Union Bank first quarter earnings post tops analysts’ estimates

Union Bank Plc earnings came strong in the first quarter of 2020 as the lender recorded a 25% increase in profit after tax to ₦6.1 billion.

As share price closed at ₦6.75, the lender’s market capitalisation settled at ₦196.565 billion on Wednesday on 29,120,752,788 shares outstanding.

In its unaudited financials submitted to the Nigerian Stock Exchange, the Bank’s gross earnings settled at ₦42.6 billion which is 18% above ₦36.1 billion reported in Q1 2019.

Interest income earned from interest yielding assets increased 18%, from ₦25.2 billion to ₦29.7 billion.

Analysts explained that the increase was supported by the impact of the 65% loan to deposit ratio target on the banks book.

The Bank has increased gross loans and advances to customers in the last 3-months, from ₦595.3 billion at the beginning of the year to ₦611.1 billion.

In the same period, customers’ deposits only increased marginally from ₦886.3 billion to ₦897.4 billion.

While the bank guide to raise its loan book in 2020, its non-performance loans ratio in the Q1 2020 jerked up marginally from 5.8% to 5.9%.

Meanwhile, the bank beats the Central Bank of Nigeria’s LDR target of 65%, as it moved up from 67.2% in 2019 to 68.1%.

Commenting on the results, Emeka Emuwa, CEO said: “Coming off a strong 2019, we maintained focus on executing our strategic priorities in Q1 2020, delivering double-digit growth across all our major income lines.

Union Bank achieved a profit before tax of ₦6.2 billion in Q1 2020. This translates to a 19% increase when compare with ₦5.2 billion in Q1 2019.

Gross earnings jerked up by 18% to ₦42.6 billion from ₦36.1 billion in Q1 2019.

Speaking further, Emuwa said: “Our platforms and channels continue to drive our performance as non-interest Income increased by 18%”.

Union Bank reflates position in non-interest income source from ₦10.9 billion in Q1 2019 to ₦12.9 billion.

For the period, e-business fees contributed ₦2.1 billion, which is a 71% growth compared to Q1 2019.

Union Bank boss said the current COVID-19 pandemic presents daunting challenges for the global economy and consequently Nigeria and our business.

However, he reiterates that the Bank focus in the short term is on ensuring business continuity through our strong operational risk framework.

“This include ensuring the health and well-being of our employees by adopting stringent health and safety protocols at our operating branches and offices and supporting our customers through the crisis”, he added.

The Bank Chief said: “We have reinforced our digital platforms to continue delivering value and convenience to our customers while aligning our focus areas to where opportunities emerge during and post COVID-19.

“We will continue to support the government, private entities and our communities in the fight against COVID-19.”

Commenting on the Q1 2020 numbers, Chief Financial Officer, Joe Mbulu said: “Headline numbers delivered 19% growth in pretax profit to ₦6.2 billion compared to ₦5.2 billion in Q1 2019.

The CFO said the 18% year on year growth in non-interest income was driven by stronger trading income of ₦5 billion compared to ₦2.2 billion in Q1 2019.

This was in addition to e-business income of ₦2.1 billion compared to ₦1.2 billion in Q1 2019.

This was in addition revaluation gains of ₦2.7 billion compared to ₦0.1 billion in the comparable period in 2019.

“Our operational efficiency also improved with cost-income ratio declining to 74.3% from 76.9% in Q1 2019 as our cost optimisation programme continues to yield results.

“We have also kept NPL ratios flat currently at 5.9% compared to 5.8% as at December 2019”, the CFO stated.

Mbulu said while the current COVID-19 pandemic has dimmed the global economy outlook for the year, the Bank will leverage strong capital position.

He said Bank will leverage its Capital Adequacy Ratio (CAR) at 19.9% and its solid risk management framework towards delivery of our 2020 objectives.

Union Bank first quarter earnings post tops analysts’ estimates