Why Unity Bank reported N62.6bn loss in 2023

Unity Bank has reported a loss of N62.6 billion for the 2023 financial year, its highest loss in thirteen years, analysis by BusinessDay shows.

This, however, is a 6,552 percent decline from the N941.4 million profit recorded in 2022.

The bank’s audited 2023 financial statements reveal a challenging fiscal period driven by reduced revenues, higher impairments, and potential write-offs.

In 2024, Unity Bank, a financially troubled yet systematically important bank merged with Providus Bank—a move largely considered as the price the fast-growing regional bank is willing to pay to go national.

The move comes amid the new recapitalisation hurdles imposed on the national bank to raise N200 billion by the Central Bank of Nigeria (CBN).

Unity Bank said it is “exploring all options” including injection of capital through private placements, rights issues, public offers, subscriptions, mergers, and acquisitions ahead of the 2026 deadline.

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However, the apex bank has provided financial accommodation of ₦50 billion and approved a ₦700 billion bailout tied to the merger.

On the flip side, the bank’s financial statement, audited by KPMG, a professional firm providing audit, tax and advisory services, highlights several factors contributing to its loss.

Net trading losses:

One of the most significant contributors to Unity Bank’s poor performance in 2023 was a massive net trading loss of N50.1 billion, a sharp contrast from the N233.8 million loss, driven by foreign exchange loss during the period.

Rising interest and operating expenses:

While Unity Bank’s gross earnings increased slightly to N59.4 billion from N57.1 billion in 2022, its interest expense surged by 22 percent, reaching N36.2 billion.

Additionally, total operating expenses rose to N33.7 billion from N27.1 billion, driven by higher personnel costs of N14.3 billion from N11.2 billion and increased depreciation and amortization expenses.

Impairment losses on financial assets:

The bank recorded a net impairment loss of N1.7 billion on financial assets, a reversal from the N1.2 billion write-back in 2022. This reflects growing concerns about the bank’s asset quality and an increase in non-performing loans to 49.17 percent under CBN prudential guidelines, up from 3.62 percent in 2022, highlighting a significant reduction in credit quality.

Capital adequacy concerns:

Unity Bank’s financial position is further strained by negative equity of N326.9 billion as of December 2023, compared to negative N274.9 billion in 2022. The bank’s Capital Adequacy Ratio (CAR) stood at a worrisome negative 76.14 percent, well below the regulatory minimum of 10 percent set by the apex bank for a national bank.

Total assets declined to N472.6 billion in 2023 from N510.1 billion in 2022, which raises concerns about the bank’s ability to meet short-term obligations.