Banks modest half year resultsh ighlight recession challenges

FELIX OLOYEDE|

Half year 2017 profits for local banks have reflected the slow growth of the broad economy, as profit figures for many of the money lenders have been mooted. A slew of banks published their half year (H1) unaudited financials in the course of the previous week with clear indications that the economic slowdown continues to weigh heavily on their performance. This has given credence to the Central Bank of Nigeria’s (CBN’s) recent warning that economy was fragile. Only a few banks appear to have pushed against recessionary headwinds.

Union Bank grow its profit 5%
Union Bank was able to faintly weather the economic slowdown to increase profit-after-tax (PAT) by 5 per cent to N9.2 billion in H1 2017 from N8.8 billion in the same period last year, riding on the back of a 23 per cent growth in revenue to N73.7 billion against N60.1 billion H1 2016.
The bank’s net interest income after impairment was N26.3 billion, 19 per cent higher than N22.2 billion it recorded in the corresponding period in the preceding year, due to 39 per cent reduction in impairment charges. The lender succeeded in cutting its impairment charges to N5.3 billion in H1 2017 from N8.7 billion in the first six months of last year.
But the non-interest income of the second oldest commercial lender in the country dipped 2 per cent to ₦15.4 billion compared to ₦15.7billion in H1 2016 as a result of -5.86 per cent decline in credit related fees and commissions income to N3.1 billion (H1 2016: N3.3 billion) and whopping -83.16 per cent drop in E-business fee income to N290 million (H1 2016: N290 million).
Mr. Emeka Emuwa, Chief Executive Officer, Union Bank said: “with the launch of our ₦50 billion Rights Issue in the second half of the year, 2017 it will remain a very busy year for the Bank. In the second half of the year, our focus will centre on our Rights Issue launch; we will remain nimble to take advantage of emerging opportunities while improving on service delivery.”
On her part, Mrs. Oyinkan Adewale, Chief Financial Officer of the bank said: “Improved foreign exchange availability enabled us to bring our foreign currency loan book down to 44 per cent of total loans, from 50 per cent at the end of 2016. Going into H2 2017, we will focus on optimizing funding costs and continue to keep operating expenses in check, while applying sound risk management practices to minimize impairment costs to ensure we deliver a sustainable financial performance.”
Union Bank risk assets declined loans -5.83 per cent to N447.6 billion in H1 2017 over N507.2 billion in the corresponding period, because of higher impairment provisions of N33.4 billion it made (H1 2016: N28.6 billion). Customer deposits was up 15 per cent to ₦759.3billion (₦658.4bn Dec 2016), which affirms the growing customersconfidence in the bank.
But its total assets grew 5.78 per cent to N1.33 trillion in the first half of the year compared to N1.25 trillion in the same period last year and the bank’s total liabilities also went up 6.35 per cent to N1.04 trillion (H1 2016: N981.01 billion).

Securities trading loss drags Sterling Bank’s PAT down
Sterling Bank Plc’s loss in securities trading, decline in net fees and commissions and higher impairment charges tainted its financial performance in H1 2017 as its profit-after-tax spiraled down by 6.17 per cent to N3.77 billion from N4.02 billion in the same period last year.
The bank declared a N2.26 billion loss in net trading income compared to N1.73 billion it posted in H1 2016 due to a N3.47 billion loss in securities trading activities (H1 2016: N88 million) and revenue from foreign exchange trading, which slumped by 26.32 per cent to N1.21 billion against N1.65 billion in the corresponding period in 2016. But other trading income ballooned 343.6 per cent to N3.43 billion (H1 2016: N773 million), bringing operating income to N34.06 billion, -0.24 per cent lower than N34.15 billion earned at this same time last year.
Sterling Bank’s interest income was, however, up 19.87 per cent to N49.8 billion in the first six months of this year (H1 2016: N41.54 billion) and interest expense likewise rose by 43.36 per cent to N22.81 billion from N15.91 billion in H1 2016. Impairment on credit losses of N4.08 billion was also higher 11.35 per cent than N3.67 billion provided in the relating period last year.
And to avoid further decline in its bottom-line, the lender reduced its total expenses marginally by 1.62 per cent to N25.68 billion by pruning contract service 1.29 per cent to N2 billion, net forex loss -34.37 percent to N800 million and net securities trading loss by N144 million.

