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Union Bank battles harsh economic environment to grow

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Union bank: Perennial crisis, regulatory interventions stymie growth

In the height of its glory, Nigeria’s second-oldest Deposit Money Bank (DMB), Union Bank of Nigeria (UBN) bestrode the nation’s financial landscape like a colossus. From retail and corporate banking, to wealth and assets management, the bank offered diverse services to its esteemed customers and was many Nigerians first point of call.

Its influence spreads across every sector: manufacturing, education, health, construction, procurement, real estate and many others, serving as a pillar of stability to Nigerian entities and individuals, including the national and subnational governments, public servants, traders, businessmen, contractors, students and corporate firms. But its current fortunes does not justify the pedigree that depicted its Stallion symbol. – Big, Strong and Reliable.

UBN has a rich history. Established in 1917 as Colonial Bank, it re-branded to Barclays Bank DCO (Dominion, Colonial and Overseas) after its acquisition by Barclays Bank of London in 1925. It immediately challenged the dominance of its precursor, First Bank of Nigeria (FBN), the Standard Bank, which had berthed in the country twenty three years earlier.

Following the enactment of the Companies Act of 1968 by the regime of former military head of state, Gen. Yakubu Gowon (retd), the bank was incorporated as Barclays Bank of Nigeria Limited in 1969, thus becoming a Nigerian bank, though still controlled from the United Kingdom.

UBN went through a series of changes from 1971 to 1979, including its listing on the Nigerian Stock Exchange (NSE) after it was nationalized by the then military government and its shares acquired by the Federal Government under the Nigerian Enterprises Promotion Acts (1972 and 1977). As a result of this, the bank became a wholly Nigerian-owned institution, severing all ties with the Barclays Bank of London.

Shortly after, Barclays Bank of Nigeria Limited assumed the name Union Bank of Nigeria (UBN) to reflect the new ownership structure in compliance with the Companies and Allied Matters Act of 1977.

In the year 1993, UBN because a public liability company in line with the privatisation policy of the Federal Government, which divested its controlling shares (51.67%) in the bank and others to private investors.

However, despite its initial successes, especially from 1960 to early 90s, UBN has not been able to sustain its performance streak, struggling to catch up with its peers in the banking industry.

Union bank: Perennial crisis, regulatory interventions stymie growth

Top 10 banks with the biggest assets base

Not only has Union Bank fallen far behind its surviving contemporaries, First Bank of Nigeria Plc and United Bank for Africa (formerly British and French Bank for Commerce and Industry), it is also playing catch-up to second generation banks like Access Bank, Zenith Bank and Guarantee Trust Bank Plc (GTCO).

ASSETS BASE/BRANCH NETWORK

Using performance and strength indices like total assets base, branch network and loans to deposits rate, among others, Union Bank’s current exploit is underwhelming, compared to the feat achieved by latter days financial institutions like GTBank, Zenith and Access, Fidelity, Stanbic IBTC and First City Monument Bank (FCMB).

According to Business Hallmark’s analysis of the financial reports of the 25 interest-charging DMBs with international, national and regional authorizations as of December 31st, 2023, Union Bank is in dismal 10th position based on total assets value and branch network.

The 26 banks have a collective asset value of around N150 trillion, while the 10 biggest banks have 3,170 branches, eBranches and Quick Service Points (QSPs) combined.
Notably, Access Bank Plc, a bank established in May 1989 (72 years after UBN’s birth), came first with an asset size of about N32.57 trillion and 737 branches, followed in second place by UBA (established 1949) with N25.37 trillion assets size and 451 branches.

In third position is Zenith Bank (established May 1990) with N24.28 trillion assets size and 447 branches; 4th position First Bank of Nigeria (established 1894) with N16.90 trillion assets size, 595 branches and 144 Quick Service Points (QSPs); 5th position Ecobank Nigeria (established October 1986) N10.37 trillion assets size and 273 branches and in 6th position GTBank (established 1990) N8.79 trillion assets size (GTCO Holding N13 trillion), 237 branches and 33 eBranches.

Fidelity Bank, incorporated in 1988 with a merchant banking license, before its conversion to a commercial bank in 1999, ranks as the 7th largest bank in Nigeria in terms of assets with a total size of N6.23 trillion and 249 branches;
It is followed in 8th by Stanbic IBTC Bank (established February 1989), which boasts a total asset size of N4.974 trillion and 130 branches across Nigeria.

