THE latest data from Union Bank of Nigeria Plc has revealed a 163 percent increase in the bank’s recovery of loans and advances which increased from N4.9 billion to N12.9 billion in the first nine months of 2021.
According to the bank’s latest financial statement, the 163 per cent increase in loans and advances of N12.9 billion was the second biggest revenue line for the bank in the first nine months of 2021 after interest income.
Data gleaned from Union Bank also showed loan recovery is the biggest non-interest income line as well for the bank so far this year.
The bank’s non-interest income increased by 26percent to N42 billion, driven by stronger net fee and commissions which gained 44percent to N10.3 billion from N7.2 billion.
Union Bank achieved a drop of as much as almost 56 percent in loan impairment expenses year-on-year to N2.7 billion at the end of the third quarter while total operating cost increased by 3 per cent to N55 billion over the review period.
Interest expenses are however on a high speed growth – reflecting a general trend in the banking industry. Cost of funds grew by 45 per cent quarter-on-quarter in the third quarter to N21 billion. The figure accounts for 43.5 percent of the closing interest expenses figure of N48 billion at the end of the third quarter.
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The development enabled Union Bank to achieve a reasonable stability in earnings performance with non-interest earnings making up for weakness in interest revenue.
According to the Bank’s CEO Emeka Okonkwo, the development is a demonstration of resilience of the bank’s business in the challenging business environment.
“This stability is underpinned by our strategic focus on deepening our customer engagements and meeting their needs as we grow our core business,” Okonkwo said. Also, Interest income which recorded an upturn over the last two quarters but a drop of 25 per cent in the first quarter still caused a year-on year drop of 6.7 per cent to about N80 billion at the end of the third quarter.
Union Bank ended the third-quarter operations with group after-tax profit of N13.4 billion, which is a decline of less than 11 per cent year-on-year.
Net profit margin went down from 12.4 percent in the same period in 2020 to close to 11 per cent at the end of the third-quarter in September 2021.
The loss of profit margin and the profit decline over the period reflect the revenue constraint and the upward pressure of interest expenses.
Speaking on the 9M 2021 numbers, Chief Financial Officer, Joe Mbulu said the bank is focused on executing its plans for revenue diversification, driving strong growth in transaction volumes while also continuing on its strong debt recovery initiatives. “These are mitigating the on-going impact of relatively low risk asset margins,” Mbulu said. He added, “We also maintained very strong control over our expenses, which grew by 3.3percent, well below the rate of inflation as we continue to realise the benefits of our cost efficiency culture and mindset.”
“With our capital adequacy ratio at 15.8per cent, above regulatory requirements and good asset quality with NPLs at 4.7percent despite continued growth in our loan book, we are focused on further optimising our capital structure to support our growth plans as we look towards 2022 and beyond,” Mbulu said.
