Unity Bank’s profit dip 38% in 2020 amid credit, revaluation loss

Nigeria’s Tier- 2 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 the year before.

In a media briefing on the bank’s performance, the Executive Director of Unity Bank, Ebenezer Kolawole explained that the bank was affected by the loss made on Agric loans and revaluation loss. Bismark Rewane, CEO of Financial Derivatives Company said most Tier-1 banks did well in 2020 because they made a profit from revaluation despite the challenging year but Unity Bank did not have this luxury.

“We made a revaluation loss of 4 billion as we were short on foreign exchange, if not we would have performed much better in 2020,” Kolawole said.

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

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

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 was heavily debited by the CBN and this also impacted their growth for the year.

However, despite in 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 instrument 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.