Union Bank’s profit surges 600.26% on reduced impairment charge

Union Bank plc 2014 full-year profit surged 600.28 percent, thanks to a remarkable reduction in impairment charge and the Nigerian lender’s ability to increase income from other activities to boost its bottomline.

This is a milestone for a bank that has been undergoing restructuring since the banking crisis of 2009.

It also means the lender is in a position to give high returns to its shareholders.

For the year ended December 2014, the bank’s net income surged by 600.26 percent to N26.82 billion from N3.83 billion in the same period of the corresponding year 2013.

The strong growth in profit can be attributed to a 60.05 percent reduction in net impairment charge for credit losses and a 133.45 spike in other operating income to N31.75 billion in 2014 from N13.60 billion in the earlier period.

The bank is also using the resources of owners to generate high profit as return on average equity (ROAE) increased to 12.72 percent in 2014 from 2.02 percent, as of December 2013.

Earnings per share increased to 151k in the period under review as against 37k in 2013.

The bank is efficient amid regulatory induced costs and reduction in COT by the Central Bank of Nigeria as it cost-to-income ratio reduced to 68.51 percent in 2014 from 91.67 percent in 2013.

It would be recalled that the Abuja-based apex bank reduced COT charges from N3/mille in 2013 to N2/mille in 2014, a policy that has been crimping the growth potentials of lenders in Africa largest economy, Nigeria.

However, net interest expense increased by 3.13 percent to N24.37 billion in 2014 compared with N23.57 billion in 2013.

The high interest expense is a reflection of the higher interest rate environment driven by increased cash reserve requirements on public and private sector deposits, heighted competition for deposits among financial institutions as well as monetary policy rate (MPR) review in the last quarter of the year from 12 percent to 13 percent.

The bank’s interest income reduced by 8.20 percent to N76.19 billion in 2014 compared with N80.86 billion the same period of the corresponding year 2014.

Loans and advances to customers rose by 14.20 percent to N312.97 billion in 2014 from N229.54 billion in 2013, while deposits from customers increased by 9.30 percent to N527.61 billion.

Loans-to-deposit ratio moved to 59.28 percent in 2014 as against 47.50 percent in 2013, which means the lender is increasingly aggressive about lending. Total assets remained flattish at N1 trillion.

Its share price closed at N11.20 on the floor of the exchange, while market capital was N186.30 billion.

 

BALA AUGIE