Union Bank reports 8.8% decline in Q1 pretax profit

Union Bank of Nigeria Plc has released its unaudited financial statements for the quarter (Q1) ended March 31, 2022.

The bank’s financial highlights show gross earnings went up by 18percent to N42.9billion (N36.4billion in Q1 2021), driven by strong earning assets from on-lending to key sectors in the Nigerian economy. Net interest income after impairments was also up 27percent to N12.9billion (N10.1billion in Q1 2021).

Non-interest income (NII) came down by 19.1percent to N11.5billion (N14.2billion in Q1 2021). Profit before tax (PBT) was also down by 8.8percent to N6.4billion (N7billion in 2021). Operating expenses went up by 3.9percent to N18billion (N17.3billion in Q1 2021), notwithstanding high inflationary environment.

Gross loans came down by 1.8percent at N882.9billion (N899.1billion in December 2021). Non-Performing Loan (NPL) ratio was flat at 4.3percent.

Customer deposits was down by 3.5percent at N1.31trillion (N1.36trillion in December 2021); following the pay down of expensive time deposits

Commenting on the results, Emeka Okonkwo, CEO said: “In 2022, we renewed our focus on turbocharging productivity and ensuring we fully leverage the strength of our digital channels, regional network and talent to maximise the bottom line.

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Our efforts are gaining momentum and notwithstanding a challenging economic climate in Q1 2022, our Net Interest Income after impairment grew by 27percent compared to the same quarter in 2021 from N10.1 billion to N12.9 billion. Gross Earnings are also up by 18percent to N42.9 billion against N36.4 billion in Q1 2021. This was bolstered by improved asset yields, treasury trading income and revenues from our alternate channels. We are steadily seeing increasing customer adoption with a 36percent YoY increase in active users on UnionDirect, our agency banking network, and increasing transaction volumes with a 20percent YoY growth across our digital channels.

Interest Income grew by 41percent from N22.2 billion to N31.4 billion as our earnings asset base expanded with a more viable loan portfolio.

Our non-performing loan (NPL) ratio is flat at 4.3percent (from December 2021), well within the regulatory limit, while cost to income ratio dropped from 79.4percent in December 2021 to 73.9percent in March 2022. We will continue to drive cost optimisation to ensure consistent improvement in efficiencies.

With a Capital Adequacy Ratio (CAR) of 15.6percent, our capital position remains strong.

On the innovation side, we launched SpaceNXT – a purpose-built hub created to encourage innovation and foster collaboration within the Nigerian tech ecosystem. This remains a space where Union Bank desires to maintain a leading position.

For the rest of H1 2022, we will continue to focus on driving productivity, mining targeted opportunities across regions and optimising our digital platforms to deliver improved customer service and acquisition. ”

Speaking on the Q1 2022 numbers, Chief Financial Officer Joe Mbulu said: “The Bank continued to demonstrate resilience in our Q1 2022 results. Headline Gross Earnings increased by 18percent to N42.9 billion from N36.4 billion in Q1 2021. Net interest income after impairment charges grew by 27percent driven by 41percent increase in Interest Income to N31.4 billion from N22.2 billion in Q1 2021. Non-Interest Income (NII) declined by 19.1percent from N14.2 billion to N11.4 billion driven by higher foreign currency revaluation loss.

Operating Expenses increased marginally by 3.9percent QoQ, as a result of higher regulatory, diesel, and software expenses. In Q2 2022, we will focus on optimising operating costs by intensifying measures to mitigate the impact of high inflation.

We will also continue to drive for a more efficient balance sheet by paying down expensive deposits and pricing our risk assets better.”

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