How Union Bank Increased Profit By 127% To N12.6 Billion
Union Bank of Nigeria Plc had a strong first quarter of 2023, with after-tax earnings rising by 127.6% to N12.6 billion according to recent study.
The increased performance, according to information obtained from the Nigerian Exchange Group, was fuelled by a windfall of N17.9 billion in net trading gains brought on by rising gains from fixed-income securities.
According to The News Chronicle’s research, the bank’s net trading income increased by a factor of more than five compared to the same amount in the prior fiscal year. The remarkable expansion in non-interest earnings more than made up for the weakening interest margin, which was mitigated by this trend.
At the end of the first quarter, non-interest income increased by 122.7 percent quarterly to N25.6 billion.
This was fueled by the trading portfolio’s good performance as well as other revenue streams including fees and commissions.
Further research revealed that the bank’s net trading income rose by 173.3 percent over the previous two years to N23.6 billion in the fiscal year 2022. Despite the difficulty of low-interest margins, this development has helped to increase the bank’s operating figures.
The bank’s cost of funds grew by 64 percent quarter-over-quarter in Q1 2023 compared to 26.6 percent in 2022 due to a number of variables, including the rising cost of money in the Nigerian economy.
Mudassir Amray, managing director/CEO of the bank, reported that Q1 2023 saw an increase in new-to-bank customers across several locations despite the rise in the cost of funds. The deposit portfolio increased by nearly N150 billion, or N1.63 trillion, as a result.
In the first quarter of 2023, interest income increased by 25.6%, but interest expenses increased by 2.5 times more. As a result, net interest income fell by 26.6 percent to N9.8 billion.
Additionally, from N375 million in the first quarter of 2022 to N2 billion in the first quarter of 2023, the net impairment charge for credit losses increased. This further decreased net interest income, which now stood at N7.7 billion, down 40.3% from the previous quarter.
The primary causes of the reduction in net interest income in Q1 2023 were the slowing growth of interest income and the rise in credit losses.
In order to improve its financial performance in the upcoming quarters, analysts predicted that the bank would need to find measures to boost interest income and lower credit losses.
The bank’s management encountered a problem in the first quarter of 2023 because interest earnings did not increase quickly enough to offset rising interest costs and charges for loan impairment. This resulted in a decrease in net interest revenue, which might have hurt the bank’s earnings.
To counteract the drop in net interest revenue, the bank’s net trading income climbed dramatically in the first quarter. This contributed to a 32.2 percent increase in operating income together with strict control of operational expenses.
The bank’s gross profits rose dramatically in the first quarter by 50.9 percent. The trading portfolio’s and other income streams’ good performance served as the driving force behind this.
Despite the difficulties it encountered, the bank’s financial performance in Q1 was excellent overall. The management of the bank is certain that it can increase profits in the upcoming quarters.
