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Union Bank Nigeria Plc’s asset quality (NPL) has improved on the back of excellent risk management strategy as gains on foreign exchange and disposal of fixed income securities added impetus to gross earnings.
Despite the sudden drop in oil price caused by the coronavirus pandemic that forced the government to impose a lockdown policy that paralyzed business activities across the country, Union Bank’s non-performing loans (NPLs) fell to 3.6 percent in September 2020-below the regulatory 5 percent threshold- from 5.8 percent as at December 2019.
The lender also said reduction in NPLs was supported by ongoing efforts to diversify its loan book to include viable businesses and households.
“Our Capital Adequacy Ratio remains robust at 19.5 percent, well above the regulatory threshold,” said the Union Bank in a statement on the Nigerian Stock Exchange (NSE).
Investors of mid-sized banks are very wary of the balance sheets of these entities because they do not have the capital buffers to weather macroeconomic headwinds.
Now, the coronavirus pandemic has added a new layer of risk for the entire banking system as bad loans are spiking since customers were unable to meet their obligations as at when due.
Despite these challenges, Union Bank’s gross earnings rose to N119 billion in September 2020 from N118.80 billion the previous year.
Operating expenses were relatively flat year-on-year at N53.4 billion, compared to N53.2 billion as at September 2019, despite inflationary pressures on cost and higher regulatory costs.
“This reflects continuing focus on cost management,” said Union Bank.
Union Bank reached a major mile stone as its customer deposits crossed the N1 trillion mark this quarter, growing by 28 percent to N1.1 trillion compared to N886.3 billion at the end of 2019.
The bank said its customer acquisition strategy has been reinforced by the versatility of its digital platforms and channels which continue to drive customer satisfaction.
It acquired over 600,000 new-to-bank customers, which reflected gains on its investments in customer-led products and digital channels.
Union Bank continues to extend credit to the real sector of the economy as total loan book were up N678.0 billion in the period under review from N595.30 billion the previous year.
“We will continue to explore bank able lending opportunities in the Nigerian economy guided by our robust risk management practices,” said the bank.