Wole Olajide
The audited financial statements of Union Bank for the year ended 31st December 2020 showed sustained growth in key income lines and significantly improved fundamentals notwithstanding a constrained operating environment largely due to the impact of the Covid-19 pandemic.
For the second year running, the Bank is proposing a dividend payment and returning value to shareholders. Subject to shareholders’ approval, a dividend of 25 kobo per 50 kobo share has been proposed.
Bank Financial Highlights:
- Profit before tax: up by 2.8% to N25.4bn from N24.7bn in FY 2019.
- Gross earnings: down by 1.9% to N156.9bn from N159.9bn in FY 2019.
- Net operating income after impairments: up by 8.3% to N103.4bn from N95.5bn in FY 2019.
- Net interest income before impairment: up by 10.1% to N56.9bn from N51.7bn in FY 2019. This is due to reduced interest expenses.
- Non-interest income: up by 1.6% to N44bn from N43.3bn in 2019, driven by growth in net trading income as well as revaluation gains.
- Operating expenses: up by 10% to N78bn from N70.8bn in FY 2019. This is due to an increase in regulatory and technology expenses.
- Gross loans: up by 23.8% to N736.7bn from N595.3bn in FY 2019 driven by targeted lending to key sectors of the economy.
- Non-performing loans ratio: down to 4% from 5.8% in FY 2019 driven by a disciplined recoveries strategy, a more robust loan book and key restructurings to support customers during the pandemic.
Key Operational Highlights:
● Channels: Active users on the bank’s digital platforms grew 1.3 times. During the year, the bank added new features such as end-to-end account opening and enhanced card services including home delivery of cards boosting revenues from its digital channels by 1.5 times.
● Agent Network Expansion: The Group’s UnionDirect network was expanded to over 18,000, representing a 6x increase. Transaction volume and value grew 10x and 12x respectively delivering 14x revenue growth.
● Enhanced Retail and Digital Offerings: The Group relaunched UnionVibe, UnionLegend and UnionInfinity, a suite of products targeting the key youth and teen demographic; and disbursed over N9.4bn loans with new credit propositions.
● Systems Upgrade – The Group upgraded its core systems to support its growth aspirations, while strengthening the performance, reliability, security and processing capacity of its platforms. With this upgrade, the Bank is now in a position to process at least 10x the volume of transactions for 2020.
● Funding: Union Bank secured both local and foreign currency funding to support growth across our priority areas. Union Bank raised:
― ₦35bn commercial paper issuance. The 180 and 270-day notes were oversubscribed.
― $200m 10-year funding from U.S International Development Finance Corporation (DFC)
― $75m Pandemic Trade Mitigation funding from Afrexim.
― $30m working capital funding from IFC
● COVID-19 Response: The impact of COVID-19 in 2020 cannot be understated. In response, the Bank constituted a CEO-led task force in February and adopted a proactive approach to ensure the health and safety of key stakeholders and to mitigate negative impact on our business.
― Business continuity: Operationally, the bank adapted as lockdowns and movement restrictions evolved during the year. The bank designed a work model that ensured operational efficiency while maintaining adequate contingencies that guaranteed business continuity should newly identified operational risks crystallize.
― Managing liquidity and credit risks: The Bank focused on raising long term liabilities in local and foreign currencies. The Bank also deepened its focus on essential sectors during the pandemic and enhanced portfolio diversity.
● UBUK Update: In January 2020, Union Bank announced its divestment from its UK subsidiary to focus solely on Nigeria and the distinct long-term opportunities that the market presents.
● Management Update: In December 2020, the Bank’s Chief Executive Officer, Emeka Emuwa announced his retirement effective March 31, 2021. Following a successful search process, the Board has appointed Emeka Okonkwo, an Executive Director currently leading the Bank’s Corporate Banking business, to succeed him. Emeka Emuwa served as CEO for eight years and led the Bank’s transformation and repositioning as a key player in the Nigerian financial space.
Commenting on the results, Emeka Emuwa, CEO said:
“The Bank has delivered a strong set of results notwithstanding the impact of COVID-19 on our operations and the wider economy, enabling the Board of Directors to continue to return value to shareholders with a proposed dividend payment for the second year in a row. This demonstrates the strong foundations we have built, as we continue to deliver against our target of becoming a leading financial institution in Nigeria”.
“For the full year, we grew across key income lines. Net income after impairments grew 8.3% from ₦95.5bn to ₦103.4bn and translated into 2.8% growth in Profit before Tax to ₦25.4bn from ₦24.7bn”.
“The core of this performance is driven by the growth in our loan book, with 23.8% increase in gross loans, to ₦736.7bn from ₦595.3bn in 2019.
The pandemic accelerated trends in customer behaviour and we have seen rapid increase in digital adoption with a 38% YOY increase in active users on our UnionMobile channel with total active users now at 2.9 million. Our UnionOne and Union360 platforms for businesses grew by 11% from 25,000 users to 27,700 users. 94% of transactions in the Bank are now done digitally, up from 89% in 2019”.
“We also aggressively grew UnionDirect (our agent network) by 6x from 3,100 to 18,100 in line with our focus on our retail business. With our investments yielding positive results, we are well positioned as a strong leader in the retail and digital space”.
“In 2021, the Bank will focus on enhancing revenues and shareholder value by revving up customer acquisition, engagement and transactions through seamless customer journeys and an optimized service delivery platform”.
“As I retire following eight years of rebuilding and repositioning this storied institution, I am convinced that with the excellent management team and a clear strategy in place, Union Bank is well positioned to continue to compete and deliver value to its shareholders”.