Union Bank: Leveraging technology in rebranding journey

ONE of the oldest financial institutions in Nigeria, Union Bank Nigeria Plc (UBN), started its journey in 1917. In the last 103 years, the lender has served customers across nooks and crannies of Nigeria. It has rebranded from being a Big, Strong, Reliable bank to become a ‘Simpler, Smarter bank.’

In today’s world of technological revolution, the bank is indeed smartly looking forward to the next 100 years.

This is just as stakeholders are equally expecting the rebranded Union Bank not only to  live up to its slogan centered around efficient and smarter service delivery, but also to leverage  technology in striving for greater market share in Africa’s most populous nation.

It has its presence in over 300 locations across Nigeria and was recapitalised in 2012 following its acquisition by new investors.

The bank’s area of focus includes retail, commercial and corporate banking businesses.

Management

The bank has an array of experienced bankers on its board with Gavin Laws as Chairman and Independent Non-Executive Director. Gavin Laws had over 36 years career with Standard Chartered Bank. He gained a deep experience of international and emerging markets having worked in Europe, Africa and Asia.

Among other Non-Executive Directors, Suzanne Iroche is an Independent Non-Executive Director with over 30 years experience in banking, including senior roles as Head of Treasury, Group Head Multinationals, Deputy General Manager, General Manager culminating in Executive Director within UBA.

At the helm of day to day operations of the bank is Mr.Emeka Emuwa. He is the Group Managing Director and Chief Executive Officer Union Bank of Nigeria PLC (UBN). He began his banking career in 1986 as a Management Associate with Citibank Nigeria Limited and eventually rose through the ranks to become its first Nigerian Managing Director and Chief Executive Officer.  Emuwa joined UBN after 25 years with Citigroup.

He is a graduate of Finance from the University of Lagos and holds an MSc. in Management from Purdue University’s Krannert School of Management.

Recent activities

As people around the world feel the impact of Coronavirus from all fronts, Union Bank of Nigeria Plc, recently enriched its customers and other Nigerians with a total sum of N15 million in its “Rise above the pandemic Challenge,” customer experience.

The objective of its customer experience initiative tagged “TheRiseChallenge,” is “to shine the spotlight on those who are doing all they can to rise above the Coronavirus pandemic, especially those thriving in innovative, charitable, creative and resourceful ventures .

For four weeks, the lender selected 10 of the most inspiring stories to share and reward, and each story selected, received N250,000 from Union Bank to support the work the promoters are doing to RISE above the pandemic.

Only recently, Union Bank donated a total of Three Hundred Million Naira (N300million) as part of its multi-pronged approach to tackle the spread of Coronavirus in Nigeria.The bank also contributed N250 million into the fund set up by the Private Sector Coalition Against COVID-19.

In addition, the bank also made a further donation of N50 million to the Lagos State COVID-19: Emergency Food Response programme which was setup to support low income families who were directly impacted by the state-wide restrictions in place to limit the spread of the disease. Lagos State currently has the highest number of COVID-19 cases in Nigeria.

Since March 2020, over 70 per cent of the bank’s workforce had been working from home, and this did not hamper service delivery as the lender’s branches remained open and fully operational during these COVID-19 crises. The bank had essentially activated its flexi-work policy for those employees who could still perform their duties remotely.

The lender in its six months interim results disclosed that the total cash reserve requirement increased from N296 billion as at December 2019 to N484.5 billion as at June 30th, 2020. It said the CBN had ‘restricted balances’ of N484.5 billion (December 2019: N296.043 billion) kept with the apex bank as at 30 June 2020. This means that the central bank has debited Union Bank N188 billion in additional CRR between January and June 2020. The bank reported a total customer deposit of just over N1 trillion, thus nearly 50 per cent of its deposits are with the CBN and cannot be accessed by the bank.

Financial performance

In its unaudited financial statements for the quarter ended June 30 2020, Union Bank said its profit before tax increased marginally to N11.3 billion, from the N11.2 billion it recorded in the first half of 2019.

Similarly, gross earnings climbed by 10 per cent to N79.9 billion in the period under review, compared with N72.4 billion it realised in the first half of 2019, just as its interest income improved by six per cent to N57.2 billion, as against the N53.8 billion achieved in the first half of 2019. The performance was driven by an increase in earning assets.