Unity Bank PAT declines 11%
The crippling economy took its toll on the books and operations of Unity Bank Plc in the first half of the year as its profit-after-tax (PAT) went down-10.94 per cent to N2.1 billion compared to N2.35 billion in H1 2016 due to -3.27 per cent drop net fee and commission income to N777.91 million and -6.73 per cent reduction in net trading income to N849.16 million.
Although the bank earned more revenue during this period with its gross income rising 7.29 per cent to N42.35 billion (H1 2016: N39.48 billion), as a result of a 31.67 per cent growth in interest and similar income to N41.05 billion, this was, however, swallowed by a 180.31 per cent surge in interest and similar expenses.
The lender was also badly hit by the massive N891.17 million loss it recorded in forex revaluation income (H1 2016: N56.22 million) and -91.34 per cent drop in other income like dividend, recoveries, gains from sale of financial investments and e-banking to N523.15 million from N7.49 billion in H1 2016.
Unity Bank financial performance would have been worse had it not succeeded in cutting its total expenses -6.93 per cent to N12.2 billion and trimming down impairment on bad loans by -37.05 per cent to N11.23 billion (H1 2016: 17.83 billion) in the first half of the year.

FCMB profit wanes massively
Things went awry for First City Monument Bank (FCMB) over the first two quarters of 2017 as growing stability in the Nigerian foreign exchange market caused it to post a huge decline in forex gains resulting in a -80.73 per cent drop in profit-after-tax to N3.02 billion in H1 2017 in contrast to the N15.67 billion posted in the same period of the preceding year.
The bank’s gross income declined -12.2 per cent to N77.51 billion in H1 2017 (H1 2016: N88.28 billion) occasioned by -96.7 per cent decreased in forex gains to N603.84 million from N18.28 billion in H1 2016. Even the whopping the 306.4 per cent increase recorded in net trading income to N1.36 billion and N13. 1 billion earned asnet income from other financial instruments at fair value was not sufficient to prevent the lender’s PAT from going southward.
It spent N29.86 billion as interest expense, which was 24.37 per cent more than it expended in the first half of 2016 to generate N62.35 billion interest income, 2.98 per cent higher than what it earned in the relative period last year. The N7.05 billion fee and commission income it posted was also 2.24 per cent better that of similar period in 2016.
FCMB devised some means of reducing costs as it cut impairment down by -26.07 per cent to N9.97 billion and personnel expenses (H1 2017: N11.51 billion) and other operating expenses (H1 2017: N5.33 billion) by -9.79 per cent and -2.36 per cent respectively.

Jaiz Bank profit grows 312%
Islamic bank, Jaiz Bank seemed to cruise powerfully along the business space in 2017 as increases in financing transaction income, income from Sukuk and fees and commissions pushed up its profit-after-tax by 312.31 per cent to N470.19 million in H1 2017 as against N114.04 million in the corresponding period of the previous year.

The bank’s total income rose by 45.7 per cent to N3.08 billion on the occasion of 19.82 per cent rise in financing transaction income to N2.95 billion (H1 2016: N2.46 billion) and 198.27 per cent increase in income from Sukuk to N293.35 million compared to N98.35 million in H1 2016. It also recorded significant growth in fee and commission income, which rose 217.56 per cent to N590.38 million during this period.
As Jaiz Bank profitability improved, consequently, its impairment provision leaped 167.73 per cent to N170 million (H1 2016: N63.5 million). It also incurred more costs, which went up 30.5 per cent to N2.61 billion.

Diamond Bank posts marginal profit growth
Diamond Bank grew PAT 2.97 per cent to N9.32 billion in the first half of this year as a result of 31.46 per cent increase in interest and similar income to N89.08 billion from N67.76 billion in H1 2016. Fee and commission income also appreciated marginally 2.55 per cent to N21.64 billion.
Significant cent decline in net trading income by -63.88 per (H1 2017: N2.8 billion vs N7.76 billion H1 2016)and -77.78 per cent drop other income (H1 2017: N309.26 millionvs N1.4 billion H1 206) slowed the lender’s profitability.