Hours after the Nigerian Stock Exchange (NSE) announced suspension of trading in its shares, along with five others, the board of Unity Bank Plc, on Thursday, November 1, 2018, presented its audited financials for the full-year ended December 31, 2017, as well as unaudited reports for the following three quarters.
A major high point of the audited report, was the drop in gross earnings and loss after tax of N14.917bn, from the previous N2.183bn net profit; just as the external auditors- Ahmed Zakari & Co, drew attention to the bank’s ongoing recapitalization plans, with prospective investors already undertaking due diligence on the bank. The recapitalization is geared towards reversing Unity Bank’s negative capital adequacy ratios, based on IFRS and CBN Prudential Guidelines impairment criteria.
The auditors also noted plans to clean up its Non-Performing Loans (NPLs) portfolio, with the disposal of N436bn toxic loans comprising commercial, insider related and intervention loans.
On the NPLs sale, the board had in the notes to the account explained that it obtained CBN approval as part of its recapitalisation strategies, “to dispose all its NPLs to an institutional assets management company.
“Consequently, upon payment of the initial consideration by the debt buyer, Loans and advances with a gross amount of N436bn have been derecognized, along with the associated IFRS impairment and Regulatory Risk Reserves. This follows the conclusion of the transaction in line with a Transaction Implementation Agreement (TIA) and a Sales and Purchase Agreement (SPA) signed with the institutional assets management company,” it added.
Gross earnings for the period stood at N89.988bn, slightly higher than the previous N84.02bn; helped by the interest and similar income of N86.629bn, up by N17.25bn or 24.87%, from N69.377bn. Interest and similar expense for the period stood at N35.452bn, an increase of N15.551bn or 78.14% over the N19.901bn reported in the corresponding full year of 2016; following which net interest income only crawled from N49.475bn to N51.176bn in 2017.
Fee and commission income was flat at N1.683bn, as against the N1.642bn in 2016; followed by the 99.75% slump in net trading income from N7.41bn to just N18.362m. Other operating income equally slipped by N3.997bn or 71.49% from N5.591bn to N1.594bn.
Total operating income therefore fell from N64.111bn to N54.473bn, representing a decline of N9.638bn, or 15.03%; the growth in impairment losses by N8.306bn or 23.12% to N33.254bn, as against N5.948bn in 2016. This resulted in net operating income of N10.218bn, down by 63.72% from N28.162bn.
Personnel expenses dropped slightly to N10.861bn from N11.634bn; depreciation of property and equipment dropped slightly from N1.727bn in 2016, to N1.602bn; while amortization of intangible assets increased slightly also from N192.626m to N194.719m. Other operating expenses slowed down from N12.792bn to N11.801bn, bring total operating expense to N24.46bn, down from N26.346bn; resulting in loss before tax of N14.242bn, from the prior year’s N1.816bn profit.
The rise in income tax expenses to N675.364m; compared to the Income tax credit of N675.364m, left loss after tax at N14.917bn, as against N2.183bn in 2016, translating to Loss per Share of 127.62 kobo, compared to 18.68 kobo.
A review of the bank’s balance sheet however paints an even gloomier picture, given the total assets of N156.506bn, down by N336.175bn or 68.23% from N492.681bn in the 2016 full year. Total liabilities declined to N398.699bn, from N409.574bn, with customer deposits falling to N252.31bn from N264.196bn.
Customer loans and advances slowed down significantly from N277.214bn to just N8.958bn, representing a drop by 96.77%, resulting in the negative shareholders’ funds of N242.193bn, which signals the bank’s need to recapitalize urgently; compared to the previous N83.106bn shareholders’ funds at the end of December 2016;” as a result of which Unity Bank had zero NPL and is in full compliance with regulatory criteria.