Unity Bank projects negative growth in Q2 on continued asset deficiency

UNITY Bank Plc has forecast a negative performance across all its profitability lines in the second quarter (Q2) of the year as the bank continued to report asset deficiency in its financial position.

The bank disclosed this in its earnings forecast for Q2 2024, which was released on Monday, March 11.

Over the last six years, Unity Bank has raised concerns over its financial health as total liabilities have exceeded total assets (see the table below).


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In December last year, Unity Bank also projected a negative performance for the first quarter (Q1) of this year amid plans to shake off and completely reverse opposing financial positions.

In second-quater (Q2) 2024, the bank expects to post a loss after tax of N21.58 billion, a pre-tax loss of N20.75 billion, a net operating loss of N13.23 billion, and an impairment credit loss of N941.85 million.

Unity Bank also projected an N20.90 billion in revaluation loss, indicating that the revaluation and impairment credit losses would bring its bottom-line profit to the negative territory.

It put its gross earnings at N24.89 billion as the company swims to stay afloat.

Unity Bank also projected its net cash flow from operating and investing activities to be at a loss of N255.28 billion. In contrast, the loss in net cash flow is to be provided and used in its investing activities at N276.92 billion.

Unity Bank’s financial position in the last six years (Figure in N’B)
Year Total Assets Total Liabilities Total equity
2017 134,957,181 405,873,267 (270,916,086)
2018 210,800,841 495,175,495 (284,374,654)
2019 293,052,070 571,907,958 (278,855,888)
2020 492,020,329 767,430,125 (275,409,796)
2021 538,868,756 815,022,211 (276,153,455)
2022 510,143,959 785,092,126 (274,948,167)
Sept. 2023 423,351,773 613,575,114 (190,223,341)
Source: Unity Bank’s audited financial statements and interim report 

The ICIR reported that Unity had proposed a loss after tax of N8.49 billion, a pre-tax loss of N7.83 billion, and negative operating expenses of N7.404 billion and anticipated positive gross earnings of N21.56 billion in its Q1 2024 financial performance.

Some analysts believe that negative cash flow from investing activities has been challenging for the company, as it could be a warning sign that the bank’s management was not efficiently using its assets to generate revenue.

The bank has shown signs of financial distress since it started to report the following performances as total liabilities continue to exceed total assets, raising concern that it might default on its obligations to creditors and be headed for bankruptcy.

The bank’s managing director/chief executive officer, Tomi Somefun, had, in a statement to The ICIRsaid 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.

The negative performances of the bank have continued to erode shareholders’ funds. As of September 30, 2023, Unity Bank posted negative total equity of N190.22 billion as its total liabilities of N613.58 billion exceeded its total assets of N423.35 billion.

The bank has yet to release its fourth quarter/full-year financial statement for the year ended December 31, 2023.

A financial analyst who spoke anonymously with The ICIR said the negative worth of Unity Bank worries many people even though the central bank has yet to take action.

The analyst pointed out that Unity Bank is in a financial mess because of its asset structure. “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.”

“The owners (majority shareholders) of the bank are powerful people,” the analyst asserted, adding that there are rumours already of a merger.”




     

     

    A check by The ICIR on the bank’s Beneficial Ownership Register revealed it has six persons with significant control (PSC) whose names and identities were undisclosed.

    A PSC has directly or indirectly held at least a five per cent stake in the company and voting rights to appoint or remove a majority of the directors.

    The bank’s December 2022 financial statements indicated that no shareholders hold up to five per cent of the bank’s issued share capital of 11,689,337,942 units except for the Asset Management Corporation of Nigeria (AMCON) and a few other companies.

    AMCON holds 34.22 per cent, Panafrican Capital Nominee 12.67 per cent, Lighthouse Capital Limited 9.01 per cent, Ibad Limited 6.14 per cent and El-Amin (Nig.) Limited 5.27 per cent.

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