Union Bank H1 2020 Profit Dips On Reduced Interest Earning

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Union Bank, one of Nigeria’s longest-standing and most respected financial institutions, announces its unaudited financial statements for the quarter
ended June 30, 2020.

Analysis of the result revealed a 9 percent decline in Profit After Tax to N10.9 billion in June 2020 from N11.7 billion in June 2019 was a result of a 14 percent drop in Net Interest Income from N28 billion in H1 2019 to N24 billion in H1 2020.

All other fundamentals, however, looks good for one of Nigeria’s oldest financial institution as the 6 percent rise in Earning Asset ensured a 10 percent growth in Gross Earning and 6 percent growth in Interest Income.

The bank was also able to maintain a flat Year-on-Year Operating Expenses and significant growth in its Balance Sheet size despite Inflationary pressure and the impact of the Covid-19 pandemic.

Income Statement

  • Gross earnings up 8% Year-on-Year (YonY) to N81.9bn from N76.0bn in H1 2019.
  • Net-interest income down 14% YonY to N24.0bn from N28.0 bn in H1 2019.
  • Non-interest income up 24% YonY to N22.7bn from N18.3bn in H1 2019.
  • Operating income flat YonY at N46.5bn from N46.3bn in H1 2019.
  • Operating expenses flat YonY at N35.4bn from N35.5bn in H1 2019
  • The net Impairment charge for credit gain of N4.2 billion as against a loss of N4.5 billion in H1 2019.
  • Profit Before Tax down 7% YonY to N11.3 billion from N12.1 billion
  • Profit After Tax for the period also down 9% YonY to N10.9 billion from N11.7 billion
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Statement of Financial Position

  • Total Assets up 22% year to date (ytd) to N2.21 trillion from N1.87 trillion in Dec 2019
  • Loans and Advances to customers up 6% Ytd to N630.5bn from N595.3bn in Dec 2019
  • Deposits from customers up 12% to N995.2bn from N886.3bn in Dec 2019
  • Total equity up 2% Ytd to NGN 258.2 billion from N252.3 billion

Commenting on the results, Emeka Emuwa, CEO said: “The impact of COVID-19 and associated movement restrictions on the Bank and the
wider economy has been broad. The total lockdown of major commercial centers Lagos, Abuja, and Ogun and partial lockdowns across the country, slowed business operations in Q2 2020.

Notwithstanding these significant headwinds, the Bank delivered a 10% increase in its top-line revenue of ₦79.9bn for H1 2020. In addition, net interest income before impairments is up 21% to N28.0bn and non-interest income up 22% to ₦22.7bn.

The slowdown limited growth in key income lines including fees and commissions and cash recoveries. However, we continue to reinforce the use of our digital channels with 90% of transactions completed digitally in H1 2020 (vs. 57% in H1 2019), which translated to a 42% growth in e-business fees from ₦2.5bn in H1 2019 to ₦3.6bn in H1 2020.

We deliberately grew our loan portfolio both in the retail and commercial/corporate banking space resulting in a 6% growth in interest income.

Given the constrained operating environment, we continue to proactively monitor our loan portfolio and support our customers in line with the Central Bank’s guidance on forbearances. Nevertheless, growing our loan book remains a strategic focus area for us for the rest of the year as we continue to identify new opportunities emerging in the face of the pandemic.

“I am pleased that the Bank has been able to support our employees, customers, and the wider community through the ongoing COVID-19 crisis. In particular, the UnionRiseChallenge which we launched in June, recognized and rewarded customers who in spite of the Covid-19 pandemic are rising to support their communities. The Bank awarded ₦15 million to 90 recipients over a period of 4 weeks and helped amplify the great work of over 1500 community initiatives that were submitted through the campaign.

As we navigate the realities of the pandemic for the remainder of the year, we will continue to focus on increasing transaction volumes on our electronic channels, managing cost, and strategic targeting of key customer segments to ensure we end the year well.

We will also continue to prioritize the health and safety of our employees and customers while finding innovative ways to meet and exceed our customer expectations.”

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Speaking on the H1 2020 numbers, Chief Financial Officer, Joe Mbulu said:
Our H1-2020 Bank numbers reflect the performance of our continuing operations for the period. Notwithstanding increasing inflation and unexpected costs related to the changes to our operating structures during COVID-19 lockdown, we have been able to keep operating expenses under control during H1 2020.

This is indicative of the strength of our Long-Term Efficiency Acceleration Programme (LEAP) which continues to optimize key cost lines. The continued expansion in the loan book led to enhanced interest income while lower interest rates enabled a reduction in interest expense.

We also grew customer deposits by 12% to ₦995.2bn from ₦886.4bn in December 2019 as a result of increased customer demand for our banking products and the continued positive perception of our brand. We continue to deliberately expand our loan book with a focus on key industry segments.

As impairments began to rise as a result of COVID-19 disruptions, the NPL ratio ticked up marginally to 6.3%, compared to 5.8% in December 2019, while our Capital Adequacy Ratio is at 19.2%, remaining well above the regulatory threshold.

We remain focused on achieving our 2020 objectives leveraging our solid risk management structures and executing our business priorities.


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