Bob Diamond’s Nigerian Bank sees lending book expanding 10-12% in 2018

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Lender writes down $177 million of non-performing loans

Union Bank Nigeria Plc, the Nigerian lender owned by Bob Diamond’s Atlas Mara Ltd., expects to boost lending for the rest of this year after a 64 billion-naira ($177-million) writedown in the first half caused its book to shrink.

UBN’s loan book will probably expand 10-12 percent this year by focusing on consumer goods, agriculture, agri-processing, services such as education and health, transportation, manufacturing and small businesses, Chief Financial Officer Oyinkan Adewale said on a conference call on Tuesday. It shrank 9 percent in the first half compared to the end of 2017 because of the write offs.

Statements from Oyinkan Adewale, the bank’s chief financial officer, for the first time since 2012 the group’s retained earnings moved from a negative to a positive position thus eliminating a major technical impediment to the payment of dividends.

Adewale, while giving more details on the H1 2018 numbers, noted, “With low-cost deposits now accounting for 70 percent of total deposits, up from 67 percent as at December 2017, our cost of funds fell in H1 2018.”

The banking group, with a capital adequacy ratio at 18.2 percent well above regulatory stipulation of 15 percent, reported a 25 percent increase in profit after tax to N11.5 billion in the half year ended June 30 2018.

Profit before tax rose 23 percent to N11.7 billion from N9.5 billion in the reporting period, just as gross earnings grew 16 percent to N83.3 billion from N72.1 billion in H1 2017 driven by a 10 percent increase in interest income and 37 percent increase in non-interest income.

Adewale said “the group’s operating expenses for the period were affected by some one-off items, as well as a combined 25 percent increase in NDIC premium and AMCON levy, adding that for the rest of the year the bank will intensify its cost rationalization initiatives.”

The group’s net interest margin also improved from 7.9 percent in H1 2017 to 8.2 percent in the period, as foreign currency deposits are up 66 percent, compared with December 2017; and up 40 percent compared with March 2018.

In his comments on the results, Emeka Emuwa, CEO said: “In the first half of the year, we have continued to see positive results from our efficiency and productivity drive. Across all our business lines, we witnessed strong underlying performance, translating into improved earnings.

“We continue to focus on the recovery of non-performing loans. With the resolution in Q2 2018 of the large real estate exposure which was impaired in December 2017, the group NPL ratio is down to 10.8 percent from 14.9 percent at 31 March 2018 and 19.8 percent at 31 December 2017.”

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