Amray’s difficult task to reposition Union Bank

Mudassir Amray, CEO of Union Bank

By OKEY ONYENWEAKU

A mixture of optimism and anxiety gripped Union Bank shareholders about the sustainability of its future. Once again, another group named Titan Trust Bank limited (a subsidiary of TGI group), a relatively new entity in the Nigerian space and a much smaller bank acquired Union Bank.

This came 10 years after a consortium, Union global partners limited, Atlas Mara and others recapitalized Union Bank in 2012. Recently, new owners named TTB took over Union Bank’s board completely .

After paying N191 billion to acquire 89.39% of the shares, a new Board of Directors emerged comprising Mr. Mudassir Amray as Managing Director and Mr. Farouk Mohammed Gumel as Chairman of the Bank.

In the meantime, all former members of Union Bank’s board of directors have been retired. These include Mr. Emeka Okonkwo as Managing Director, Ms. Beatrice Hamza Bassey, Chair/Non-Executive Director; Mrs. Obafunke Alade-Adeyefe, independent non-executive director and Mr. Richard Burret, non-executive director. The others are Mr. Ian Clyne, non-executive director, Mr. Kenroy Dowers, non-executive director; Mr. Paul Kokoricha, non-executive director; Mr. Taimoor Labib, non-executive director; Mr. Mark Patterson, non-executive director; and Mr. Emeka Ogbechie Non-Executive Director.

But what was not made clear to market participants is why Atlas mara and co., the lead investor, sold? While BH is still searching for an answer, many believe that all the market involves is buying and selling, especially when there are profits to be made. But could this reason be enough for the attraction of disposing of such heavy stocks and embarking on other more profitable businesses? Many have asked.

Market observers recall that in the past 10 years, Union Bank has paid dividends only once. And this did not particularly impress the owners of the bank.

Nevertheless, commentators believe that the major investors may have divested either because they could not obtain the expected returns or because they were venture capitalists who made good returns in terms of earnings at the time. during the 10 years of investment and have decided to withdraw.

Expectations of shareholders vis-à-vis the new team
Change mostly comes with anxiety; that seems to be the mindset of Union Bank’s small shareholders right now. But there are subtle assurances that the new owners are not only competent bankers but also confident and wise.

There is a consensus that Mr. Tunde Lemo, former Deputy Governor of the Central Bank of Nigeria, also CEO of Wema Bank, who has been singled out among the new owners of the financial institution, ably understands the Nigerian operating environment and facilitate the process. rough edges if any.

One strength the previous management can boast about is that currently Union Bank seems to have recovered from its huge non-performing loans and has since returned to profitability.

A shareholder of the bank, Mr. Boniface Okezie told Business Hallmark that the new owners of Union Bank are investors looking for better returns. He said the new management team was however working hard to reposition the bank and make it stronger.

”We believe the new management team will transform Union Bank and make it more competitive. Union Bank is in the class of First Bank and UBA and it is the target of the new management. In fact, Union Bank is now expected to return to its rightful place,” Okezie said.

”I see the new owners reaping good results. The confidence brought by the new owners will certainly bear fruit. The bank will soon start to compete with companies like Zenith Bank and UBA,” also explained David Adonri, CEO of HighCap Securities limited.

Challenges

These are very difficult times for most businesses around the world, including banks. Mr Amray is expected to act almost magically at a time when the economy is unable to adequately support businesses. Banks are currently operating under very difficult conditions due to significant economic disruption caused by insecurity and political instability.

There have been business closures in parts of the North and Southeast that threaten the lives of businesses, even banks.

The negative impact of Covid-19 persists, disrupting the flow of businesses, funds, supplies, logistics among other related items around the world; these were also responsible for the weak economy. Other challenges are spiraling inflation, shrinking access to foreign exchange, defaults on loans and falling profits with threats of insolvency.

The CBN’s low interest rate regime, although recently adjusted down to 13%, is also not healthy for banks as reduced revenues and low profitability have followed. These dislocations have not only forced banks to close some of their branches in the far north of Nigeria, but travel is now restricted as bank workers and customers fear for their lives.

Remittances have plummeted, the price of crude, although currently high at over $100 a barrel, continues to fluctuate, falling incomes, high unemployment and biting poverty have all conspired to keep the economy and , by extension, banks. More worrying is that the government is in debt to the tune of N41 trillion while still planning to borrow over N6 trillion to make up for the budget shortfall in 2022.

