Unity Bank Plc shareholders have voiced severe concerns about the bank’s current issues, urging the board and management to address them as soon as possible.
The lender’s shareholders announced this at its 15th Annual General Meeting (AGM) on July 1, 2021, held at its offices on Plot 42, Ahmed Onibudo Street, Victoria Island, Lagos.
The shareholders expressed concern during the AGM, which was live online and monitored by E-NIGERIA! Newspaper, that the board had failed to locate a suitable investor to preserve the bank from collapse.
Mrs. Adebisi Bakare, the national coordinator of the Pragmatic Shareholders Association of Nigeria (which represented over 30,000 bank shareholders), spoke on behalf of her group and expressed concern about the bank’s auditor, KPMG, raising a red flag. She also inquired about the board’s plans to fully recapitalize the bank.
“I’d like to discuss the external auditors’ report on important points relating to material uncertainty connected to going concern,” she says. I’d like to know what the board and management are doing to address the concerns [made] about a N275 billion negative shareholders’ fund. I’m curious as to when the bank will be recapitalized. Are new investors expected before the end of this year or the beginning of next year? Furthermore, with the rise of cyber-attacks and fraud in financial institutions, how has our bank weathered the storm to protect the safety of depositors’ funds?
“What efforts is the board making to ensure the it has three independent directors, as required by CAMA 2020?”
Mr. Aminu Babaginda, chairman of Unity Bank, responded by saying, “Among other things, COVID has substantially slowed down the recapitalization process.” There were a lot of interested parties, and there are still interested parties that we are engaged with, and I believe that we will get there in due time, but we will not bring it to light until the discussions are completed.”
“The Chairman’s reaction is insufficiently comforting. It lacks the necessary conviction to relieve shareholders’ concerns, and that is my wory, according to another shareholder who spoke to us about the matter.
Mr. Kabiru, who was in attendance on behalf of other shareholders who were unable to attend due to COVID-19 restrictions, urged the management team, led by Mrs. Oluwatomi Somefun, to address the negative rumors about the company, saying, “We don’t want to hear anything bad about Unity Bank again.” We’ve had enough of the nasty news in the media, MD. We no longer want to hear terrible news about the bank; we want to hear positive news instead.
“I also want to make a plea to our chairman, who is a young man with a lot of enthusiasm and resources, to please help keep our bank alive.
“We are aware of what is going on in the globe and in the economy, as well as our earnings, which has decreased from N3 billion to N2 billion, and we are confident that the bank will survive, God willing. If I can’t say anything positive about this bank, I’ll keep my mouth quiet. To be honest, I am one of the company’s oldest shareholders. I’ve always worked for the good of this establishment. I’ve been banking with Unity Bank since I was in high school, and I’m still with the bank today; of course you can check my record. I don’t want this bank to fail I’m hoping that the bank’s problems will soon be forgotten.”
Meanwhile, as previously revealed by E-NIGERIA! (READ IT HERE), a detailed examination of Unity Bank’s records reveals that the bank is in desperate need of capitalization if it is to escape the CBN hammer.
Even Unity Bank’s external auditor, KPMG Professional Services, raised a red flag over the bank’s viability in 2019 and 2020, pointing out that the lender’s total liabilities exceeded its total assets by N279 billion and that it did not reach the needed minimum CAR of 10% for a national bank.
KPMG had warned that “a material uncertainty exists that may cast significant doubt about the bank’s ability to continue as a going concern.”
Agusto & Co. had also assigned a “BB-” rating to the bank, meaning that it is junk, which is below investment grade.
However, the board has expressed strong confidence that it would salvage the situation and get the financial institution back on its feet, but there seem to be no action to the promise.
In the 2020 reporting year, the auditor again warned about the persistent issue and in the results. It was noted that in the year, Unity Bank only managed a pre-tax of N2.1 billion, lower than N3.4 billion in 2019 and its total liabilities exceeded its total assets by N275 billion versus N279 billion in 2019, with CAR of -101.29 per cent as against -200.8 per cent in 2019).
“The lender, therefore, did not meet the minimum capital requirement and the CAR as stipulated by the CBN for a bank with a national banking license which is 10 per cent.
“The directors acknowledged that uncertainty remains over the timing of the recapitalization of the bank.
“However, the directors have reached an advanced stage with both local and multinational investors in the fund mobilization for the bank,” the results said.
In the last five years, the performance trend of the financial institution has hardly tickled investors and there have been patches of weaknesses here and there, indicating that all is not well with the bank.
For instance, its profit before tax slumped 82 per cent from N13.639 billion in 2014 to N2.342 billion in 2015. It also dropped by 22 per cent from N2.342 billion in 2015 to N1.816 billion in 2016.
In 2017, the bank had a loss before tax of N14.243 billion compared with the pre-tax profit of N1.816 billion in 2016 and in 2018, in its restated results, the bank recorded a loss before tax of N7.554 billion, but in 2019, it was a pre-tax profit of N3.642 billion and in 2020, it slumped to N2.223 billion.
A close look at the 2020 financial results of the bank showed that the lender has not recovered as its profit plunged again over credit and revaluation loss.
The lender’s profit dropped 38 per cent to N2.08 billion compared to N3.38 billion a year before.
The report of the independent auditors for Unity Bank, KPMG Professional Services, showed that as at December 31, 2020, the total liabilities of the bank “exceeded its total assets by N275 billion and the bank did not meet the required minimum Capital Adequacy Ratio (CAR) of 10 per cent and the minimum capital requirement of N10 billion for a national bank as required by the Central Bank of Nigeria (CBN).”
From the analysis of the results, the total assets of the lender stood at N492.0 billion in the period under review, while the total assets stood at N767.4 billion, with the CAR at -101.29 per cent. These indicators are worrying.
Earnings per share fell 38 per cent to 17.8 kobo per share from 28.9 kobo per share the previous year.
Personnel expenses rose by 10 per cent to N10.4 billion compared to N9.4 billion in 2019, while depreciation of property and equipment dropped to N1.69 billion compared to N1.7 billion in the same period of 2019.
The bank paid N22.1 billion income tax in 2020, a 38 per cent decline compared to N 36.2 billion paid the year before.
There are concerns among shareholders of the lender that there may not be time to achieve these lofty goals as last year, the lender had to receive a N50 billion short term loan from the CBN to meet working capital requirements and this credit facility is expected to mature on September 19, 2021. This loan and others have increased the debt of the financial institution.
A critical look at the financial statements in 2020 showed that Unity Bank is no longer enjoying the patronage of individual and government depositors, except for corporate depositors.
Last year, the deposits from the government reduced to N27.1 billion from N30.9 billion, while the deposits from individuals dropped to N99.1 billion from N123.0 billion.
Only deposits from corporate organisations rose to N230.4 billion from N103.8 billion and this contributed to the increase in the customer deposits of Unity Bank in the year to N356.6 billion from N257.7 billion in 2019.
The lender said its profit before tax dropped to N2.2 billion from N3.6 billion, while the profit after tax went down to N2.1 billion from N3.4 billion.