BY EMEKA EJERE
The claim last week by an online news medium that the Central Bank of Nigeria (CBN) was planning to nationalise Unity Bank Plc is creating anxiety over the future of the bank, and even the apex bank’s swift denial of same may not have been able to settle raising questions on the minds of many.
The report had claimed that the banking sector regulator’s target examination of Unity Bank showed that the foremost agriculture lender is in ,”grave financial condition”, with Capital Adequacy Ratio (CAR) and Non- Performing Loans (NPL) ratio that breach prudential standards.
However, this does not fall in line with the position of the CBN’s Monetary Policy Committee ( MPC), which just last month noted in the communiqué issued at the end of its meeting that the banking industry is in good health
According to the communiqué, “the Capital Adequacy Ratio (CAR) and the Liquidity Ratio (LR) both remained above their prudential limits at 15.8 and 38.9 per cent, respectively. The Non-Performing Loans (NPLs) at 5.89 per cent in April 2021 showed progressive improvement compared with 6.6 per cent in April 2020.”
Besides, its unaudited Q1, 2021 results submitted to the Nigerian Exchange Group (NGX) recently showed that Unity Bank sustained the growth momentum demonstrated in its 2020 full year earnings as it recorded an impressive performance of 43 per cent in both profit before and after tax.
The remarkable positive growth in profit and other strong indicators recorded in Q1, the bank’s leadership said, is a sign of its growing resilience as the economy continues on a recovery path following the impacts of COVID-19 pandemics.
The retail lender’s profit before tax (PBT) grew by 43 per cent to N784.3million from N550.1 million recorded in the corresponding period of 2020, just as the profit after tax (PAT) for the period, which also grew by 43 per cent stood at N721.5million compared to the N506.1million recorded in Q1 2020.
As an outcome of increased focus on supporting local enterprises and industry, the asset portfolio also showed significant growth in loan book of 76 per cent as net loans and advances to customers increased to N223.2 billion, from N126.6 billion recorded in the corresponding period.
The total assets of the bank for the period showed an appreciable growth of 42 per cent to close at N521.5 billion, from N366.8 billion in the corresponding period of 2020.
Its balance sheet had been considerably de-risked with the non-performing loan (NPL) ratio of near-zero per cent, which it has consistently maintained over time. This has seen the bank rank number one in risk management assessment.
The bank recorded gross earnings of N11.5 billion, representing a marginal decline of three per cent when compared to N11.9billion posted in the corresponding period of 2020.
According to the Managing Director/CEO, Mrs. Tomi Somefun, the result is a promising indication of a better outcome for the year, profoundly reflecting the bank’s renewed focus on driving efficiency and productivity anchored on targeted initiatives to grow both volume and quality of assets.
She noted that the top-line performance was driven by improvement in net interest income margins which reported 16 per cent growth, adding that the bank is replicating the same momentum in the area of liability generation.
“And to gain traction, we are targeting opportunities across regions and identified segments in retail and SMEs whilst optimising our technology and digital platforms”, Somefun said.
A review of the bank audited result for the full-year ended 31 December 2020, as submitted to the NGX had shown that Unity Bank raised its asset value to N492.02 billion, which represents an increase of 67.9 per cent, from the N293.05 billion posted in 2019, even as it posted an impressive earning per share of 17.85 Kobo.
The bank also declared gross earnings of N42.71 billion within the period. Its PAT stood at N2.09 billion, as against N2.22 billion recorded the previous year. The marginal drop in the profit, according to the bank’s executives, resulted from a revaluation loss of N4 billion. The previous year, the cash reserve ratio (CRR) was also raised by the CBN, leaving the banks with huge non-performing assets.
The executive had also noted that the year was defined by the unmitigated impact of the global pandemic, characterised by disruptions in business activities and the general downturn that resulted in revenue/returns dip in major leading sectors globally.
Nevertheless, the lender grew its customers’ deposit portfolio to N356.62 billion, up from N257.69 billion in 2019, representing a 38.4 per cent growth. This affirms the growing positive market uptake of the bank’s product offerings, and its growing customer base.
Its net operating income rose to N25.46 billion from N23.21 billion, an increase of 9.71 per cent. This is even as the net interest income recorded a significant jump, as it rose by 7.6 per cent to N17.75 billion from N16.49 billion in the comparative year.
The bank’s gross loan portfolio increased by 92.9 per cent to N206.2 billion in December 2020 from N106.9 billion in December 2019 with its lending strategy aligned to support the nation’s agric programmes.
Affirming the ‘Bb-’ rating assigned to Unity Bank, which will expire by June 30, 2021, Agusto & Co. stated: “The rating assigned to Unity Bank Plc reflects the bank’s strong retail brand, particularly in the Northern Nigerian states, acceptable asset quality and stable management team.
“However, the rating is constrained by Unity Bank’s negative shareholders’ fund which is below the minimum capital required to operate as a national bank, subpar profitability and the prevailing macroeconomic headwinds in Nigeria heightened by the COVID-19 pandemic.
“Agusto & Co. has attached a stable outlook to the rating of Unity Bank Plc. We will continue to monitor the bank’s performance to reassess the impact of the pandemic on the assigned rating and outlook in the short term.”
Little wonder the Acting Director, Corporate Communications Department, CBN, Osita Nwanisobi, while reacting to the planned nationalisation rumour, described the report as fake news, adding that the public should disregard such news .
“The report is fake news. There is no iota of truth in it,” Nwanisobi said.
Surviving the storm
Unity Bank is the only bank with northern ownership that survived the consolidation programme implemented by former CBN governor Prof. Charles Soludo in 2006.
Again, experts suggest that the bank was spared in 2010 because of northern sentiment when the immediate past CBN governor, Sanusi Lamido Sanusi, carried out a reform that consumed five other banks.
One of the legacy banks that merged as Unity Bank was Bank of the North, a financial icon established by the late northern region premier, Sir Ahmadu Bello and owned by the 19 northern states.
The bank was grasping for breath until a management team led by Henry Semenitari, turned around its fortunes from doldrums. The efforts of Mr. Semeniteri, who became GMD on January 9, 2014, started yielding results that reflected in the bank’s third quarter results, which showed a 900 per cent growth in profit. It consequently declared profit after tax of N10.692billion in its audited results for 2014.
The results had marked the bank’s return to profitability after declaring a loss after tax of N22.582bn in the previous year 2013. The lender made a profit before tax of N13.639bn, compared to a loss before tax of N33.639bn for the year ended December 31, 2013.
However, political issues and leadership instability have often impacted its performance and continuing march to sustainable growth.