Union Bank cuts NPL to 7.8% as PBT remains unchanged

FELIX OLOYEDE

In line with its resolve to reduce the size of its toxic assets, Union Bank successfully trimmed down Non-Performing Loans (NPLs) down to 7.8 per cent in the first three months of the year from 8.7 per cent as at December 2018.

This was on the back of 819 per cent improvement in its loan recoveries with ₦2.8 billion recovered during the period.

The first quarter 2019 financial result of the bank showed that the slow growth in the Nigerian economy impacted its bottom-line as the Profit Before Tax was unchanged at ₦5.4 billion, the same of the amount declared in the same period last year.

Due to a lower loan book base and declining yields in the current interest rate environment, gross earnings was down 5 per cent to ₦37.7 billion, compared to ₦39.5 billion in Q1 2018.

While net interest income after impairment dipped 17 per cent to ₦12.9 billion because lower volume of earning assets, non-interest income grew 39 per cent to ₦10.8 billion (₦7.8 billion in Q1 2018), on the back of the lender’s ongoing debt recovery efforts, improved fees and commission income and dividends from investments.

Meanwhile, net operating income rose 3 per cent to ₦23.9 billion (₦23.3 billion in Q1 2018), operating expenses increased by 4 per cent to ₦18.5 billion (₦17.9 billion in Q1 2018); driven by investments to strengthen workforce and treasury and transaction banking platforms.

Union Bank risk assets was up 5 per cent to ₦494.9 billion (₦473.5 billion Dec 2018) and low cost deposits drove customer deposits up marginally by 1 per cent to ₦867.2 billion (₦857.6 billion Dec 2018).

The lender revealed that it recorded 42 per cent increase in active debit cards when compared to Q1 2018), “highlighting our focus on customer penetration through digital products and channels.”

“Our focus in 2019 is to leverage our platform to deliver efficiency and seek to maximize value across all areas of the Bank,” said Emeka Emuwa, Union Bank CEO.

He noted that the bank is currently employing a multi-pronged approach focused on increasing revenue and optimizing cost to ensure it delivers enhanced performance in 2019.

Joe Mbulu, Chief Financial Officer, explained: “The Group’s resilience in a challenged environment is demonstrated in these first quarter numbers. While Gross Earnings declined by 5 per cent to ₦37.7 billion from ₦39.5 billion in Q1 2018 due to loan book resolutions from the previous year, our Non-Interest Income grew by 39 per cent from ₦7.8 billion to ₦10.8 billion driven by recoveries, credit-related fees and dividends from investments.

“Operating Expenses increased marginally by 4 per cent QoQ, reflecting adjustment to staff compensation to strengthen our workforce; and increased depreciation expenses from technology investments to strengthen our treasury and transaction banking platforms in 2018, in line with our desire to lead in the transaction banking space. With the commencement of our Long-term Efficiency Acceleration Programme (LEAP), we expect to record savings on the expense line in 2019.

“Notwithstanding a challenging macro-economic backdrop, the Group improved Return on Equity to 9.3 per cent from 6.8 per cent as at December 2018.The Bank remains well capitalized with a Capital Adequacy Ratio (CAR) of 16.5 per cent, which provides room to grow quality risk assets as the economy recovers.”