How FX liberalization policy of CBN costs Unity Bank N39.85bn loss in H1 2023

The Central Bank of Nigeria’s (CBN) foreign exchange liberation policy has cost Unity Bank Plc N39.85billion loss before tax in the unaudited half year ended June 30, 2023 result and accounts, as against N1.11billion profit before tax reported in the half year ended June 30, 2022.

The lender on Saturday on the Nigerian Exchange Limited (NGX) also announced N39.9 loss in the period under review as against N1.04 billion profit after tax reported in the corresponding period of 2022.

The bank’s profit for the period was impacted by foreign exchange revaluation on the back of CBN’s recent foreign exchange liberalization policy, resulting in a slide in our position.

Unity Bank declared a N36.05 billion foreign exchange revaluation loss in H1 2023 as against N16.23 million reported in H1 2022.

Aside from foreign exchange revaluation loss, Unity Bank declared N7.9 billion total operating expenses in H1 2023, an increase of 18 per cent from N6.71 billion in H1 2022.

Notwithstanding, the retail lender grew its foreign exchange trading income significantly by 17per cent to N239.8 million from N204.4 million in the corresponding period of 2022, underscoring the Bank’s strategic focus on diversifying and growing its earnings portfolio.

Similarly, fees and income commission also witnessed a 10per cent growth to N3.5 billion from N3.2 billion compared to the corresponding period of 2022, on the strength of the growing popularity of its digital banking platforms and customers’ acquisition in the retail space.

Unity Bank grew its deposits to N333.38 billion, representing a marginal increase of two per cent compared to N327.42 billion recorded in H1’22 in its Half-Year unaudited financial statement submitted to the NGX.

The growth in deposits demonstrates incremental gains by the lender from its commitment to deepening its retail footprint through a well-diversified banking product suite that caters to different segments of the retail market.

Other highlights of the unaudited financial statement include gross income and total assets which recorded N27.5 billion as against N27.4 billion and N512.1 billion from N510.1 billion respectively within the period under review.

The net loans portfolio reduced significantly by 31per cent to N198.6Billion as of June 30, 2023, from N289.4Billion as of December 31, 2022.

The Bank’s Non-Performing Loan (NPL) ratio remained moderate at below three per cent while the liquidity ratio stood strong at over 45per cent.

Commenting on the financial statements, the Managing Director/CEO of Unity Bank Plc, Mrs. Tomi Somefun in a statement noted that the significant disruptions that characterized the operating environment have impacted the positions of the Bank to the extent that we have constraints in income generation on the back of revaluation of the bank’s net foreign liabilities occasioned by the Naira devaluation during the period.

Tomi stated: “In the light of the prevailing FX revaluation in the financial system, what we have is a market-driven impact which is adjustable envisaged from the positive economic outcomes of the government policies in the near term. Be that as it may, the negative shareholders’ fund has improved considerably through the injection of N135billion which moderated the negative shareholders’ fund from (-ve) N275billion in the December 2022 financial year-end to (-ve) N178Billion at the end of June 2023, after absorbing the FX revaluation loss suffered in Q2/2023.

“We are, however, focused with clear-cut plans to close out on our recapitalization programme very soon to enable us to do business as expected in the fast-growing markets in Nigeria”

She further stated that while we remain optimistic that the government’s policy initiatives will lead to correction in the market, the Bank has accelerated measures to ramp up asset creation and liability generation in the short and medium term.

The Bank is aggressively driving its retail growth in every segment of the market, expanding strategic partnerships; and growing commercial banking business to develop new and sustainable income lines for the Bank as well as pay sufficient attention to fast-paced process automation, cost and resource efficiency, targeted value chain relationships, and product marketing to enhance value creation in the market.