Union Bank Nigeria plc has rebounded to growth as third quarter profit rose 6.73 percent, a remarkable improvement despite harsh operating environment fuelled by regulatory headwinds.
The results showed the lender’s strategic policies are yielding fruit as this quarter’s profit improved compared with the slow growth witnessed at the beginning of the year.
For the first nine months through September 2014, Union Bank’s profit after tax PAT increased by 6.73 percent to N8.08bn from N7.57bn the same period of the corresponding year 2013.
However, the bank’s top line took a hit as a result of the Central Bank’s multiple regulations which culminated in a 7.26 percent decrease in interest income to N56.15bn in Q3 2014 from N60.55bn the preceding year.
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.
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The regulator also told lenders to lower fees and commissions to reduce costs to customers.
Additionally, net operating income reduced by 11.41 percent to N36.64 percent while operating income dipped by 9.98 percent to N52.20bn.
Despite retrenching over 540 staff in order to reduce costs strengthen the bank for better performance, operating expenses spiked by 5.85 percent to N43.75bn from in Q3 2014 from N41.33bn last year.
Additionally, cost of sales ratio a measure of efficiency spiked to 83.68 percent in Q3 2014 as against 71.16 percent the preceding year-as regulatory induced costs continues to spiral costs.
Loans to deposit ratio which showed the aggressiveness of a bank toward lending increased to 55.06 percent in Q3 2014 from 47.55 percent the previous year. Total loans and advances were up by 20.66 percent to N276.97bn in Q3 2014 as against N229.54bn the same period of the corresponding year 2013.
Deposits to customers were up by 4.17 percent to N503.03bn compared with N482.70bn as at Q3 2014.
Total assets were down slightly by 2.28 percent to N979.12bn from in Q3 2014 from N1.0trn the preceding year.
Union Bank’s share price closed at N6.97bn on the floor of the NSE while market capitalisation was N115.50bn.
