Union Bank of Nigeria (UBN) Plc, one of Nigeria’s oldest surviving and most respected financial institutions, has recorded considerable growth in key performance indicators in the first quarter of this year, giving prospects of better returns for the 2018 business year.

The bank’s interim report and accounts for the first quarter ended March 31, 2018 showed that gross earnings rose by 15 percent while profits before and after tax grew by 16 percent and 17 percent respectively.

The first quarter earnings report, which was released alongside the audited report for 2017 yesterday at the Nigerian Stock Exchange (NSE), showed that Union Bank improved on its commendable performance in 2017.

The three-month report showed gross earnings of N39.5 billion in first quarter 2018 as against N34.3 billion in first quarter 2017. Profit before tax rose from N4.7 billion in first quarter 2017 to N5.4 billion in first quarter 2018. Profit after tax also increased to N5.3 billion in first quarter 2018 compared with N4.5 billion recorded in comparable period of 2017.

Chief Executive Officer of Union Bank, Mr. Emeka Emuwa, said the first quarter results reflected the bank’s renewed focus on driving efficiency and productivity with a view to fully leveraging resources including human, technology and new capital to maximize the bottom line.

“While we are just in the early stages of this drive, we are already starting to see positive results,” Emuwa said.

The top-line performance was driven by improvement in net interest margins from 7.1 percent to 8.7 percent and 18 percent increase in non-interest income due to enhanced trading income and increased volumes on alternate banking channels.

Interest income had grown by 14 per cent to N31.7 billion in first quarter 2018 as against N27.7 billion in first quarter 2017. Net interest income before impairment increased by 22 per cent to N17.8 billion in 2018 compared to N14.6 billion in 2017, driven by 14 per cent increase in interest income and a lower six per cent increase in interest expense. Non-interest income also rose by 18 per cent from N6.6 billion to N7.8 billion.

The audited report for the year ended December 31, 2017 showed that gross earnings rose by 26 percent from N126.6 billion in 2016 to N163.8 billion in 2017. Profit before tax was largely flat at N15.5 billion in 2017 as against N15.7 billion in 2016.

The CEO explained that the group’s non-performing loan ratio had improved to 14.9 percent by March 2018 from 19.8 percent at the beginning of this year, noting that the bank has continued to maintain aggressive focus on its impaired loans and is expected to resolve some large exposures in the course of the year, which will further drive down the ratio.

He added that the bank has been pushing strongly on debt recovery efforts across board including initiating or continuing legal action where necessary.

“For the first half of the year, we will continue to hone initiatives around our productivity drive, focusing our people on targeted opportunities across regions and optimising our technology and digital platforms to deliver operational efficiency and improved customer service,” Emuwa said.

Operational highlights indicated continuing success of the bank’s simple, tech-savvy growth strategy with 68 per cent increase in new-to-bank accounts, underlining customer acceptance of new products and increasing brand penetration.

The bank also saw 90 percent increase in volume of funds transfer transactions on its alternate channels, highlighting efficiencies gained from technology investments which are driving increased customer adoption. This led to 58 times increase in net alternate channel fee income, underlining efficiencies gained from investments in alternate channels.

Chief Financial Officer of Union Bank, Oyinkan Adewale said while the first quarter results reflected the adoption of International Financial Reporting Standards (IFRS) 9, which came into effect at the start of 2018, the bank’s regulatory risk reserve was adequate to absorb the impact of the new accounting rules.

“Our capital adequacy ratio (CAR) remains robust at 17.9 per cent in spite of the impact of IFRS 9 on impairments. Liquidity ratio is at 39.4 per cent, well above the minimum requirement, while net interest margin improved to 8.73 per cent in first quarter 2018 from 7.14 per cent in first quarter 2017,” Adewale said.

She noted that despite 19 percent and 27 percent increase in the bank’s Asset Management Corporation of Nigeria (AMCON) levy and Nigeria Deposit Insurance Corporation (NDIC) premium respectively, the bank’s operating expenses increased by only 10 per cent, reflecting management’s continuing focus on optimising operating costs.

“We will continue to be proactive in managing the risks in our business as we pursue targeted opportunities identified for growth,” Adewale assured.

UBN successfully raised about N50 billion in 2017 through a rights issue that was oversubscribed. This strengthened the bank’s capital base to support business growth and maintain regulatory capital requirements.