5 things to note about Unity Bank’s financial results

Despite tough economic conditions characterised by soaring inflation, rising interest rates, and foreign exchange fluctuations, Unity Bank has reported double-digit growth in its income line in the nine-month period of 2022.

Commenting on the result, the Managing Director/CEO of Unity Bank Plc, Tomi Somefun said that “the outlook for the full year 2022 remains positive, reflecting optimism, stability, and growth in key performance indicators.

She noted that the growth trajectory recorded in the bank’s key performance metrics is a testament to the positive sentiment in the market, especially at a time the market is experiencing a downturn with high inflationary trend and volatility which impacts negatively on the operating environment.”

She stated that the Bank will create more initiatives even in the very short term to broaden its retail focus, ride on novel technology and digital Banking to push aggressively on product marketing in addition to major activations in identified market segments to attract sustainable streams of income for the Bank.”

“The outlook for our financial position for the current year is bright as the Bank is increasingly innovating with products and collaborative strategies to diversify our portfolio businesses while taking advantage of robust technological resources to take on mass market & the unbanked sector thereby boosting income and liability generation and financial inclusion of the banking ecosystem,” she said.

Below are five (5) things to note about the nine-month financial results;

Gross income and profit growth amidst economic headwinds

Unity Bank’s gross income grew by 17 percent in the nine-month period of 2022 to N42.24 billion from N36.18 billion in the corresponding period of 2021.

The income grew on the back of a 54 percent increase in other operating income which soared due to the 369 percent increase in transactional income to N468.75 million during the period.

Other operating income grew to N695 million in the nine-month period of 2022 from N451 million in the corresponding period.

Interest income grew by 15 percent to N36.36 billion in the nine-month period of 2022 from N31.44 billion in the nine-month period of 2021, largely due to the 22 percent increase in interest income derived from loans and advances to customers during the period.

Unity Bank also generated income from its fees and commission charged and the income generated grew by 17 percent to N5.34 billion in the nine-month period of 2022 from N4.56 billion in the nine-month period of 2021. Further analysis shows that a 48.9 percent increase in credit-related fees and commissions was responsible for the boost.

The bank also generated N1.34 billion and N2.72 billion from account maintenance fees charged and e-banking income respectively during the period.

Consequently, profit grew by 5 percent to N2.03 billion in the nine-month period of 2022 from N1.94 billion in the nine-month period of 2021.

Cost to income ratio decline despite high business cost

Unity Bank’s operating expenses grew by 11 percent to N 20.37 billion in the nine-month period of 2022 from N18.28 billion in the nine-month period of 2021, bringing the cost-to-income ratio to 48.22 percent, 231 basis points lower than 50.53 percent reported in the nine-month period of 2021.

Operating expenses grew on the back of a 179.7 percent increase in professional fees which amounted to N388.7 million in the nine-month period of 2022 from N138.99 million in the corresponding period of 2021.

Advertising and marketing expenses grew by 23 percent to N490 million in the nine-month period of 2022 from N399 million in the same period of 2021.

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Negative shareholders equity & depleted retained earnings

Despite making a profit during the period, Unity Bank’s reported an accumulated loss brought forward amounting to N371.73 billion, which resulted in negative retained earnings hitting N369.7 billion in the nine-month period of 2022, a slight improvement from N-370.8 billion reported in the nine-month period of 2021.

Unity Bank has been posting profits since 2018 but has not declared dividends for years, due to the losses it has accumulated and is still redeeming.

The bank also reported negative shareholder’s equity on the back of its depleted retained earnings which slowed to N275.3 billion in the nine-month period of 2022 from N-280.6 billion in the nine-month period of 2021.

A negative shareholder equity balance implies that a company has incurred losses of such size that they completely offset the combined amount of any payments made to the company for its stock by investors, and any accumulated earnings from prior periods.

Growth in customer loans and deposits

Unity Bank reported its highest customer loans and deposits for the first time in ten (10) years in the first nine months of 2022. Its loans and advances to customers grew by 7.13 percent in the nine-month period of 2022 to N284.25 billion from N265.32 billion in the nine-month period of 2021.

In the same vein, its deposits from customers grew by 10.29 percent to N334.69 billion in the nine-month period of 2022 from N303.46 billion in the corresponding period of 2021.

Cash position

Cash and cash equivalents, the value of cash and liquid cash for the period, declined by 36 percent to N98.94 billion from N154.64 billion in the nine-month period of 2021.

Movements of its cash and cash equivalents show that the bank’s cash from operations for the period amounted to N2.09 billion in the nine-month period of 2022, indicating that the bank generated adequate cash from its core business activities during the period and is able to meet up with its short term obligations.

Net cash from investing activities for the period under review totaled N3.95 billion, primarily due to the acquisition of investment securities during the period amounting to N6.15 billion and proceeds from disposal of financial instruments amounting to N3.65 billion.

The bank repaid borrowings amounting to N28.03 billion in the nine-month period of 2022 and also got proceeds from borrowings during the period worth N15.73 billion, therefore bringing net cash from financing activities to N-12.19 billion in the nine-month period of 2022.