Facts Behind The Figures

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FACTS BEHIND THE FIGURESOF UNION BANK OF NIGERIA PLC

PRESENTED BY

G A T OBOHGROUP MANAGING DIRECTOR/CHIEF EXECUTIVE

10th September, 2002

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1.0 INTRODUCTION

DG of the NSE Management & Staff Doyen of the Capital Market Distinguished Stock Brokers & Dealers Members of the Press Ladies & Gentlemen

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INTRODUCTION (contd.)

In consonance with tradition and our faith in the Stock Exchange, we are here to make a full disclosure of the facts behind our success and financial performance for the year ended 31st March, 2002.

In spite of the tough challenges during the financial year, our bank returned an enviable result.

For an appreciation of the financial statements, permit me to review the economy and the banking industry during year 2001/2002.

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2.0 THE ECONOMY Performance of the economy was mixed: Real GDP was 4.2% as against budget of

5.0% though better than 3.8% for year 2000. Capacity utilisation was over 50%

compared to 38% in previous year Stock of External Reserves improved but

not as much as in 2000.

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Fiscal operations of the Federal Government worsened with a deficit of 4% of GDP.

Inflation reversed to the double-digit of 19% in 2001 as against 7% in 2000.

The growth in monetary aggregates surpassed the programmed rates.

Thus, Narrow Money (M1) grew at 28.1% as against target of 4.3%

Broad Money (M2) grew by 27.0% as against target of 12.2%.

The Economy (cont’d.)

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However, these growth rates indicated vast improvements over the rates of 62.2% and 48.1% respectively in year 2000.

Similarly aggregate bank credit grew by 76% as against target of 16%.

Government credit grew by 80%. Credit to the Private sector grew by 43.5%.


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Also during the period, the economy was, as usual,characterised by:– Weak real sectors– Poor socio-economic infrastructure– High import dependence– Widespread poverty– High unemployment rate– External debt overhang at US$29 Billion– Vicious armed robbery attacks, serial ethnic

killings, threats of strike by the Nigeria Police, etc.


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The table below summarises the hard figures for the economy in 2001 (in %, otherwise):

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Index Target Actual Comments M2 12.2 27.0 Expansionary M1 4.3 28.1 ExpansionaryAggregateCredit Growth 15.8 75.8 ExpansionaryCredit to FG 2.6 79.7 ExpansionaryCredit toprivate sector 22.8 43.5 ExpansionaryInflation 7.0 19.0 UnfavourableGDP 5.0 4.2 Under-

achievementExternal Debt - $28.5billion UnfavourableNaira ExchangeRate (End of period N/$) - 113.5 Very High

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Despite the gloom, there were positive signals:– Economic fundamentals remained very

strong.– The capital market exhibited a bullish

prognosis as epitomised in the capitalisation.– FG’s continued unbundling of the economy:

12 enterprises for privatisation in 2002. 24 in 2003, etc. NEPA to be broken into 18 separate companies.

– Also during the period, the supply of energy significantly improved nationwide

– Communications had a major improvement due to the liberalisation of the sector.


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3.0 THE BANKING INDUSTRY

Excess liquidity persisted and was aggravated by the Government’s expansionary fiscal operations.

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– Tinkering of IFEM guidelines and the subsequent introduction of the Dutch Auction System

Other significant measures:– Capital votes of Government parastatals

transferred to the CBN.

THE BANKING INDUSTRY (contd.)

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– Enforcement of the increase in capitalisation of new banks to N2 billion.

– Because of high risk of default, banks were forced to make provision of 50% and 100% on performing & non-performing loans to governments and their agencies.


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– Currently, 91 banks are operating in the Industry.

– To prevent a repeat of the generalised distress of 1990s, banks were forced to put in place a contingency plan on crisis avoidance and mitigation.

– In spite of all these challenges which confronted the Industry, Union Bank performed well as a financial power-house.


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Our institution has been around and operating in the Nigerian market for nine decades.

