In what seems to be a glimpse of the effect of the prolonged bearish capital market on investment banks in the country, United Capital Plc at the weekend announced a 17 percent decline in revenue in the first half of 2019. The Nigerian capital market defiled all the projections about the much anticipated post election rally with the highly capitalised stocks shedding significant amounts from their market capitalisation. The All Share Index of the NSE ended last week at 27,919.50 points representing -11.17 percent year to date decline in the overall market activities. Save for the admission of the shares of MTN Nigeria and Airtel, the bond market capitalisation would have outstripped that of the equity market capitalisation, thus indicating the extent of beating equities have received year to date.
United Capital’s gross earnings fell to N3.24 billion at half year 2019 as against N3.88 billion in corresponding period in 2018. Investment income, fee and commission income as well as the trading income were all affected. Investment income, generated mainly from fixed deposits and investment securities fell by 5 percent to N1.69 billion at half year 2019 compared with N1.77 billion in corresponding period in 2018.
Fees and commission income realised from advisory services and other charges fell by 17 percent to N772.32 million in contrast to N930.34 million in similar period in 2018. The company realised just N52 million as net trading income compared with N121.2 million same period last year. Other income declined by 45 percent to N419.9 million down from N758.5 million in similar period in 2018.
Meanwhile, there is much hope on the horizon. This is because the decline seen in United Capital’s top and bottom lines happened mainly in the first quarter of this year, when the election risks made many investors and firms to scale down operations. Strategic initiatives introduced by the company’s management led to improvement across board in the second quarter of 2019.
“We did deliver on our promise to improve performance in Q2 2019 and as can be gleaned from our numbers, we had a good outing in the quarter under review as Q2 profit before tax grew by 27% year on year on the back of reduction in operating expense which was the result of the various strategic initiatives that we embarked on in the last quarter, which was to reduce and increase our top line as a way of furthering our efficiency drive. Unarguably, the global economy is still recovering from the lingering contagion effect of the US-China trade war and the Brexit saga”, Peter Ashade, group CEO said.
“We are going into the second half of 2019 stronger and with an improved strategy aimed at preserving and increasing shareholders’ wealth as evident from the 3% increase in the latter during the period under review. We would like to inform shareholders that we are poised and resolute on our promise to deliver an even improved result come Q3 2019”, Ashade added.
TELIAT SULE
