Banks have for a period been burdened with the regulatory headwinds which have been hampering their growth potentials.
Union bank Nigeria Plc, going by the just released first quarter 2014, showed slow growth at both top and bottom line which analyst have attributed to the hike in reserve requirements by the Central Bank of Nigeria (CBN).
For the first three months of the year gross earnings shrank by 11.40 percent year on year to N26.03 billion from N29.38 billion for the same period (Q1 2013).
Bottom line performance also slowed as profit before tax PBT dipped by 34.60 percent to N5.03 billion in FY13 compared with N7.69 billion as at FY12.
Profit after tax PAT also shrank by 36.37 percent to N4.95 billion in FY13 as against N7.78 billion as at FY12.
The bank has been unrelentingly pursuing strategies that will bring it back to the position it once occupied in the industry.
Net margin, a measure of profitability and efficiency reduced to 19.01 percent in 2014 as against 26.48 percent in 2013.
Some analysts are optimistic that the new CBN governor Emefiele will relax the tightening stance which will positively impact on Nigeria banks.
The CBN has increased CRR -the minimum cash, as a percentage of customer deposits that each bank must set aside as a reserve, from 4 percent in 2011 to 15 percent for private deposits and 75 percent for public sector deposits.
Earnings per share EPS fell to 28K in Qtr1 2013 from 52 percent as at Qtr 1 2014
A further breakdown of efficiency ratio showed cost to income ratio increased to 77.01 percent in Qtr1 2014 from 72.02 percent as at Qtr1 2013.
This means that a larger proportion of the bank’s operating income is undercut by operating expenses.
The cost control mechanism put in place by union bank is yielding positive results as operating expenses reduced by slightly by 14.7 percent to N 14.7 billion in Qtr1 2014 from N15.2 billion as at Qtr1 2013.
The non performing loan figure of 7.2 percent is above the CBN target rate of 5 percent
Loans and advances were up 29.4 percent to N220.5 billion in Qtr1 2014 compared with N170.7 billion as at Q1 2013, while loans to deposit ratio remained flat at 52 percent.
The bank is aggressively pursuing the a more deposit mix as deposit to customers increased by 8.9 percent to N466.4 billion in Qtr1 2014 from N428.7 billion in Qtr 1 2013.
Return on average equity (ROaE) in the review period stood at 10.3 percent, while return on average assets (ROaA) was 2.03 percent.
Union bank’s total assets dropped to N958.6 billion in Qtr1 2014 compared with N997.3 billion as at Qtr1 2013.
Liquidity ratio in the review period was 63 percent, which is higher than the 30 percent CBN minimum requirement, while capital adequacy ratio stood at 24 percent.
The company’s share price closed at N10.30- June 6th 2014on the floor of the Nigeria Stock Exchange, while market capitalization was N174.43 billion.
BALA AUGIA
