September 26 (THEWILL) – Union Bank of Nigeria Plc invests heavily in technology. This is not to be outdone in this digital age which has reconfigured the banking landscape. But the bank’s 2021 semi-annual report shows that a lender is struggling to match the speed of the “galloping stallion” (symbol of its logo) and it has been the trend for five years.
Compared to the corresponding period of 2020, Union Bank’s performance, to a large extent, points in the opposite direction of the “galloping standard”: most fundamentals are negative. In the few cases where positive results were recorded, the difference was rather small.
While the massive investment in infrastructure might provide some relief, some stakeholders share concerns that the company’s creeping growth could erode earnings. There are also concerns that it could have a negative impact on the return on investment – achieved through dividends or capital appreciation.
Gross profit for the half of 2021 was 76.31 billion naira compared to 81.9 billion naira for the corresponding period of 2020, or 6.8%. Net interest income after depreciation was also negative: 20.34 billion naira compared to 22.7 billion naira or 10.3 percent. Although net income from fees and commissions reached 6.59 billion naira compared to 5.05 billion naira in 2020, or 30.4%, profit after tax recorded a negative difference of 11.3%. It fell from 10.7 billion naira in the corresponding period of 2020 to 9.84 billion naira in the first half of 2021. Profit before tax was also negative. It fell 9.7% during the period – 10.3 billion naira compared to 11.3 billion naira in 2020.
Customer deposits increased slightly to N1.16 trillion during the period, from N112 trillion in 2020, an increase of 3.6%; while loans and advances to customers at amortized cost remained stable at 734.05 billion naira. Total assets also registered a slight increase of 2.2%, from 2.16 trillion naira to 2.21 trillion naira in 2020 and 2021, respectively. Amid the stifling effects of high inflation, operating expenses jumped to N48.14 billion during the period, from N31.66 billion recorded in the corresponding period of 2020, or 52 %.
The current slowdown in the bank’s performance began to manifest itself about five years ago, when periodic reports revealed negative and weak key fundamentals. Gross profit fell to 76 billion naira in the first half of 2019, from 83.3 billion naira recorded in the corresponding period of 2018, or 8.76 percent. Profit after tax edged up 3.5%, from 11.5 billion naira to 11.9 billion naira in the first half of 2018 and the first half of 2019, respectively.
Key ratios have also become harbingers of the current situation: the net interest margin slipped to 7.8% in 2017, from 8.6% in 2016, while the rate of return also recorded a decline. decrease – from 65% to 61%. Return on equity, which stood at 5.9% in 2016, fell to 4.7% in 2017 as the net asset value per share fell 11.87% from 16% in 2017 and 2016, respectively. However, the return on assets increased slightly to 15.7% in 2017 from 14.5% in 2016.
Union Bank has accelerated infrastructure upgrades and acquisitions through its digital drive strategy, especially since the landmark ‘smarter bank’ rebranding project of 2015, when it unveiled a plethora of digital banking solutions . It launched its improved online banking platform, UnionOnline, with aesthetic improvements, new features and targeted offerings for its customer segments at the time.
The then CEO, Emeka Emuwa, reportedly said: “A smarter bank is not just a slogan for us. We have worked tirelessly for almost two years to deliver the solutions we present today, as we have invested time and resources to understand what our customers really need and how we can deliver the right solutions to meet their needs. these needs.
“This investment in understanding the needs of our customers has led to the innovations and novel features that we are unveiling today. Our new platforms combine simplicity, functionality and aesthetics to deliver a seamless and improved user experience to our customers. “
Among its latest digital infrastructures, the M36 is intended to offer a wide range of investment products directly to individuals. According to the bank, M36, as an innovative and user-friendly app, offered investment options that are not typically available on digital self-service platforms. These include transactions in foreign currencies, commercial paper, bonds denominated in local and foreign currencies, treasury bills and other fixed income products,
“In a rapidly changing environment with changing consumer behavior fueled by technology and increasing access to information, M36 seeks to expand opportunities for investors at all levels, while simplifying the investment process,” the bank said in a statement. declaration in July 2017.
The bank’s 2017 naira 50 billion rights issue aimed to bolster its capital reserves and invest in technology and digitization, which included upgrading nearly 300 branches towards a more robust digital transformation. . The bank said in 2017 that it recorded 130 billion monthly online transactions and 250,000 active online banking users.
Association of Stockbroking Houses of Nigeria (ASHON) President Patrick Ezeagu praised Union Bank for the foresight to invest heavily in ICT infrastructure. He said the lender made the right decision because that’s what the business is demanding right now.
“We are now in the Fourth Industrial Revolution and ICT infrastructure is the engine of the economy. I can tell you that any organization that does not invest in technology will find that it is no longer in business when the time comes. Now is the time to do what Union Bank does; however, it may take some time to see the real result, ”Ezeagu told THEWILL in a telephone interview.
Some institutional and high net worth investors have recently taken stakes in Union Bank, which has bolstered the lender’s recapitalization program. African Capital Alliance (ACA) led a consortium of international investors (Union Global Partners) to recapitalize Union Bank in 2012. The consortium invested $ 500 million for a majority stake in the bank. ACA has invested $ 75 million as part of the consortium.