The bank’s  net interest income before impairment stood at N28 billion, which was an increase by 21 per cent, as against the N23.2 billion recorded in the first half of 2019, while its non-interest income rose by 22 per cent to N22.7 billion in the period under review.

In the same vein, the bank’s gross loans was up by six per cent, to N630.5 billion, while customer deposits in the period under review was N995.2 billion.

Commenting on the results, the CEO, Union Bank, Emeka Emuwa said “The impact of COVID-19 and associated movement restrictions on the bank and the wider economy has been broad. The total lockdown of major commercial centers Lagos, Abuja and Ogun and partial lockdowns across the country, slowed business operations in Q2 2020.

“Notwithstanding these significant headwinds, the bank delivered a 10 per cent increase in its top line revenue of N79.9 billion for H1 2020. In addition, net interest income before impairments is up 21 per cent to N28 billion and non-interest income up 22 per cent to N22.7 billion. The slowdown limited growth in key income lines including fees and commissions and cash recoveries.”

Further analysis of the lender’s financials shows that its half year 2020 results followed the same line of growth as the full year 2019.

For instance, in a notification sent to the Nigerian Stock Exchange (NSE), UBN said it recorded a 10.3 per cent growth in profit. The profit before tax as of December 31, 2019, was N20.35 billion as against the N18.45 billion that was achieved for the corresponding period of 2018.

In the same vein, the profit after tax for 2019 was N19.87 billion. This 9.8 per cent increase is against the N18.09 billion that was recorded for the corresponding period in 2018.

The gross earnings for full-year 2019 stood at N166.54 billion as against the N145.5 billion that was recorded for the corresponding period of 2018. This represents a 14.45per cent increase.

The net interest income was a 1.8 per cent increase to N52.5 billion   as of December 31, 2019, against the N51.6 billion that was achieved for the corresponding period in 2018.

The bank realised N11.3 billion from net fee and commission income for full-year 2019 as against the N10.9 billion that was recorded for the corresponding period for 2018.

The bank’s stock earlier in July 7 closed trading session on the Nigerian Stock Exchange at a share price of N5.45. Year to date, the stock has gained by roughly about 10 per cent.

Current assessment of rating agencies

Activities in the bank have not gone unnoticed by foreign and local rating agencies. For example Moody’s Investors Service on July 10, 2020 announced Completion of a Periodic Review of Ratings of Union Bank of Nigeria Plc.

According to the global rating agency, Union Bank’s B2 long-term local currency deposit rating is one notch above its b3 baseline credit assessment (BCA).

Moody’s recognised that the lender’s b3 BCA reflects its high asset risks due to huge concentration risks amid Nigeria’s difficult operating environment worsened by the coronavirus pandemic and depressed oil prices, as well as modest profitability.

It also understood that these challenges are counterbalanced by the bank’s stable deposit-based funding profile and satisfactory local currency liquidity that is supported by the bank’s solid retail deposit franchise.

Similarly, a recent report from the Nigerian based consulting outfit Augusto Consulting believes Nigerian banks may have no choice but to raise significant equity in 2020.

According to the report, banks are expected to have a net asset to total assets ratio of at least 12.5 per cent considering the effect of the crash in crude oil prices and the impact of COVID-19

Nigerian banks currently have on average 12.2 per cent net assets to total assets ratio and this is estimated to be 11.5 per cent in 2020.

Its total assets will include loans and advances, investments, fixed assets, cash etc.

The Central Bank of Nigeria assigns a Capital Adequacy Ratio of 15 per cent for Nigerian banks but as of December 2019, Union Bank was comfortably at 15.1 per cent very close to Zenith Bank’s 15.7 per cent.

Typically, a commercial bank’s financial strength is measured using a term called the Capital Adequacy Ratio (CAR).

In terms of other recognitions, Union Bank won three awards at the 2019 Sustainability, Enterprise and Responsibility (SERAs) Africa CSR Awards; Best Company in Environmental Excellence, SERAS Innovation Prize Award and the Second Runner Up award in the Most Responsible Company category.

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