UNION BANK'S SMALL BUT MIGHTY IMPAIRMENT

Compared to 38.3% growth in loans and advances to N507,190m in a troubled economy, Union Bank Nigeria PLC's  66.9% increase in impairment provision to N16,582m did not seem huge but as it turned out, it tilted the bank's bottom line downwards in 2016.


From the audited figures released recently, gross earnings had closed the year only 8% up at N126,590m  and impairment provision turned out to be lone expense that was way ahead of this growth 

Personnel cost had risen by 3.97% to N31,234m; Other operating expenses had grown by 8.55% to N25,860m leading to only 7.17% increase in non impairment overheads.

Much earlier, interest income had risen by 7.81% to N98,002m while being generated using N32,963m interest expense, down 6.41%.

True, gross earnings had been dragged down by 9.36% drop in Other operating income to N10,350m and 2.71% decrease in trading income to N5089m but it was well boosted by 37.4% rise in fee and commission to N10,577n and 41.3% increase in fair value income to N2572m 

Hence in the end, impairment provision was the main factor behind Union Bank's 6.7% increase in profit before tax to N15 738m.

This growth rate was behind gross income growth and so, inevitably, the bank's bottom line dropped to 12.4% compared to 12.6% in 2015.

Let's concede though that achieving even that in Nigeria of today indicates some resilience which Union Bank, still struggling to come back to top three in the industry, more than needs in abundance.

UNION BANK: Nm Full year.
                           2016.           2015
Gross income 126590.    117211
Interest inc.       98002.      90902
Interest exp.      32963.      35219
Impairment.       16582.       9948
Fee& Comm.      10577.       7697
Trading income.  5089.       5231
Fair value inc.       2572.      1820
Other op. Inc.     10350.    11419
Personnel.          31234.    30041
Other op. Exp.    25860.    23823
Profit B4 tax       15738.    14756
Margin%                 12.4.       12.6
Loans & Adv.    507190.  366721

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