In 9th position is FCMB, established in 1982 by Otunba Subomi Balogun, with N3.78 trillion total asset size and 203 branches.
Coming last in 10th is Union bank with N3.65 trillion asset size and 258 branches/cash centres.

Union bank: Perennial crisis, regulatory interventions stymie growth

Nigerian banks and their capital base

Some analysts, who spoke on the performance of UBN using the two indices (assets and branch networks), agreed that UBN should rather be competing with the likes of GTB, UBA, Zenith and Access Banks.
“How can you explain relatively newer banks like Fidelity and FCMB doing better than UBN? This means that there is a systemic problem in the bank that is not being addressed”, declared a stakeholder in the financial sector, who did not want to be identified.

CUSTOMER BASE

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Industry leaders like Access, Zenith, GTCO, Ecobank have also done a better job in their drive for customers than UBN, according to BH findings. Based on information mined from the bank’s website, UBN currently has 7.8 million customers.

However, when compared to other leading banks like GTBank, Zenith and Access, the figure is paltry. For instance, three of the leading banks that were established more than five decades after Union Bank’s, GTBank, Zenith and Access Banks have 48 million, 32 million and 52 million customers respectively at the end of 2023.

Likewise, UBN is far behind its older contemporary, First Bank, which currently has over 41 million customers, as well as Ecobank, which has 28 million customers, FCMB 11.4million customers and Fidelity Bank with 8.5 million customers.

During a visit to some of UBN’s branches scattered across the country, BH observed that most of its customers are long time and elderly customers, especially, retirees, civil servants, traders and businessmen, who have been banking with it for over 40 years.

A 73-year-old retiree, who is a customer of UBN, Madam Ilerioluwa Awopetu, while speaking to our correspondent at the Fagba, Iju Road branch of the bank, disclosed that she has been banking with it since 1981, when she secured employment with the Federal Ministry of Works.

“I had to open a bank account as a precondition for receiving my salary. By that time, we only have banks like International Bank for West Africa (IBWA), which later transformed to Afribank, African Continental Bank (ACB), National Bank of Nigeria (NBN), First Bank of Nigeria, Wema Bank, Savannah Bank, Union Bank and many others.

“We were given the option of either picking FBN or UBN and I picked Union Bank owing to its pedigree and close proximity to my house.

“I retired 13 years ago at the age of 60 and have been collecting my monthly pension in the bank since. I have not had any regret. So, why would I change bank?

“We all know what happened to banks like Oceanic, Intercontinental and BankPHB. So, you want me to go and put all my life savings in all these new banks owned by unpredictable individuals?”, she fired back at our correspondent, when asked why she still patronize Union Bank.

DEPOSITS

Union Bank also extended its poor run in the area of customers deposit at the end of December 2023 business operations.
According to BH’s analysis, customers’ deposit in the top 10 DMBs rose 66 percent Year-on-Year (YoY) to N76.04 trillion at the end of December 2023, from N45.81 trillion at the end of December 2022.

However, Union Bank missed out on the list of first 10 banks with the highest deposits in 2023, with Zenith Bank in 1st position, Access Bank in 2nd, FBN Holdings 3rd, UBA 4th, GTCo 5th, Fidelity Bank 6th, Wema Bank 7th, Sterling Bank 8th, Stanbic IBTC Holdings Plc 9th and FCMB in 10th position.

Further breakdown of the reports showed that UBA recorded the highest growth of 90.3 percent to N14.89 trillion against N7.83 trillion it recorded in 2022, followed by Zenith Bank Plc, which recorded a 69 percent increase to N15.17 trillion from N8.98 trillion.
In third position is Access Bank with 65.6 percent deposit growth of N15.32 trillion compared to N9.25 trillion in 2022.

Others are Stanbic IBTC Holdings, which came 4th with 65.5 percent increase to N2.07 trillion from N1.25 trillion; GTBank emerged 5th with 65.2 percent deposit growth to N7.41 trillion from N4.49 trillion in the corresponding period in 2022.

In 6th, 7th, 8th, 9th and 10th positions respectively are Wema Bank, which grew its customer deposits to N1.87 trillion from N1.67trillion (60.2%); FCMB from N1.95 trillion to N3.09 trillion (58.9%); Fidelity Bank’s deposits grew 55.5% to N4.02 trillion from N2.58; FBN Holding Plc by 52.6 percent to N10.87 trillion, and Sterling Bank by 9.4 percent to N1.33 trillion respectively.
Speaking on the development, a financial analyst, Debo Williams, said the trend showed depositors’ confidence in the 10 banks that came top.