Hence, not only do we understand the environment, we have unequivocally been in the vanguard of developing and monetising the economy.

The current size of the bank has been made possible by the generations of management and staff as well as the loyalty & confidence of customers and shareholders.

4.0 THE BANK

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We remain focused in our vision of making Union Bank the “best of the best to bank on”.

THE BANK (contd.)

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5.0 OUR STRATEGIC FOCUS

Banking in 21st century is not the arm-chair scenario of the past.

Hence, the need to apply our creativity & doggedness

Our strategic focus has been programmed towards 5 main projects:

5.1 STALLION 2000 PROJECT Our renewal agenda code-named “Stallion

2000” started in 1998.

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We embarked on an aggressive programme of attitudinal change & paradigm shift involving:– Formal/informal training– New code of conduct– Effective communication– Re-energising and re-awakening the bank’s core

ideology To synchronise with attitudinal change we

embarked on– Physical restructuring of branches & head office departments– Process re-engineering

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We have now moved a gear up to start the cross-engineering of resources, facilities and locations.

Currently, 38 of our strategic locations are operating on-line, real-time.

OUR STRATEGIC FOCUS (contd.)

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5.2.1 UNION MERCHANT BANK LTD Union Merchant Bank Ltd witnessed a

dramatic improvement in its performance when compared with its peers in the industry.

It successfully consummated the largest State Bond ever on the Nigerian Capital Market.

It made a profit after tax of N557.7 million for year ended 31/3/02.

5.2 SUBSIDIARIES

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5.2.2 UNION HOMES SAVINGS & LOANS LTD Another subsidiary which continues to

dictate the tune in its sector of operations and setting the benchmark is Union Homes Savings & Loans Ltd.


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It has a network of 13 branches nationwide. During the financial year ending 31/3/02, it

returned a profit after tax of N488.2 million.

5.2.3 UNION TRUSTEES LTD Our subsidiary in the Trusteeship sub-

sector is Union Trustees Ltd. In keeping with its tradition of

steadfastness, during the financial year, it made a profit after tax of N76 million.

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5.2.4 UNION ASSURANCE COMPANY LTD Our insurance outfit has been making a steady

progress. In its financial year ending 31/12/2001, it made a

profit after tax of N12.5million. Ladies and gentlemen, we will continue our

strategy of building a financial hyper-market through the establishment of viable subsidiaries in sectors with new windows of opportunity.


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5.3 STAFF Our greatest asset is our staff and we

encourage their intellectual capacity building in terms of quality, efficiency and affirmative action.

An eloquent testimony to this intellectual capacity building and re-orientation of the bank is that today, Union Bank has the largest number of professionally qualified and chartered bankers in the industry.

OUR STRATEGIC FOCUS (Cont’d)

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And we continue to organise in-house and external courses to update staff knowledge about banking operations and practice.

Our industrial harmony has also been excellent which explains why we are not always in the news.


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5.4 BRANCH NETWORK

The bank continued to exploit the opportunity of economies of scale by expanding our branch network and those of subsidiaries.

The number of branches for the bank and the subsidiaries stood at 306 by the end of March 2002.

Our branch expansion policy is not limited to the domestic economy but off-shore as well.


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5.5 INFORMATION, COMMUNICATION TECHNOLOGY (ICT) PRODUCTS/SERVICES.

A major capacity issue for Union Bank is our information, communication and technology and the associated infrastructures.

New electronic products such as “Union e-link”, “Telephone Banking” and Automated Teller Machine (ATM) are currently riding on our Flexcube Banking Application Package and being enjoyed by our customers.

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OUR STRATEGIC FOCUS (cont’d)

Apart from having the highest traffic on our ATMs in the Industry, in addition to the current number, we are deploying 100 more ATMs nationwide to make financial transactions seamless for the banking public.

We are also a leading promoter of the electronic purse product - the Valucard.

Following this trend, we are converging towards the EMV-compliance.