Just recently, Fitch Ratings warned that the operating environment for banks in Nigeria could deteriorate in 2022-2023 given the adverse global economic conditions impacting the local economy. There are serious pressures on banks’ profitability and asset quality, the report notes.

Many banks have recently cried out that AMCON fees are becoming worrisome for their ability to deliver good returns to investors.
These challenges and many more await the new management team of Union Bank led by Amray as the days go by.

Performance

The bank’s first quarter result ended March 31, 2022 showed gross profit rose to N42.9 billion in 2022 from N36.4 billion in the first quarter of 2021.

Top line growth was driven by strong on-lending revenues to key sectors of the economy.

A critical look at its results shows that net interest income after writedowns also increased by 27% to 12.9 billion naira in the first quarter of 2022 from 10.1 billion naira in the first quarter of 2021.

While non-interest income fell 19.1% to 11.5 billion naira from 14.2 billion naira in the first quarter of 2021, pre-tax profit also fell 8.8% to 6, 4 billion naira in the first quarter of 2022, compared to 7 billion naira in the first quarter. quarter 2021.

Further details reveal that operating expenses increased by 3.9% to N18 billion from N17.3 billion. Gross loans fell to 882.9 billion naira from 899 billion naira in December 2021. The non-performing loan (NPL) ratio remained stable at 4.3%.

Emeka Okonkwo, former Chairman and Chief Executive Officer of Union Bank of Nigeria (UBN) Plc, said: “In 2022, we renewed our focus on turbocharged productivity and ensured that we fully leverage the strength of our digital channels, our regional network and our talents to maximize the fund. line.

“Our efforts are gaining momentum and despite a difficult economic climate in the first quarter of 2022, our net interest income after impairment increased by 27% compared to the same quarter in 2021, from 10.1 billion naira to 12.9 billion naira. Gross revenue also increased by 18% to N42.9 billion from N36.4 billion in the first quarter of 2021.

This was reinforced by improved asset returns, treasury trading revenue and revenue from our alternative channels. We are seeing a steady increase in customer adoption with a 36% YoY increase in active users on UnionDirect, our agency banking network, and an increase in transaction volumes with 20% YoY growth annual on our digital channels.”

Union Bank’s five-year performance from 2017 to 2021 revealed that profit before tax increased from N13.008 billion in 2017 to N20.690 billion in 2021. Net operating profit increased from N105.964 billion naira in 2017 to 100.1 billion naira in 2021.

Remember that after half a century of domination of the local banking system until the mid-1980s, the bank gradually saw its relative market disappear. Nevertheless, in recent years, the institution has regained lost vigor and has begun to sprint at an impressive pace with aggressively growing gross profits and operating margins.

At a time of economic weakness and political instability where it has been difficult for companies to continue to exist as going-concern companies, UBN has bucked common boardroom trends by showing an ability to take on the vigor to achieve solid quarterly performances. But the concerns are still there.

After the intervention of the CBN in 2009, the bank emerged from the burden of toxic assets, poor governance as well as weak leadership etc. and began charting a new, direct path to funfair-free profitability.

Stock performance

Shares of Union Bank had reached an all-time high of N43.90 per share as of March 5, 2008. It was a boom time in the equity market. On February 27, 2009, the share price had plunged to 13.38 naira per share. Since this year, shares of Union Bank have hovered between N5 and N6.00 before closing on Friday July 1, 2022 at N6.15 per share.
Can Mudassir Amray take Union Bank to greater heights

Amray has just emerged as the new chief executive of Union Bank following the completion of its majority share acquisition by Titan Trust Bank Limited, a subsidiary of TGI Group.

Amray has experience in foreign and local banks, which has helped strengthen his grip on leadership and decision-making
He earned his Bachelor of Commerce degree from the National College, University of Karachi, then went further to earn an MBA from the University of Santo Tomas.

According to analysts, Amray is a seasoned banker with more than 25 years’ experience in senior management positions and a proven ability to adapt across six geographies, including the United States, Nigeria, Malaysia, Hong Kong, Singapore and Pakistan.

His experience spans corporate banking, investment banking, treasury, trading and some retail banking.

He worked for Citibank New York for many years and held various management positions before joining TTB. He had also worked in other foreign and local banks during his career.

About Meredith Campagna

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