“It is normal for customers to always look for the safest hands to keep their funds. It shows that the banks are either doing enough marketing to drive traffic, or depositors believe they are the best hands to keep and manage their hard-earned savings”, Williams noted.

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TROUBLES

According to BH findings, one of the troubles hindering the progress of Union Bank is its fluid ownership structure.

Unlike most second generation banks, where single individuals and corporate entities largely own the controlling shares, Union Bank, before Titan Trust’s takeover, was owned and controlled by several shareholders, who come together to run the affairs of the bank.

“As a result, the bank had been contending with boardroom squabbles and leadership crisis as almost equal shareholders often team up with smaller investors to effect a change in ownership.

“The persistent leadership crisis has had negative impacts on the bank, unlike in banks like FCMB, UBA, Fidelity and Stanbic IBTC, whose controlling shares are held by a few individuals and corporate organisation.
BH had in a report published in May 2011 titled: “The Rape of Union Bank”, exposed how in-fighting in the executive management team of the bank over the succession of the then MD/CEO, Bartholomew Ebong, whose tenure was extended by the Central Bank of Nigeria (CBN), was exploited by some powerful forces to take over the bank.

According to the BH report, by the time Sanusi Lamido Sanusi was appointed governor of the CBN in August 2009, Union Bank was a very financially sound institution.
“Its only problem had to do with in-fighting in the executive management team over the succession of the MD/CEO, Bartholomew Ebong, whose tenure had been extended by the CBN.

“The only other problem the bank faced was business development; how to grow its business by re-engineering its processes and operational systems.

“In order to achieve that, the bank had retained the management company, Accenture, which embarked on a comprehensive review of the bank’s processes.

“But the CBN thought differently. In its statement announcing the sacking of the Executive Management, it alleged that “Union Bank of Nigeria Plc is in dire need of capital. The issued and paid up capital of the Union Bank of Nigeria Plc has been lost, Union Bank of Nigeria Plc has insufficient capital to cover its liabilities.

“It has therefore become imperative to take urgent action in order to arrest the deteriorating state of Union Bank of Nigeria Plc, save the bank from failure, and pave the way for the repositioning of the bank for its stability and growth”, BH had reported.
The newspaper further added that an exhaustive investigations it carried out revealed that the CBN’s position was not correct, but was based on a patently false evaluation of the bank’s financials.

A former director of the bank had told BH back in 2011 that the apex bank merely read the bank’s financials in manner that would enable it arrive at a predetermined position that “Union Bank of Nigeria Plc was financially distressed, so as to take it over”.

The rescue team headed by Mrs Funke Osibodu, supported by the Assets Management Company of Nigeria (AMCON), subsequently sold UBN to Union Global Partners Limited and Atlas Mara Limited, rumoured to be owned by powerful Nigerians.

Rather than abating, the crisis rocking the bank exacerbated. In December 2021, the board of UBN announced that its core investors have sold 89 per cent of their shareholding in the bank to Titan Trust Bank (TTB) Limited in an off-market deal worth N191 billion. The new owners immediately bought off the bank’s minority shareholders and proceeded to delist the financial institution on the NGX.

Hardly had the euphoria that followed the transfer of ownership died down that the CBN again wielded the big stick
In December 2023, a Special Investigator appointed by President Bola Tinubu in July 2023 to probe the CBN, Jim Obazee,reported that a former governor of the bank, Godwin Emefiele used ill-gotten wealth to set up Titan Trust Bank, which he, in turn, used to acquire Union Bank and Keystone Bank through proxies.

The document noted that two Dubai-based firms namely Magna International DMCC and Luxis International DMCC, owned by Vink Corporation Middle East FZC, were used as proxies by Emefiele to establish Titan Trust Bank.

The special investigator added that it discovered that the two entities have no physical presence in Dubai as claimed after requesting the Nigerian embassy in the UAE to verify their locations and corporate status.
Acting on the report, the CBN in January 2024, sacked the board of directors governing Union Bank and two others.

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Experts told BH that the embattled bank will likely be sold to another buyer at the end of the day.

“I don’t expect Titan Trust Bank Limited, which is rumored to be fronting for Emefiele, to retain the bank at the end of the house cleaning exercise.

“It is surely going to be acquired by another group of investors fronting for forces interested in the bank. I am so sure of that”, a source in the banking industry told BH.
The CBN’s move is expected to further throw the bank into turmoil, preventing it from catching up with its peers in the race for customers funds.

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