Union Bank sees profit drop 19.3% amid 8.9% earnings growth to N175bn

BY CHARLES ABUEDE

Union Bank of Nigeria, one of Nigeria’s oldest banks, has reported a 19.3 percent year on year drop in its profit before tax to N20.5 billion in 2021 from N25.4 billion in 2020 as a result of an increase in the bank’s tax expenses during the year.

The bank also reported 1.5 percent marginal growth in its operating expenses to N79.1 billion in 2021 from N78 billion in the prior year, reflecting its tight cost control during the operating year, despite the pressures from inflation and macroeconomic headwinds.

The bank, in its full-year audited financial statement for the year ended 31st December 2021 filed to the Nigerian Exchange showed that the bank has sustained steady performance as a result of increased customer engagement from an enhanced operating and go-to-market model and gains derived from its digital penetration strategy.

As a result, Union Bank reported an 8.9 percent year on year surge in its gross earnings to N175 billion in 2021 from N160.7 billion in the prior year, largely driven by strong non-interest income, which was also up 26.7 percent year on year to N55.7 billion in 2021, as a result of the significant increases in debt recoveries by the bank while its net profit for the year plunged 22.2 percent year on year to N19.2 billion from N24.6 billion.

The drop in net profit was as a result of the bank’s net operating income after impairment, which was also down 3.6 percent year on year to N99.7 billion.

Emeka Okonkwo, chief executive officer, in his comments on the results said, “Following an enhancement to our operating and go-to-market model to deliver better performance and efficiency leveraging our network across the regions, we are increasing our customer engagement and product penetration which is translating into higher customer revenues across geographies. On the back of this, the bank has continued to record headline growth by diversifying our income streams and accelerating our recoveries programme.”

Okonkwo also said the bank’s interest income grew by one percent as the earnings asset base expanded with a growing loan book.

“We continued our strong growth in non-interest income through a combination of aggressive recoveries, which grew 119 percent in the period, from N7.2 billion to N15.9 billion and further growth in fee and commission income (33%) and e-business (26%). These were delivered on the back of sustained multi-channel growth in users, volume and value across our digital and agent channels. Total active UnionMobile users now stand at 3.3 million, up 20 percent while our Union360 customer base grew by 22 percent to 26,400,” he further said.

Joe Mbulu, chief financial officer, said in his comment, “We maintained very strong cost controls during the year despite the inflationary pressures and the translation effect of currency depreciation on our cost base. Operating expenses increased marginally by 1.5 percent with increasing regulatory, depreciation and amortisation costs. Customer deposits grew by 20 percent while our loan book grew by 22 percent from N736.7 billion to N899.1 billion, as we deepened support for key sectors in the economy. We have remained proactive in the way we manage our growing risk assets, maintaining our asset quality during the year with our NPL ratio growing marginally from 4 percent to 4.3 percent.”

The bank’s focus on exploring new frontiers in the digital space contributed to growth in digital revenue from N6.9 billion to N7.4 billion in 2021 as the deposit money bank made strides in creating new revenue streams and scaling digital payments platforms,

Looking ahead into the new financial year, the bank expressed high optimism as it transits to become a part of Titan Trust Bank following its acquisition in December 2021.

According to Okonkwo, “In 2022, the bank will continue to focus on broadening and deepening the strong foundations we have built while enhancing our digital delivery platforms and service propositions to customers. We remain deeply thankful to our erstwhile core investors, Union Global Partners and Atlas Mara, who have been instrumental to our journey since 2012. Their invaluable support and expertise helped steer the bank through turbulent waters and into an era of growth and stability.

“As we turn a new chapter … with a new core investor expected to come on board, we are proud of the solid foundation built over the last ten years and look forward to a seamless transition and continued successes in the future,” he concluded.

Meanwhile, Union Bank’s gross loans to the key economic sectors of opportunity grew 22 percent to N889.1 billion while the total customer deposit also grew 20.4 percent year on year to N1.4 trillion from N1.1 trillion the previous year, precipitated by its continuance to expand product base and key digital channels.