Unity Bank Plc released an advertorial in the Punch Newspaper on Tuesday warning debtors of the bank with “bad loans to come forward to regularise and make good their obligations to the Bank within 14 days”.
The Bank also warned that failure to do so will “leave the Bank with no option than to publish the names of all defaulters”. This is an unprecedented warning from the Bank and reminds us of the what Sanusi did in 2009 when he published names of defaulters who were owing failed banks. But why is Unity Bank going this far?
Why Publish names
The Bank did not give any reason for going this far. However, we can from the last result of the bank perhaps understand what the motivation for this could be. The Bank as at 2014 provided for credit losses (loan losses) of a whopping N15billion and another N21.5 billion in 2013. Both figures represent about 20% and 75% of equity for 2014 and 2013 respectively.
Such huge impairment charges are astronomical for a bank looking to rebuild its balance sheet and they just can’t let it go like that. By taking an impairment charge they have basically assumed it is lost. This could also lead to further impairment charges down the line as this typically may just be a tip of the iceberg.
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Warnings for defaulters
For defaulters, not paying means your names addresses, photographs of all account signatories, directors and guarantors of the bad loans will be published and sent to Foreign Embassies, CBN, SEC, NSE etc. We don’t know how much of an impact this threat it and wonder why they didn’t issue it during the election period.
Unity Bank recently embarked on a capital restructuring that saw it share outstanding shrinking thus sending the share price from 50kobo to N5. It has since dropped to by about half of that about since then.