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Explainer: what to know about Fidelity Bank’s Union bank UK acquisition

Fidelity Bank, LBS partner to support CBN’s export initiative

Fidelity Bank Plc. recently announced its acquisition of 100 percent equity stake in Union Bank UK (UBUK) Plc, which is in line with its short to medium term aspirations and international expansion drive.

The transaction according to Nneka Onyeali-Ikpe, managing director/CEO, Fidelity Bank, aligns with the bank’s strategic plan of expanding its service touchpoints beyond the Nigerian market and providing straight-through services that meet and exceed the needs of Fidelity Bank’s growing clients.

Prior to the acquisition announcement, the bank has maintained a steady growth, growing from a tier two bank to now a tier one lender with capital adequacy ratio of 19.8 percent in the first half of 2022.

Stanley Amuchie, executive director, chief operations and information officer of the bank, during a media chat in Lagos, said the bank ranks among the top six banks in Nigeria across different indices including total assets, deposits and loans.

In its half year (H1 2022) financial results, the bank grew total deposits by 13.1 percent Year-To-Date (YTD) to N2,290.1bn from N2,024.8bn in 2021FY, driven by double-digit growth in low-cost deposits. Low-cost deposits increased by 26.1 percent YTD to N1,902.4bn and now represents 83.1 percent of total deposits from 74.5 percent in 2021FY, which explains the drop in funding cost.

“We are delighted with our H1 2022 performance which showed strong growth across key performance indices. With improved efficiency and customer experience around our network, customer transactions have grown considerably as we optimize our balance sheet and build up a large stock of stable low-cost deposits”, said Onyeali-Ikpe.

The bank’s gross earnings increased by 37.9 percent YoY to N154.8bn on account of 52.9 percent growth in interest income to N136.2bn from N89.1bn in H1 2021. The increase in Interest Income was driven by improved yield on earnings assets and 14.9 percent YTD expansion in earnings base to N2,546.5bn.

Fidelity Bank’s strategic plans are driven by seven core pillars, which include performance discipline, brand refresh, innovation, accelerated growth, digital transformation and service excellence.

Read also: Shareholders approve Fidelity Bank’s 35 kobo dividend for year 2021

Acquiring Union Bank UK offers a lot of benefits to the bank as UBUK offers a compelling investment case for Fidelity Bank.

Union Bank UK is a UK incorporated and regulated commercial Bank – wholly owned

operating subsidiary of Union Bank Nigeria.

Commenced operation from the heart of the city of London in 1983.

Following authorisation from the UK Financial Services Authority (FSA) and approval from Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) in 2013,

UBUK became independently incorporated as a UK deposit-taking bank.

Its competitive range of banking services include personal banking, trade finance, treasury management, structured trade, and commodity finance which it ¹offers to individual and corporate clients.

Its licensed to accept current, savings, time deposits from retail and corporate

customers (unlike other Nigerian Banks in the UK).

It also enjoys UK deposit guarantee which provides cover of up to GBP 85,000 per depositor.

The Union Bank UK is the 167th largest bank in the UK in terms of total assets.

The bank offers a robust range of banking services to customers doing business from and into Africa, including trade finance, personal banking, business banking, treasury services and commercial lending.

According to Amuchie, Union bank UK has maintained regulatory capital in excess of the minimum capital requirements stipulated by the PRA

under its Individual Capital Guidance.

The bank’s activities are closely guided by sound risk management and compliance policies.

Potential areas of synergy are seen around revenue / services, operations and technology, he stated.

In terms of benefits of the acquisition, he noted the significant captive business opportunity for UBUK from Fidelity Bank existing foreign currency transactions

in Nigeria.

It gives room for revenue and cost optimization through cross-selling and shared services.

Other beneficial areas centers around economics of scale, integrated customer

experience, and Fidelity bank aspirations.

“Complementary business operations will enable strong value creation for shareholders and clear benefits for customers, staff, and other key stakeholders.

UBUK will service other subsidiaries of Fidelity Bank under the proposed Holdco structure,” Amuchie said.