If I was told to predict Union Bank’s results at the end of the year ended December 2012, I would have lost out horribly. To explain what I mean, at my review of Union Bank’s Half year result for 2012, the bank’s net interest income was N44billion, 14% less than 2011. At the end of 2012 Interest Income had jumped to N93billion….adding an extra 49billion in the last six months of 2012.
On the result
On the back of its improved Gross Earnings, Union Bank is back to profitability posting a pre-tax profit of N9billion (EPS of 61kobo) at the end of the year following the over N107billion loss it posted in 2011. The first step on the long walk to getting back to profitability and creating shareholder value is well on track. Their Gross Earnings puts them ahead of Stanbic Bank and just behind FCMB. Net Interest margins is well above industry average and the bank’s total loans is currently less than its total equity. Margins are still very much thin as operational expenses continue to eat deep into revenues, slicing off 91% of operating income.
Despite the seeming effective rebuilding process, Union Bank still isn’t a bullish proposition in my opinion. The bank is still weighed down by huge negative distributable reserves of about N265billion to contend with. A clear cut plan explaining how it intends to set this off against premium is ket to his ability to repay shareholders some returns on their investment. Its huge and aging work force is still a worry coupled with its antediluvian perception amongst the younger generations of depositors.
Their share price has declined month to date by N10.20 to N8.60 as at April 29, 2013. Price Earnings is like 19x and about 1.8billion of the stock is traded monthly on average according to Bloomberg. Price to book ratio is just about 0.76. Some might find this metric enticing and find a buying opportunity whilst some may just see the stock as over priced. This stock should be trading at about N2.50 at the most. For me, I’d wait on the sidelines. There are better opportunities out there.
Union Bank Plc Audited Accounts for 2012 is posted on the website of the NSE