Union Bank in slow start as half year profit slides 34.08%

Union Bank is in a slow start to 2014, as half year profits slid 34.08 percent as the Nigerian lender continues to grapple with increased regulatory induced costs combined with hike in cash reserve requirements by the Central Bank of Nigeria (CBN).

It has been tough for bankers since last year as the CBN refused to relax the tightening stance, and also the scrapping of income streams further exacerbated their position.

For the first six months of the year, the bank’s gross earnings reduced by 11.69 percent to N49.59 billion from N56.16 billion in the corresponding period of (HY) 2013.

The bank recorded profit before tax (PBT) of N6.46 billion in HY 2014, a 34.06 percent contraction from N9.80 billion recorded last year. Profit after tax (PAT) shrank by 32.48 percent to N6.34 billion in HY 2014, compared with N9.39 billion as of HY 2013.

It would be recalled that the bank was one of the eight Nigerian banks bailed out by the CBN.

Banks have had their profits hit by the mandatory contribution to the Asset Management Corporation of Nigeria (AMCON).

The AMCON Act 2010 stipulated or mandated all Nigerian lenders to pay 0.5 percent of their total assets to the sinking fund. Other income streams have also been affected as the CBN scrapped the N100 ATM fees.

Net income, a measure of efficiency and profitability ,reduced to 12.78 percent in 2014, compared with 16.72 percent in 2013. The bank was aggressive about lending as loans-to-deposit jumped to 54 percent in 2014, from 47.30 percent in 2013.

Total loans and advances to customer were up by 13.74 percent to N261.08 billion in HY 2014, from N229.54 billion as of HY 2013, while deposits from customers remained flat at N480 billion.

Total assets fell slightly by 2.13 percent to N979.73 billion in HY 2014, as against N1 trillion as of HY 2013.

The bank’s share price closed trading at N8.91 on July 28, 2014, on the floor of the Nigerian Stock Exchange, while total capitalisation was N150.89 billion.

BALA AUGIE