Union Bank’s lethargy to be expunged by Atlas Mara  

Union Bank of Nigeria Plc (UBN), which recently announced plans to raise N50 billion through rights issue, will see its efforts stimulated with N16.8 billion ($50mn) from London-based Atlas Mara that currently owns 31.10 per cent of the Nigerian Lender.

UBN is a first-generation Nigerian Bank which has failed to rise to the challenge of a new banking regime fostered by a regulatory-induced consolidation in 2005. The bank’s old generation peers, First Bank Nigeria (FBN) and United Bank for Africa Plc (UBA), have since the consolidation moved on to become top five biggest Nigeria lenders by asset size in the tier-1 category.

The bank is currently a mid-sized bank valued at N97.51 billion as at June 19 2017. FBN and UBA were valued at N235.11 billion and N317.45 billion as at the same date.

“The bank refused to move from the old system it was used to before the rave of new generation banks came,” said a banking equity analyst in a leading stockbroking firm based in Lagos. “The bank has a strong (staff) union that has held the bank hostage”

Union Bank traded at 64 per cent discount to book value for three consecutive days as at Wednesday and has been the worst performing bank in 2016, pummelled by a recession which hit Africa’s biggest economy for the first time in 25 years.

Analysts say that the lender, just as other lenders in Africa’s biggest oil producer, is cheaply priced, presenting allure for foreign investors seeking huge returns on investment. Atlas Mara is one of the investors that seek to cash in on the banks’ cheap valuation to maximise their wealth, a judgement which shareholders of UK investment firm endorse.

“Atlas Mara represents a unique opportunity to invest in many profitable banks in the region at a very attractive valuation,” said a major investor in Atlas Mara. “Banks are at the forefront of economic development in sub-Saharan Africa.”

With the fresh capital injection, Atlas Mara will now control 44.50 per cent of UBN shares and seek to make major strategic and operational changes that will position the bank on the path of improved performance.

UBN’s group audited financial statements for the year ended December 31 2016 showed that earnings dropped 12 per cent to N15.9 billion.  Bad loans, represented by credit impairments loans spiked to N16.5 billion, 67 per cent from the 2015 levels.

A series of measures to raise the bank’s performance started in 2012 with the appointment of Emeka Emuwa, the former Citibank’s chief executive officer, as the group managing director. The bank’s new chief has since introduced new banking products and innovative channels to boost its competitive capacity, and hopes to use the fresh funds to accelerate the bank’s turnaround.

“While the operating environment remains a challenge, we are focused on our 2017 priorities which include raising Tier 1 capital to execute our growth agenda across our retail, commercial and corporate businesses, particularly transaction banking and value chain.”

This story was originally published in the BusinessDay edition of June 23 2017, omitting key some figures; it is now republished with the omitted figures.

 

 INNOCENT UNAH