Unity Bank in crisis over N369bn bad loans

Unity Bank Plc is in serious crisis over N369 billion bad loans and continuous dwindling profits.
The struggling bank had in 2015 reported a N241 billion bad loans over deterioration in asset quality as capital adequacy ratio dip by negative 46.98 per cent in 2016 from 21.46 per cent in 2015.
Unity Bank Non-Performing Loan (NPL) ratio hits 97 per cent in 2016 from 77 per cent in 2015, the height in the banking industry and significantly above five per cent threshold of Central Bank of Nigeria (CBN).
The bank said it has taken a strategic step to reduce the high NPL ratio through the NPL resolution initiatives that have been embarked upon.
Those steps include, “commenced the process of NPLs sale initiative with initial application to the Central Bank of Nigeria (CBN), following which regulatory consent was received in March 2016. The Bank is currently at an advanced stage in the resolution of the NPLs challenges that are endemic in its credit portfolio.
The bank explained that the exercise has achieved, “Proper due process of financial due diligence through a reputable international audit firm and legal due diligence by a renowned legal firm in accordance with the directive of the Loan purchaser.
“As at February 2017, a “good faith” payment by the loan purchaser has been received representing a percentage of the initial consideration to the Bank in respect of the transaction and execution of Completion Timetable for the final Loan Rights Transfer from the Bank to the purchaser with closure date in the second quarter of 2017.”
The bank maintained an actively managed capital base to cover risks inherent in the business and meet the capital adequacy requirements of the local banking supervisor.
According to the bank, “The adequacy of the Bank’s capital is monitored using among other measures, the rules and ratios established by the Basel Committee on Banking Supervision (BIS rules/ratios) and adopted by the CBN in supervising the bank. During the past year, the Bank had complied in full with all its externally imposed capital requirements.
“The Bank had serious discussions with several private equity interests with the view to injecting substantial capital into the system. Due diligence has largely been concluded by all parties and the Bank has received several Binding offers that are currently being reviewed and considered. It is expected that this exercise will be concluded by the second quarter of 2017.
“NPLs sales proceed with initial consideration payment of N6.43 billion and cash flow waterfall of circa N60 billion over the 5-year period. The cash flow will impact on capital positively over the period which will benefit the entire shareholders of Unity Bank (both existing and potential investors).
The bank in 2016 loans and advances moved to N378.8 billion from N311.9 billion in 2015, while impairment on loans gained 92.7 per cent to N211.8 billion in 2016 from N109.9 billion in 2015.