Union Bank’s little impairment remains an albatross


Segun Edwards

Union Bank Plc’s loans and advances 38.3 percent growth in its 2016 financial year results to N507, 190 million may be insignificant but it seemed huge in a troubled economy like Nigeria as it contributed a 66.9 increase to the bank’s increase in impairment provision to N16,582m which tilted the bank’s bottom line downwards in the year under review.

From the audited figures released recently, gross earnings had closed the year only 8 per cent up at N126,590 million and impairment provision turned out to be lone expense that was way ahead of this growth

Personnel cost also risen by 3.97 per cent to N31,234 million; while other operating expenses equally grew by 8.55 per cent to N25,860 million leading to only 7.17 per cent increase in non-impairment overheads.

Similarly, interest income had risen by 7.81 per cent to N98,002 million while being generated using N32,963 million interest expense, down 6.41 per cent.

Gross earnings had equally been dragged down by 9.36 per cent along other operating incomes to N10,350m and 2.71 per cent decrease in trading income to N5089 million, although boosted by 37.4 per cent rise in fee and commission to N10,577 million and 41.3 per cent increase in fair value income to N2572 million.

At the end, impairment provision was the main factor behind the bank’s 6.7% increase in profit before tax to N15 738 million.

This growth rate was also the enabler behind gross income growth and so, inevitably, the bank’s bottom line dropped to 12.4 per cent compared to 12.6 per cent in 2015.

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It remains daunting task for any publicly quoted firm in Nigeria today to achieve a strong and viable bottom line, which would see the likes of Union Banks struggling to come back to top three bracket in the Nigerian banking industry. And no doubt it would take more than an effort for the bank to achieve such aim.

UNION BANK: Nm full year.       2016.     2015
Gross income                             126590. 117211
Interest inc.                                 98002.   90902
Interest exp.                                32963.   35219
Impairment.                                 16582.   9948
Fee& Comm.                               10577.   7697
Trading income.                           5089.     5231
Fair value inc.                              2572.     1820
Other op. Inc.                              10350.   11419
Personnel.                                   31234.  30041
Other op. Exp.                            25860.  23823
Profit B4 tax                              15738. 14756
Margin%                                    12.4.     12.6
Loans & Adv.                            507190. 366721