Union Bank Declares Over N39bn Profit in 2022, But There's Big Trouble Ahead

• Union Bank of Nigeria has reported an impressive increase in profit after tax payments for 2022, ending in December
• The bank also reported improvements in key metrics of its financials, from earnings to interest income
• Despite the positive results, Union Bank is facing severe challenges, including a massive increase in its non-performing loans and a pending judgment debt

Union Bank, one of Nigeria's oldest financial institutions, has announced an impressive improvement in its financial results for 2022.

According to the bank's audited financials submitted to the Nigerian exchange, its profit after tax payment for December 31, 2022, amounted to N39.18 billion, a substantial increase from N16.9 billion in the previous year (2021).

The 106-year-old bank also reported a 19% increase in gross earnings to N208.2 billion, primarily driven by solid growth in net interest income.

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Net interest income, which includes money made from loans to customers and other assets, also increased by 33% to N59.1 billion.

Furthermore, Union Bank reported an 11% increase in gross loans, which grew to N1 trillion as the bank expanded lending to vital economic sectors of opportunity.

While customer deposits also rose by 9% to N1.48 trillion, thanks to the bank's expanded product base and digital channels.

The bank also reported that its total assets increased from N2.56 trillion to N2.79 trillion in 2022.

Troubles ahead for Union Bank

However, it's not all good news for Union Bank, as the institution faces severe challenges.

Firstly, the bank recorded a significant increase in non-performing loans, rising to N40.27 billion from N38.6 billion in 2021.

In addition, there is a pending court case where the bank is expected to pay a judgment debt of N1.495 trillion.

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Should the bank lose its appeal and be asked to pay the full amount, its total assets will decrease from N2.79 trillion to just N1.30 trillion, which could significantly destabilise the firm financially and render its capital base insufficient.

A part of its financials written by its auditor EY reads:

"The Bank faces several legal actions with contingent liabilities of N1.497 trillion as of December 31, 2022 (compared to N1.98 trillion in 2021).

"In the most significant case, the Bank and co-defendants were awarded judgement of N1.495 trillion by a Federal High Court, but the Bank has appealed and the case is pending before the Supreme Court.

"In another case involving Petro Union, the Bank's initial application was dismissed, but it subsequently filed another application seeking leave to appeal the lower court's judgement.

"The Supreme Court granted the Bank leave to appeal the judgement of the Court Appeal, and the Bank filed an appeal on May 5, 2022, although a hearing date has not yet been set.

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"The potential liability associated with these legal actions was deemed a key audit matter, and the directors determined that no provision was required in the financial statements."

List of 45 failed banks in Nigeria and dates of closure

In another report, Legit.ng revealed that in the last 28 years, approximately 46 commercial and merchant banks have closed down for various reasons.

The banks had their licenses revoked by the Central Bank of Nigeria between 1994 and 2006.

United Bank of Africa and Ecobank took control of the failed commercial banks.

Source: Legit.ng