Union Bank reflates earnings, to pay first dividend since 2008

Union Bank of Nigeria Plc has raised earnings performance bar, with gross income coming at ₦159.9 billion, representing a 14% uptick when compare with ₦140.1 billion reported in 2018.

The performance was supported by increased income from interest earnings assets as well as strong contribution made from its non-interest earnings business activities in 2019.

The board of director however proposed to pay 25 kobo ordinary shares dividend. It would be recalled that UBN has not been paying dividend in more than a decade after the CBN intervention.

In its audited financial statement submitted to the Nigerian Stock Exchange, Union Bank profit before tax surged 33% to ₦24.7 billion compare to ₦18.7 billion in FY 2018

The bank reported increase in interest income which jerked up by 11% to ₦116.5 billion compare with ₦104.8 billion in 2018.

Its net interest income before impairment also inched up 1% to ₦51.7 billion as against ₦50.9 billion in 2018.

The audited financial statement also shows that non-interest income expanded 23% to ₦43.3 billion compare to ₦35.3 billion in 2018; driven by growth in fees and commission income as well as recoveries

The bank reported that net operating income surged 6% to ₦95.5 billion compare to ₦89.7 billion in 2018.

Despite an increase in average inflation rate at 11.4% in 2019, operating expenses sloped down 0.4% at ₦70.8 billion when compare with ₦71 billion in 2018; driven by our cost optimization programme.

In line with the CBN requirement on 65% loan to deposit ratio target, UBN expanded its gross loans 20% to ₦595.3 billion from ₦496.8 billion in 2018

The management said this is in line with its drive to create quality risk assets across key economic segments of opportunity.

“The performance demonstrates the impact of some of the key operational and cost saving initiatives that have been implemented to accelerate growth and profitability”, the management remarked.

Going further, the audited result revealed that customer deposits increased 5% to ₦886.3 billion as against ₦844.4 billion in December 2018.

“This reflects the strength of the brand in a very competitive environment for deposits”, the management held.

In 2019, the management recalled that its Project LEAP was introduced in March 2019 to drive cost optimization and ensure optimal operational efficiency.

It revealed that the programme saved the Bank N2.4 billion in recurring expenses helping drive overall cost down notwithstanding double-digit inflation and an increase in nondiscretionary cost.

Commenting on the results, Emeka Emuwa, the Chief Executive Officer said: “The Bank’s strong overall performance has paved the way for a critical milestone.

With the approval of the Central Bank of Nigeria, the Board of Directors will recommend a dividend payment to shareholders for the first time in over a decade, Emuwa stated.

He further stressed that returning value to shareholders has been at the core of Union Bank’s transformation and continuous drive to become a leading financial institution in Nigeria.

Emuwa said: “Core to our earnings has been the conscientious growth of our loan book. The Bank booked ₦98 billion in new loan assets in the course of the year reflecting a 20% growth to close at ₦595.3 billion in Gross Loans.

“As a result of our larger loan book and intensified recovery efforts, non-Interest Income grew by 23% from ₦35.3 billion to ₦43.3 billion in the period with recoveries accounting for ₦8.8bn of the total amount”.

He said, “Consistent with our vision to be Nigeria’s ‘most reliable and trusted banking partner,’ we are optimizing our business model to focus solely on Nigeria where we continue to invest and thrive.

“Consequently, we have made the strategic decision to divest of our UK subsidiary, Union Bank UK which will enable us focus on the distinct long-term opportunities in the Nigerian market.

“The divestment is expected to conclude in 2020 subject to regulatory approvals in Nigeria and the UK. In 2020, we will continue to focus on bottom-line initiatives that will build on our success in 2019.

“We are promoting synergy across our businesses and functions to ensure alignment with and on our strategic objectives”.

Speaking on the 2019 numbers, Chief Financial Officer, Joe Mbulu said: “Our Group numbers reflect the classification of our UK subsidiary as a discontinued operation in line with IFRS 5.

Mbulu added that this is reflected in both 2018 and 2019 numbers.

“We are proud of the top-line and bottom-line numbers the Bank delivered in 2019, owing largely to operational efficiencies and a laser focus on key deliverables.

“Through our LEAP initiative, our focus on discretionary cost discipline led to a reduction of N2.4 billion on related cost lines driving overall expenses down.

“Consequently, our Cost-Income Ratio declined to 74.1% from 79.2% in 2018”, he added.

Meanwhile, UBN total customer deposits grew by 5% to ₦886.3 billion from ₦844.4 billion in 2018 with low-cost deposits up by 7.7% and now accounting for 74% of total customer deposits compared to 71% in 2018.

With our sustained and aggressive focus on recoveries to improve asset quality, we have brought the Bank’s NPL ratio down to 5.8% from 7.8% in 2018, in line with our 2019 guidance, the management said.

Capital Adequacy Ratio (CAR) remains well above the regulatory threshold at 19.7%.

“We will leverage our improved risk asset and capital base as we continue to rebuild our loan portfolio which we expect to be a significant driver of growth in 2020”, the management stated

Union Bank reflates earnings, to pay first dividend since 2008