Unity Bank: Next for Bankruptcy or Possible Take Over?

… Accumulated loss swells to N338 billion … Reports negative equity book value of N242 billion

Unity Bank: Next for Bankruptcy or Possible Take Over?

… Accumulated loss swells to N338 billion

… Reports negative equity book value of N242 billion It may be open season on poorly performing banks in the Nigerian banking sector and Unity bank’s underwhelming performance over the past year puts them on the map of newly deposed banking giants for a possible takeover/merger.

The race to be the market leader in the Nigerian Banking sector intensified on the news of the proposed merger between Access Bank and Diamond Bank. Analysts told BusinessDay that the synergistic value of the merger is expected to propel the new Access Bank to become the biggest bank in Nigeria by size of balance sheet, loan size and share of deposits.

Barely two months ago, Skye bank needed a N786 billion capital injection to properly transition into Polaris Bank and a capital injection into Unity Bank is not a far-fetched idea with a negative book value of N242 billion and accumulated loss of N338 billion as at Q3 2018. Prior to the revocation of the banking license of Skye Bank, it had a market value of N10.6 billion and negative book value of almost N800 billion according to Godwin Emiefele, Governor of Central Bank of Nigeria. At the point of suspension of trading of Skye bank shares on the day of the Polaris takeover, the market cap of Skye bank was N1.25 billion higher than Unity Bank’s current market capitalization of N9.35 billion.

With a few banks struggling to weather the economic headwinds in recent times, the opportunity baskets for takeovers by bigger banks have now become wider. In a bid to compete, analysts say Tier 1 banks will look towards possible mergers and/or take overs of other banks as an option to propel them back to be the leader in the banking sector. Unity bank is currently the cheapest bank on the exchange in terms of valuation and may garner some interests from bigger banks.

But Unity bank has not shied away from controversy in recent times. Following a suspension on trading the shares of Unity Bank on November 1, 2018 the bank released its results for the last three quarters and the previous years’ annual performance. The struggling bank lost over N14.5 billion at the end of the financial period of 2017 with operating expenses recorded as 140 percent above the operating profits. In the first nine months of 2018, cost efficiency improved from N18 billion to N15 billion, a decline of 17percent.

In a note to the Nigerian Stock Exchange, Unity Bank’s management said “The delay in filing the financial statements was occasioned by certain corporate actions, including ongoing discussions with the bank’s prospective investors undertaken by the Bank which necessitated extensive reviews by our primary regulator.”

On the local bourse, the N9.35 billion market capitalization of Unity bank is below the minimum capital base of N25 billion required to own a national bank license in Nigeria. Currently at a price of N0.80 from February highs of N1.92, investor sentiment is not on the side of the tier 3 lender that is the only bank in the country with a negative book value.

Earlier in March, private equity firm Milost Global Inc disclosed their interest in acquiring Unity Bank in a $1 billion offer but withdrew their interest in the bank in very controversial circumstances. After the deal failed, Unity Bank sold about N400 billion worth of its bad debts to Frontier Capital Alternative Assets, a unit of Lagos based advisory and investment firm Frontier Capital Group.

“I think investors remain very concerned about unity bank and it must be worrying the Central Bank too. It has managed to survive through the years, but its luck may be running out. They have managed to clean up a significant part of their books by selling the bad debt to Frontier Capital but its still not enough. I think there are still more debts to writeoff and their equity position will take a massive hit if they do. If any bank is going to be taken over in 2019

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  1. […] Unity Bank has faulted the allegation against it by Special Presidential Investigation Panel for Recovery of Public Property (SPIPRPP) over the ongoing reconciliation of the affected MDA accounts. It says the report is geared towards misinforming the public and misrepresenting the bank’s position and nil impact resolutions reached during the reconciliation engagements. This is contained in a press released from the bank on Tuesday. According to the press statement, in the ongoing investigation, the bank has conducted itself professionally by providing all evidence of customers instructions requested by the panel as it relates to all the MDAs. The bank had earlier transferred all the MDAs balances to their respective TSA accounts in Central Bank of Nigeria as far back in 2016. Upon approaching the bank in 2018 to conduct investigations on the subject MDAs, the bank cooperated with the panel accordingly. But out of its own volition, the panel refused to admit further documentary evidence from the bank when it was obvious that the bank had no balances kept in its books for the MDAs. Instead, the panel suspended the investigation, as apparently could not fault any of the evidence presented by the bank. The panel in an earlier letter requested the bank to accept culpability and pay off a certain sum deemed outstanding, which the bank objected and insisted on completing the reconciliation exercise because the claims presented at this point against it were unfounded and frivolous. It is therefore surprising for the SPIPRPP to turn back and issue statement to allege sabotage when it abandoned its sitting and investigation midway. Furthermore, it must be emphasised that, without prejudice to the constitutional power of Revenue Mobilisation and Fiscal Allocation Commission (RMFAC) as the sole agency of government to investigate, review, reconcile and collect revenue for government, the bank cooperated fully with SPIPRPP and its consultants in the investigation process. Also, it was proven beyond reasonable doubt that Unity Bank has all records to show that it does its banking transactions transparently and in compliance with extant regulations and at no time took charges on the MDAs that are outside what are contained in the Bankers Tariffs that guide banking operations in Nigeria. The allegations of SPIPRPP are superfluous, frivolous ill motivated and unfounded as falsely presented in the news purportedly sent to the public. We hereby call on our customers and the general public to disregard the allegations, which is subterfuge aimed to unnecessarily smear the image of the bank, the bank said.   […]

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