Unity Bank’s retail banking innovations take services to the people

The hallmark of retail banking is supporting local businesses, both large and small. But in order to turn a bank into a retail banking of choice, first you must turn the bank around by getting a management team that is professional and well focused, moving a human resource that is highly motivated into strategic positions. This is because there is a large measure of interface with people.

Then you need to show fantastic results that will raise the confidence of shareholders and the investing public. And crown it all with market presence and penetration through network of well-developed branches.

That is the direction Unity Bank plc is impressively headed, going by the results of its recent postings.

That’s the clear vision of  James Henry Semenitari, managing director/CEO of Unity Bank-Unity Bank, a product of the largest merger of banks in Nigeria’s history – into a retail banking of choice in the country. And clearly, he is edging towards that.

He inherited a bank that was built around the legacy of over relying on public sector funds. But today Semenitari, along with the new management team and a highly motivated staff that the bank’s recent rightsizing exercises produced, is steering the ship away from the troubled waters of public sector funds reliance even before the CBN’s constant hiking of the Cash Reserve Ratio (CRR) began to take its toll on the Nigerian banks.

The bank has been steadily recording impressive growth so far in 2014; posting a 26 percent increase in pre-tax profit in the first quarter of the year and surpassing that performance by the end of the second quarter, posting an 81percent increase in its half year pre-tax profit as well as an 11percent drop in operating expenses.

If we take a closer look at the unaudited account of the bank’s profit per quarters in 2014 so far we see progressive improvements over the first three quarters in comparison to similar periods in 2013. For example, the profit earnings of the bank in first quarter stands at N2.6 million compared to N2.1 million same periods in 2013. The profit in the second quarter got even better it was N7.1 million as opposed to N4.3 same period last year. Incredibly the third quarter result surpassed all the previous quarters put together with the profit standing at N11.05 compared to N1.1 same period in 2013.

Earnings per share have been growing too, rising from N6.95 during the first quarter to N18.49 and N20.76 in the second and third quarters, respectively.

Impressive results heighten investor confidence. And this is what we saw when Unity Bank offered its rights issues early this year that it was over subscribe by almost 5 percent. In the Rights Issue exercise for existing shareholders, Unity Bank put up for sale a total of 38,446,689,710 ordinary shares of 50 kobo each at N.50 per share for every ordinary share held as at March 2014 with the aim of raising a total of N19.2bn as part of a N39.2bn capital raising exercise.  The Bank had carried out the two-part capital raising exercise – a Rights Issue exercise for N19.2bn which ran from May 16 to July 8, 2014, and a special placement through which a further N20 billion was raised.

With the verification exercises by both the CBN and Security and Exchange Commission (SEC) completed, Unity Bank’s capital base has been boosted by additional capital injection of a whopping N39 billion, which the bank aims to utilise in improving its services, especially in the areas of branch development and renovation, Information Technology infrastructure as well as products and channels upgrade and human resource development.

Specifically, the bank intend to spend N2.8 billion (15%) in the next 48 months on branch development; IT upgrade will gulp another N2.8 billion (15%) over the next 36 months and products and channel upgrade will consume N1.8 billion (10%) over a period of 18 months. Human resource development, which is continuous exercise, got 15 percent of pie equivalent to N2.8 billion; corporate communication will receive N0.9 billion (5%) while left for enhancing the bank’s working capital got the largest chunk of N7.4 billion (40%).

As financial intermediaries, banks assume two basic types of risk as they manage the flow of money through their business. The first is interest rate, which entails the management of the spread between interests paid on deposits and those received on loans over time.

Then there is credit risk, which focuses on the likelihood that a borrower will default on a loan or lease, causing the bank to lose any potential interests earned as well as the principal that was loaned to the borrower.

Unity bank has demonstrated ability to manage any of these risks. The profit it made in the first three quarters of the year and the earnings shareholders made are attesting to that, while the bank’s resolute pursuit of loans recovery is a testimony to its ability to reign in the associated credit risks.

The bank is bringing some innovation into its retail banking. According to the head, corporate communications of the bank, Theodora Amaechi, in a presentation in Lagos, “the bank also plans to use the agency banking model and its branches in the rural areas to create cheaper and easier access to financial services as part of the CBN financial inclusion drives. The bank has already concluded plans for application of the model and has selected the agents, who will take the service closer to the people.”

Bashir Ibrahim Hassan