibility that the leadership may be doing some haircuts to its personnel cost.

Obviously, operating cost may be receiving some attention. Both cost drivers went down fairly in the first half. Personnel cost was reduced to N6.94 billion from N7.09 billion while credit losses provision stood at about N131 million as against N903.6 million it recorded in the corresponding year 2015.

Its first half result in 2016 took a beating, as net interest income lowered by 48% to N7.555 billion from N14.56 billion in the corresponding year. Also, the worse may not have been heard of the bank performance as its pretax profit bolted by 70% to N2.614 billion from N8.77 billion a year earlier.

The result in all ramifications reflects the very characteristic of the economic situation but to a greater extent the intrinsic competitive weakness of the bank itself.

On corporate governance, Unity Bank may need to do more. In its banking sector report 2015, Afrinvest, an investment banking firm, advised the bank management to gear efforts toward improvement in corporate disclosure.

There was an existing allegation, though Unity bank denied its existence but analysts still refuse to wish it away, of some distrust between the board and former CEO, Mr. Semenitari, which forced to resign after returning the bank to profitability in 2014; however, in 2015 the bank non-performing loans bloated?

To a certain extent, a deposit money bank technological infrastructure determines to a larger extent its placement in the retail market. This has not forged the bank competitive position; perhaps due to massive investment requirement. Analysts are of the opinion that the bank’s infrastructure is still at basic threshold.

Few banks are more complex, less transparent and easier to do business with than the Unity bank, a victim of amalgamation of strange bed-fellows in its ownership.

However, the recent banking regulation indicates that that is the only way to go.

For Unity bank that came to existence as a result of combined strengths and weaknesses, assets as well as liabilities of nine different banks in 2006, competitive horizon has not been in its favour. The bank is playing catch up with the industry tides, while its profit capability is lowest in the sector.

In the last few years, the banking industry has assumed a quite new dimension. Regulation and competition have become so tough and banking stock has become less tasty for investment purpose.

However, in spite of changing dynamism, banks are still rated differently.

In both retail and corporate segment, dimension of competitive rivalry has changed. Banking customers are demanding for the impossible. Regulators are watching mode of operation like a hawk to ensure no sharp practices. The Central Bank of Nigeria is hell bent on the quality of financial institutions, while energy sector is taking away profit expectation as need to increase provision against non performing loans.

In the midst of the tough operating business environment lies Unity Bank with total asset close to half a trillion Naira. At the retail end of the market, the bank is a marginal player without strong competitive edge. Most daunting part of its sector is the fact that it is competing with behemoths in the market. Over the last five years, the bank’s performance has being sliding below the industry profit line.

Unity bank is one of the few with strong capital base but without much business to do. Unlike some bank chiefs that are “indirectly” seeking potential partners, the bank’s leadership seems quite comfortably enough to maintaining status quo.

The bank total asset moved up by 7% in 2015 to N443.32 billion. In 2014, the bank assets berthed at N413.30 billion from N403.63 billion in 2013, having done about N395.7 billion in 2012. The bank had projected to increase asset to N441.02 billion but eventually achieved a total assets N443.32 billion.

However, financial year 2015 performance reflected that the bank is struggling as profit before taxation dropped by about 83%. The bank went through hard time in 2013 with massive non-performing loans. This was the situation apart from the fact that its operational cost was high.

Financial year 2014 smiled on the bank as it returned to profitability after it had declared N22.6 billion loss after tax. This came because of improve business performance in 2014, when gross earnings of the bank jerked up by 23% from N62.8 billion in 2013 to N77.3 billion.

The bank loan and advances grew N219.335 billion in 2014 from N189.04 billion in 2012. In 2013 when the bank declared a loss, it jerked up its loans portfolio to N195.229 billion and it achieved gross earnings of N62.827 billion.

Of this, it turned out a loss after tax of about N34 billion, but the shareholders funds slid to just about half of the value the bank had carried in 2012 to N28.212 billion from N51.457 billion in the corresponding year.

Deposits surged to N277.02 billion in 2014, having somersaulted from N303.27 billion in 2013. Treasury assets portfolio had moved up from N86.615 billion in 2012 to N116.046 billion in 2013.

The bank treasury assets were priced down to N106.852 billion in 2014, probably due to market volatility of portfolio divestment.

The then Managing Director/Chief Executive Officer, Mr. Henry Semenitari, performed a miracle. In 2014, the bank net interest margin soared to 13.4% from 9.5%.

The feat made the bank to lead the pack across the sector. But 2015 washed away the beauty of its numbers as major metrics went south.

The Bank posted gross earnings of N78.8 billion as against N77 billion it had achieved in the corresponding year 2014. Profit after Tax (PAT) dropped massively to N4.6 billion in 2015 as against N10.6 billion in the year 2014.

This seems to be fallout of the implementation of the single treasury account (TSA) which had a very direct impact on the bank operation due to the way its business was structured.

Unity Bank is known as one of the banks that have been in bed with government and especially Rivers State and others have substantial interest in the bank.

Also, the bank performance nosedived partially because its impairment charges rose to all time high with about 60% to N27bn in 2015 as against N17bn in 2014.

The new management of the bank could be resizing and de-risking the bank balance sheet.

Leave a comment

XHTML: You can use these html tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Recent posts

  • Time is ripe for rates cut, says Rewane as inflation slows further in Oct.

