THE financial health status of Unity bank Plc has raised some unanswered questions about the risk exposure of shareholders’ and depositors’ funds as it posted an N62.64 billion loss in its 2023 financial year, The ICIR findings revealed.
The bank reported the loss in its 2023 annual report for the year ended December 31, 2023, released to the investing public on Tuesday, February 25.
A cursory look at the report shows Unity bank reported negative performance across its profit lines.
It posted a net operating loss of N28.59 billion in 2023 relative to a net operating profit of N28.47 billion in 2022.
Its operating expenses widened to N33.75 billion from N27.09 billion, while its loss before tax to N62.64 billion from a profit before tax of N1.101 billion.
Its loss for the year settled at N62.64 billion in the review year from a N941.38 million profit in 2022.
A further analysis of the Unity bank’s annual report showed it also reported a negative financial position, widening its debt obligation.
Its total liabilities widened to N799.46 billion, exceeding its total assets of N472.58 billion, resulting in a negative equity of N326.87 billion.
Compared to 2022, its debt obligation increased by 18.89 per cent from N274.95 in 2022 as total liabilities of N785.09 billion outdo its total assets of N510.14 billion.
The ICIR earlier did an analysis on the debt trend of Unity Bank which now shows that it had been for more than five years.
Its five-year summary shows that in 2019, Unity Bank reported a negative equity of N284.37 billion as total liabilities of N495.18 billion exceeded its assets.
In 2020, it posted a debt obligation of N278.86 billion as liabilities of N571.91 billion surpassed its assets.
In 2021, it reported a negative equity of N275.41 billion after its liabilities of N767.43 billion exceeded its assets.
Unity Bank has also been reporting operating losses in the past five years.
In 2019, it posted an operating loss of N20.71 billion. It widened to N19.59 billion in 2020, N23.24 billion in 2021, N27.09 billion in 2022, and N33.75 billion in 2023.
A financial analyst had told The ICIR that the negative worth of Unity Bank was a worry for many of its investors.
Its debt liabilities and poor financial performance have continued to create concern for investors who see this level of asset deficiency as worrisome.
Some analysts believe that the bank’s negative cash flow from investing activities has been a challenge, raising warning signs and pointing in the direction of management’s inefficiency in using the bank’s assets to generate revenue.
These signs of financial distress have raised fear that the bank might default on its obligations to creditors and be headed for bankruptcy.
In August 2024, following Unity Bank’s unhealthy financial position, the Central Bank of Nigeria (CBN) granted a lifeline to the bank to merge with Providus Bank Limited.
The apex bank anchored its action with the provisions of Section 42 (2) of the CBN Act, 2007, and said the merger was contingent upon its financial support, which was essential for the financial health and operational stability of the post-merger of the two banks.
The scheme of the merger, which has yet to be revealed to the investing public, analysts believe should be examined to understand the details.
A financial expert and capital market operator told The ICIR that shareholders of Unity Bank were pleased with the merger but expect a seamless transformative process that would be beneficial to all parties.
Another analyst who commented unanimously on Unity Banks’ financial mess said, “You can see that they have foreign currency liabilities more than foreign currency assets, so the value of those liabilities will increase more than the assets due to the devaluation of the naira.”
Shareholders said they are hoping that the bank’s merger with Providus Bank would reverse the trend of debts and poor financial performances.
As of December 31, 2023, Unity Bank’s shareholding structure reveals no shareholder held more than five per cent of the bank’s shares.
None of its board of directors except Halima Babangida held 0.33 per cent or 38,191,947 unit shares.
Its managing director/chief executive officer, Tomi Somefun, holds no single share in the bank having held the role since August 12, 2015, as the first woman appointed to that position in the history of the bank.
As of the end of the 2023 financial year, the Asset Management Corporation of Nigeria (AMCON) has the largest substantial stake with 34.22 per cent or 4,000,130,848 units of the shares of the bank.
Amid the Unity Bank’s financial mess, shareholders anticipate that the merger deal to lead to better performance for the bank.
“To us as shareholders, it is our earnest prayer that the merger talk between the two banks will be fruitful. It is better for us as shareholders than to see the bank go into liquidation or an unceremonious takeover by CBN.
“We look forward to much better merger talk that will remain promising, fruitful, and beneficial to us minority shareholders,” the national president of New Dimension Shareholders, Patrick Ajudua, said.