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6.0 FACTS AND FIGURES:

6.1 BALANCE SHEET POSITION It is commonly observed that Union Bank

has a solid balance sheet, which makes it a bank of first choice whenever issues of safety, professionalism and public confidence are uppermost in the investors’ mind.

During the review period, our balance sheet constituted a significant proportion of the industry’s aggregates.

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FACTS (Cont’d)

Permit me, at this juncture, to discuss the most important items on the bank’s balance sheet:

6.1.1 TOTAL ASSETS The bank’s total assets remain the largest in the

Nigerian banking industry. It increased by 28% from N214.885 billion in 2001 to

N275.2 billion as at 31st March, 2002. This asset base is good and attractive given its

balanced portfolio spread.

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Such spread has always given a good mix between return and risk within the philosophy of Union Bank culture so as to retain customers’ confidence in the Big, Strong, Reliable bank.

The Group’s total assets increased by 26% from N238.3 billion to N300.0 billion during the same period.

FACTS (Contd)

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FACTS (cont’d)

6.1.2 TOTAL DEPOSITS The bank mobilised a total deposit of N204.3billion as

at 31st March 2002 which was a 20% increase over 171.0billion in 2001.

In a similar fashion the figure for the Group increased by 18% closing at N222.7 billion during the same period.

6.1.3 LOANS & ADVANCES Creation of credits especially to the real sector

remains a core function of our institution.

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The bank enlarged its lending portfolio to N45.5 billion which was a 23% increase over the N36.93 billion for 2001.

In year 2001, the Banking Industry set aside N6.2 billion to fund SME projects.

Considering that there are ninety-one (91) banks operating, the contribution of N741 million by Union Bank Group, representing 12% of the Industry total, is enviable.

FACTS (cont’d)

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And this year, we have set aside another N752 million making a total of N1.5 billion in two years from Union Bank and Union Merchant Bank alone.

The graph below gives the five-year summary of all the above growth indices:

FACTS (cont’d)

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19971998

19992001

2002

Capital Funds (Networth)

Total Loans & Advances

Total Deposits

Total Assets

85,850109,586

138,342

238,311

299,755

63,65483,093

102,774

189,605

222,718

23,36426,148

28,662 39,631 49,3826,338

9,15711,199 15,191

32,8960

50,000

100,000

150,000

200,000

250,000

300,000

Mil

lio

ns

of

Na

ira

Year

GROWTH INDICATORS

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FACTS (Cont’d)

6.1.4 CAPITAL ADEQUACY The bank’s called-up share capital

increased from N629 million in 2001 to N1.3 billion in 2002.

However, after the successful conclusion of our Rights Issue, the Tier 1 Capital and Shareholders’ Fund moved to the unassailable records of N28.8 billion and N30.3 billion respectively.

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The bank’s capital adequacy ratio as at 31st March 2001 stood at 14.4% but has moved up to 25.5% by 31/3/02 as against the recommended minimum of 8% by the Bank for International Settlement (BIS) and Central Bank of Nigeria (CBN).

A cursory look at the graph below shows the comfortable liquidity, Capital Adequacy and other health indicators of the bank in the past five years:

FACTS (cont’d)

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19971998

19992001

2002

31.8 32.66

46.3649.3

47.92

34.57

31.04

37.29

22.625.51

14.1

18.3 19

14.4

27.7

8.6

7.18

4.447.3

13.25

0

5

10

15

20

25

30

35

40

45

50

In P

erc

en

tag

e

Year

HEALTH STATUS INDICATORS

Price-Earnings Ratio

Capital Adequacy Ratio

Non-Performing Loans

Liquidity Ratio

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FACTS ( Cont’d)

6.2 PROFIT AND LOSS The Group’s earnings stood at N39.4 billion

during the period ending 31/3/2002 compared with N40.7billion for 18 months in 2001.

The major contributors to the bank’s turnover were the treasury operations, 44%; interest on loans and advances, 32%; commissions, 20%; forex, 1% and others, 4%.