    FELIX OLOYEDE This is the appropriate time for the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to cut benchmark monetary rates after inflation rate slows down for the ninth consecutive time in October, said Mr Bismarck Rewane, Managing Director, Financial Derivatives. The National Bureau of Statistics on Tuesday released Consumer Price […]

  • ELAN National Lease Conference Focuses on Revamping Nigerian Economy

    FELIX OLOYEDE In furtherance of its objective of promoting the business of leasing in Nigeria, Equipment Leasing Association of Nigeria (ELAN) has concluded plans to organise the 15th Annual National Lease Conference with focus on revamping the Nigerian economy. The conference which is the biggest gathering of stakeholders in the leasing industry is expected to […]

  • Nigeria-centric restaurant, Labule, opens new outlet in Lagos

    Labule, Nigeria-centric restaurant, operated by an indigenous company, Roots Foods Limited, offering real Nigerian local delicacies in a unique environment that combines the setting of a modern quick service restaurant with that of an African setting of a local ‘buka’, has opened a new outlet on Admiralty Road in Lekki Phase 1, Lagos. The brand […]

  • Nigerian banks shine in Ghana

    By JOHNMARK UKOKO Nigerian banks have been credited with “revolutionizing “the banking sector in Ghana, due to the many innovations they brought to Ghana’s banking sector. The Ghana Deputy Minister of Trade and Investment Hon. Carlos Kingsley Ahenkorah said in Lagos that the innovation and transformation of the Ghana’s banking sector is credited to the […]

  • Ajimobi moves to save Oyo APC from disintegration

    By OLUSESAN LAOYE The seeming crisis in Oyo APC has now forced the Governor of the state, Abiola Ajimobi, to begin consultations with stakeholders to convinced members on why they must come together as a body to face the 2019 general elections, Although the internal crisis is yet to break open as the aggrieved party […]

  • YolaDisCo sale stalled as no potential buyers emerge

    By ADEBAYO OBAJEMU Two years after the core investors of the Yola Electricity Distribution Company, YolaDisCo, declared a force majeure owing to their inability to operate under the reign of terror unleased by Boko Haram, the Federal Government is yet to find any investor interested in operating the utility company, it has been learnt. In […]

  • Company Analysis: Much Ado about Seplat

      By TESLIM SHITA-BEY The oil and gas sector has had a bumpy since the beginning of 2017 with local oil major, Seplat, seeing its financials whipped raw by prior year liabilities despite rising revenues over the nine months (9M). The company in the last two years has moved from being distinctively bad to singularly […]

  • How to start a photography business

    By ZUBAIR DANIE While photography could be accounted for as a full blown course in any offering institution of learning for professionalism, the field equally provides a platform for individuals whose passion it is to project images as a form of livelihood. The socio-cultural aspect of Nigerians that play host of events like: wedding, naming, […]

  • BOFE to celebrate unsung heroes in local communities

    OluwasolaJesuseitan, a brand and advertising expert, is an advocate of sustainable brand communications. He is also the founder, Business Owners Forum Enterprise (BOFE), a non-profit making organization, which seeks to build the capacity of business owners in and around Akute, Ogun State. He tells FELIX OLOYEDE in this interview of his organization is promoting business […]

  • Lager wars: Who wins?

    By JOHNMARK UKOKO Nigeria has many lager beer producing companies, some have been in existence for over 50 years while others are quite new in existence in the country. Some of these companies that have over the years churned out millions, if not billions of bottles of beer to Nigerian drinkers are: Nigeria Breweries Plc, […]

  • Nestle sparkles in Q3 results

    By OKEY ONYENWEAKU As the packaged Consumer goods (PCG) sector struggles to stay ahead of falling consumer demand, companies such as Nestle Nigeria plc are bucking the trend of businesses with shrinking bottom lines. Indeed the multi-product packaged goods producer has seen earnings rise to mind boggling with its pre-tax profit rising by a stunning […]

  • 2018 Budget proposals renew old anxieties

          FELIX OLOYEDE   Mixed reactions trailed the presentation of the 2018 federal government budget by President Muhammadu Buhari to the National Assembly (NASS) last week. Public policy analysts have expressed moods from the congenially positive to the outright incredulous. The staggering N8.6 trillion expenditure plan is one of the most audacious in […]

  • Anambra 2017: Obiano battles for life

    By Obinna Ezugwu The time has finally arrived. On Saturday the people of Anambra State will head to the polls to either renew the mandate of the incumbent state governor, Chief Willie Obiano who is running for a second term in office, or elect fresh hands from among other prominent contenders, including Mr. Oseloka Obaze […]

  • (Editorial) CBN’s BVN distraction and matters arising

    Nigeria’s fiscal and monetary authorities have a frustrating way of responding to the seizure of private assets; they typically gloat with glazed eyes over private citizen’s money ready to pounce on the cash like a pack of hyenas starved witless. The recent order by the Central Bank of Nigeria that customer accounts that are not […]

  • 12 Yoga tips for beginners

    The popularity of yoga has soared in the last decades, and it seems that every other friend and acquaintance of ours is already practicing it. But don’t let it fool you into thinking it is easy: yoga is quite challenging, especially for beginners. The good news is that there are some practical tips to make […]

  • Finally, embattled IGP, Ibrahim Idris, appears before Senate

    The Inspector General of Police, Ibrahim Idris, has arrived before the Senate ad hoc committee set up to investigate the allegations and counter-allegations between him and Senator Isa Misau. The IGP was accompanied by his lawyer, Alex Iziyon (SAN) and Special Assistant to the President on National Assembly Matters (Senate), Senator Ita Enang.   Details […]


Visit us on Google+