Union Bank’s annual profit doubles as trading income hits N24bn

From Abubakar Yunusa, Abuja

Nigeria’s second oldest lender Union Bank built a more than two-fold surge in net profit substantially from a strong net trading income in 2022, it’s audited financial report has shown.

Standing at N23.6 billion, net trading income – the money earned from transactions in financial instruments –accelerated by 173.3 per cent compared to interest income, typically the biggest contributor to banks’ revenues, which only grew by 29.5 per cent.

Within the period, many other banks boosted profit through hikes in lending rates that enabled them to charge more for loans.

Gross earnings were up by 18 per cent at N209.1 billion, noninterest income contributing twofifths of that, according to the audited financial report published on Wednesday.

The bank’s impairment charge, which accounts for the cash it provisioned for defaults by borrowers, totalled N3.2 billion in contrast to a net impairment reversal of N34 million a year earlier.

Net fees and commission marginally declined by 6.6 per cent, following a drop in creditrelated fees and commission.

“In 2023, we will remain focused on executing our strategic initiatives, which are centred on pursuing additional opportunities to diversify our revenue sources while strengthening our core business,” said Mudassir Amray, Union Bank’s managing director, in a separate document.

“We also look forward to completing the merger of Union Bank of Nigeria and Titan Trust Bank, which began in 2022,” he added.

The business combination involving the two lenders is to be delivered this year, well over a year after the deal of relatively new Titan Trust acquiring Union Bank was announced.

Last year, a board member of

Union Bank who does not want his name in print, told Nigerian online newspaper that the corporate name “Union Bank” will be retained after the merger.

Titan Trust Bank, a subsidiary of the conglomerate TGI Group, backed by Dutch-Nigerian magnate Cornelius G. Vink, has 94.1 per cent ownership in Union Bank.

After-tax profit for the period climbed 131.6 per cent to N39.2 billion from N16.9 billion a year earlier.

The bank is not paying dividend for 2022 the same way it did not announce cash rewards for shareholders for 2021, according to its annual report.

Nigerian Breweries laments dollar scarcity amid hike in cost of raw material

From Abubakar Yunusa

Abuja

Nigeria’s prolonged foreign exchange squeeze is forcing its biggest beermaker to source raw materials at phenomenally high costs, Nigerian Breweries CEO Hans Essaadi told journalists in Lagos Wednesday.

Cost of sales spiked by 21.8 per cent or N60.4 billion in 2022, driving margin low and hurting gross profit, as the company now deploys tough measures to keep operations going,

“We’ve been faced and we are not going to stop being faced with a very significant storm,” Mr Essaadi said on Wednesday at a media briefing preceding its annual general meeting.

He remarked that Nigeria’s foreign exchange crisis in 2022 caused a shortage of dollars and euros for a business where “roughly 50 per cent of our input costs is imported.”

The condition reflects the ordeal of many manufacturers in Africa’s largest economy who turn to the parallel market, where the dollar sold for N740.6 at 11:05 WAT, according to @naira_rates, compared to N462.5 on the official market because the latter did not have enough to meet demand.

This month, the World Bank stated in its publication Africa Pulse the naira shed 10.2 per cent against the dollar in 2022.

But that could be way higher considering that the exchange rate used by such organisations in their reviews belongs to the autonomous forex market, a window closely controlled by the government, unlike the parallel market rate, which is driven by the forces of demand and supply and is more widely used.

The dilemma has sharply shot the brewer’s outstanding payable for business-critical imports upward, with overdue debt to Ibecor, its overseas buying agent, now as high as €110 million.

To settle the debt, Nigerian Breweries is looking unto Heineken NV, its parent company, to convert the credit to an intercompany loan, a lifeline the consumer goods giant hopes to get around May.

Heineken majority-owns the company, holding about 54 per cent of the issued shares. According to a presentation slide, that urgency needs to be quickly addressed to avert a partial or total shutdown of operations.

Meanwhile, the company is partnering with New York-based Africa-focused renewable energy developer CrossBoundary Energy for two solar power projects, eight and a half times the size of a football field, said Martin Kochl, the supply chain director.

“CrossBoundary Energy will fully finance the development and construction of the Ibadan and Ama renewable energy facilities, and will operate both facilities as part of a 15-year solar services agreement with NB,” the company stated on its website.

The sustainability move is targeting 10-gigawatt hours of electricity for both plants.

Through the solar and battery storage hybrid system, Nigerian Breweries expects to pare down carbon emissions by 100,000 tonnes as long as the plants exist in a push to dilute its energy mix further and boost its climate credentials.

But the energy ambition is much larger with a power purchase pact with Konexa that will fully convert the energy source for operations at the two breweries in Kaduna to hydropower already in place.

That is being extended to its distribution chain where a good number of trucks are set for conversion to gas from diesel, whose price jumped by almost threefold in 2022 alone.

The brewer, which grew property, plant and equipment by about 40 per cent or N101.8 billion last year, committed a huge investment to the extension of Ama plant, the biggest of its nine factories.