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FACTS (Cont’d)

Our overhead expenses were largely affected by staff welfare and inflation as well as our contribution to the Pension Fund.

The net effect of all the statistics is the bank’s profit before tax of N7.5 billion representing 14% increase over N7.1 billion achieved in 2001.

The bank was able to return a profit after tax of N4.7 billion.

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FACTS (cont’d)

In a similar fashion, the Group’s profit before and after tax stood at N9.0 billion and N5.7 billion respectively.

The graph below shows the profit and earnings performance of the bank in the last five years:

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19971998

19992001

2002

Dividend

Profit After Tax

Value Added

53757014

9521

1939519107

1297 1924 3248

5767 5866

437881 1321

1888 31460

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

In M

illi

on

s o

f N

air

a

Year

PERFORMANCE INDICES AT A GLANCE

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6.3 APPROPRIATION Apart from the large corporate tax of over N2.8

billion, the bank is currently the largest single contributor to the funding of the Industry’s new initiative on Small and Medium Industries Equity Investment Scheme (SMIEIS).

The Bank set aside a total sum of N749 million , representing 10% of our profit before tax.

Adding the contribution of Union Merchant Bank Ltd, the Group’s total goes to an unbeatable figure of N752million.

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FACTS (Cont’d)

The recommended dividend pay-out to our shareholders is N3.15billion representing an increase of 67% over the 2001 figure and translating into a dividend of N1.25k for every 50kobo share held.

The sum of over N709 million was appropriated into reserves, thus confirming our belief in the adequacy and robustness of the bank’s core capital.

The graph below shows the dividend pay-out, earnings/share, dividend cover, net assets/share and stock price trend over the last five years:

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19971998

19992001

2002

Dividend / Share

Earnings / Share

Dividend Cover

Net Assets / Share

Stock Price

13.00

10.70 11.30

32.50

42.00

5.007.00 9.00

5.86

12.86

2.892.13 2.42 2.99

1.801.01 1.49 2.542.24

2.250.35 0.70 1.05 0.751.25

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

In N

air

a

Year

MARKET PERFORMANCE

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FACTS (cont’d)

THE AWARDS Several organisations have awarded Union

Bank honours in recognition of its contributions to the economy.

On the domestic scene, the bank monopolised the annual CBN Award for the best agriculture-supporting bank winning it again for the seventh consecutive year.

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“The Banker”, a subsidiary of the Financial Times of London only last week gave our institution the award of the “number one bank in Nigeria”. This is now the third year in a row that “The Banker” has so recognised Union Bank.

Also all the Rating Agencies in which we participated gave our Bank, a multiple “A” rating.

FACTS (cont’d)

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Above all, our Bank was also awarded the prestigious Nigerian Stock Exchange President’s Merit Award for the Banking Industry in year 2001.

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THE FUTURE We are not unaware of the numerous

challenges and adversities that lie ahead of the domestic banking industry but we are confident that we shall surmount them all, given the resources at our disposal.

Our Bank is poised to explore the limitless opportunities offered by the emerging train of globalisation in the market place.

The bank’s renewed focus on better service delivery and value creation for customers will now be pursued vigorously at all locations.

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We are also not complacent nor resting on our oars regarding competition and the insatiable demands from stakeholders.

We have a culture to repay our investors handsomely which informs the recommended pay-out of N1.25k. Therefore, you should continue to provide the right and dispassionate advice to your clients.

In spite of the current skirmish in our national polity, our bank remains focused and confident about the Nigerian economy.

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Distinguished market operators, Ladies and Gentlemen, the only thing I can now do is to assure you further that Union Bank will strive to maintain its leadership position in the industry while I admonish you all to continue your investments and business relationship with the bank and together, we shall reap the mouth-watering harvest in the current financial year.

I thank you for listening and God bless

G A T OBOHGroup Managing Director/Chief Executive10th September 2002

Business

Facts Behind The Figures