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Unity Bank’s profit dips 38% in 2020 on credit, revaluation loss

Nigerian lender, Unity Bank Plc, saw its profit plunge as credit and revaluation loss affected growth in 2020.

The lender’s profit dropped 38 percent to N2.08 billion compared to N3.38 billion a year before.

In a media briefing on the bank’s performance, the Executive Director of the Bank, Ebenezer Kolawole, explained that the bank was affected by the loss made on Agric loans and revaluation loss.

“We made a revaluation loss of N4 billion as we were short on foreign exchange, if not we would have performed much better in 2020” Kolawole said.

Bismark Rewane, CEO of Financial Derivatives Company said most Tier-1 banks did well in 2020 because they made profit from revaluation despite the challenging year but Unity Bank did not have this luxury.

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The Central Bank of Nigeria (CBN) devalued the naira three times in 2020 and this translated into revaluation gains for banks with foreign exchange.

Also, Unity bank gave a total of N206 billion loans and advances to customers of which 86.9 percent were agricultural loans.

Unity Bank

About N4.1 billion of the agricultural loans was classified as expected credit loss, this is 86 percent higher than the N2.2 billion recorded last year.

Kolawole also explained that Unity Bank had a reserve of N91 billion in 2020 but were heavily debited by the CBN and this also impacted their growth for the year.

However, despite a low yield environment in 2020, the bank grew interest income by 9 percent to N39.1 billion from N35.1 billion the previous year.

Interest expense, the cost incurred by an entity for borrowed funds was up 9.7 percent to N21.3 billion 2020 compared to N19.4 billion in 2019.

This brought net interest income to N17.7 billion in 2020 from N16.4 billion in 2019.

The lender’s Fees and commission income grew 6 percent to N5.2 billion from N4.9 billion a year before.

The bank made a net trading loss on financial instruments of N3.8 billion in 2020 from a gain of N329 million in 2019.

A loss of N1.62 billion was also made on other operating income compared to a profit of N 3.6 billion last year.

Earnings per share fell 38 percent to N17.8 per share from N28.9 per share the previous year.

Personnel expense also rose by 10 percent to N10.4 billion compared to N9.4 billion in 2019.

Depreciation of property and equipment dropped to N1.69 billion compared to N1.7 billion in the same period of 2019.

The bank paid N22.1 billion income tax in 2020, a 38 percent decline compared to N 36.2 billion paid the year before.

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