UNITY Bank Plc shows signs of financial distress as its total liabilities exceeded total assets in its half-year results, raising concern that it may default on its obligations to creditors and be headed for bankruptcy.

The bank’s unaudited financial statements for the six months ended June 30, 2023, showed that total liabilities at N688.826 billion exceeded total assets at N509.998 billion.

Checks by The ICIR on the company’s profit lines revealed that the bank posted negative growth.

Financial analysts say the bank’s position could cause a publicly traded company to be delisted from a stock exchange.

Unity Bank reported a negative net operating income of N23.359 billion, a loss before tax of N38.705 billion and a net loss of N38.865 billion.

In its 2022 audited results for the year ended December 31, 2022, and 2021, the 17-year-old lender also posted negative performances as liabilities exceeded its assets.

In 2022, the bank posted an unfavourable financial position as the total liabilities of N785.092 billion exceeded its total assets of N510.143 billion by N274.948 billion.

In 2021, the bank reported a similar unfavourable financial position as total liabilities at N815.022 billion exceeded its total assets at N538.868 billion by N276.153 billion.

In its 2022 independent auditor’s report signed by its professional services chartered accountants, Akinyemi Ashade, KPMG raised concerns over the bank’s financial health after total liabilities exceeded its assets.

The KPMG noted that Unity Bank did not meet the required minimum Capital Adequacy Ratio (CAR) of 10 per cent and the minimum capital requirement of N25 billion for a national bank as required by the Central Bank of Nigeria.

Pointing to Note 35 in the financial statement, it said the conditions and other matters outlined in the note indicated a material uncertainty that might cast significant doubt on the bank’s ability to continue as a going concern.

“We draw attention to Note 35 of the financial statements, which indicates that the bank made a profit of ₦941.4million for the year ended 31 December 2022. As of the same date, the bank’s total liabilities exceeded its total assets by ₦274.9billion, and the bank did not meet the required minimum Capital Adequacy Ratio (CAR) of 10 per cent and the minimum capital requirement of ₦25 billion for a national bank as required by the Central Bank of Nigeria (CBN).

“As stated in Note 35, these events or conditions, along with other matters as set forth in Note 35, indicate that a material uncertainty exists that may cast significant doubt about the bank’s ability to continue as a going concern,” KPMG noted.

Unity Bank had forecast gross earnings of N23.46 billion and profit after tax of N230.182 million for the second quarter of 2023.

TechCabal reported that Unity Bank, alongside TeamApt and Access Bank, were victims of a data hack, although the banks did not confirm this.

In a statement to The ICIR, the managing director/chief executive officer of Unity Bank, Tomi Somefun, said the operating environment impacted the positions of the bank in income generation on the back of the revaluation of the bank’s net foreign liabilities following the Naira devaluation.

She 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 December 2022 financial year-end to (-ve) N178Billion as 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 do business as expected in the fast-growing markets in Nigeria.”

She hinted that 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,” Somefun added.

Update: This report was updated to reflect the comment by Unity bank CEO, Tomi Somefun.