CFA- Analysis of Union Bank AFS ( 2010)

History of Union Bank

Union Bank is one of the oldest banks in Nigeria. It was established in the year 1917 as a colonial bank. In 1925, the bank became known as Barclays Bank resulting from its acquisition by Barclays Bank.
Following Nigeria’s independence and the enactment of the Companies Act of 1968, the bank was incorporated as Barclays Bank of Nigeria Limited (BBNL, est. 1969).
Between 1971 and 1979, the bank went through a series of changes including its listing on the NSE and share acquisitions/transfers driven by the Nigerian Enterprises Promotion Acts (1972 and 1977); this resulted in its evolution into a new wholly Nigerian-owned entity.
To reflect the new ownership structure, and in compliance with the Companies and Allied Matters Act of 1990, it assumed the name Union Bank of Nigeria Plc. (UBN “the Bank” or “Union Bank”).
In 1993, in line with its privatization/commercialization drive, the Federal Government divested by selling its controlling shares (51.67%) to private investors. Thus, Union Bank became fully owned by Nigerian citizens and organizations all within the private sector.

Following the banking crisis in 2009 and the intervention of the CBN via Asset Management Company of Nigeria (AMCON), the bank was recapitalized. The bank was recapitalized in 2012 with an injection of $500 million by Union Global Partners Limited (UGPL), a consortium of local and international investors.

Brief Analysis of the statement of financial position

The Bank Statement of Financial Position points to the fact that the bank has non-Income generating Assets to the tune of ₦211,107Bn. The implication of this is that the Bank has tied down its cash in assets that are not generating income for the bank. The bank would have to sell these assets to free up some cash to invest in the business.
The bank’s total asset reduced by 13.6% in the financial year under review. We can assume that this decrease was a result of a drop in tis managed fund. The bank’s cash at hand and cash with CBN dropped significantly. This also indicates that bank had some liquidity challenges . The bank’s liquidity ratio was 23% which was below the regulatory requirement of 25%
The bank’s liabilities show a decrease in its liabilities. The bank must have tried to her exposures by settling some of their obligations. This did not have a positive impact as the company still had a net liability to the tune of ₦ 115,788Bn.
The bank had more risk fund/Interest bearing liabilities. They were paying heavy interest on these loans.
The bank’s shareholders funds were below the regulatory requirement of ₦25B It was in a deficit of ₦ 115.79 billion as at the Dec 31st 2010. The Bank would need to clear the deficit and then bring in additional funds to be able to continue operations. The total sum of N140.78bn will be needed urgently by the bank to enable her function properly. T

The Central Bank of Nigeria was able to provide a loan to the tune of 120b to help the bank meet her liquidation needs.

The bank will also need to inject new capital either from existing investors or new investors.

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