Tier two lender, Union Bank may be considering a Eurobond raise, according to reports by Reuters. Citibank and Renaissance Capital have also reportedly been appointed as advisers to the transaction. The bank in December last year concluded a ₦50 billion rights issue. Proceeds of the rights issue, are to be channelled towards boosting the bank’s capital base and lending to the agriculture sector. Funds raised from the bond will be applied to the same objectives.
Why the move?
The bank is taking advantage of relatively cheap interest rates in the United States before they go up later in the year. Foreign exchange rates in Nigeria are currently stable, due to improved crude oil earnings. Crude oil prices have recovered from less than $40 a barrel in 2016 to over $70 barrels this year. Nigeria
Improved macroeconomic fundamentals mean businesses will slowly move towards expansion mode. Figures released by the National Bureau of Statistics (NBS) this week, show Gross Domestic Product (GDP) growth hit 0.83% for 2017. The economy slipped into a recession in 2016, due to a drop in crude oil prices and production volumes.
Tier two banks had a tougher time dealing with the crisis, and several of them have had to embark on a capital raise. Diamond bank, disposed of its non-essential assets to boost its capital base. Several of them, may not pay dividends for the 2017 financial year due to recent guidelines issued by the Central Bank of Nigeria (CBN).
Union Bank closed at ₦6.75 in yesterday’s trading session on the Nigerian Stock Exchange up 3.85%. Year to date, the stock is down 13.46%
Results for the 9 months ended September 2017 show Gross Earnings increased from ₦94 billion in 2016 to ₦109 billion in 2017. Profit before tax, however, fell from ₦13.2 billion in 2016 to ₦12.4 billion in 2017