Union Bank to boost profitability with N49.7bn rights issue

With the stage set for the raising N49.7 billion through right issues, issuing 12.1 billion ordinary shares of 50k each at N4.10 per share, Union Bank Plc is set to enhance its capital base as well as profitability.

The offer which opened on September 20, and will close on October 30 will give five new ordinary shares for every seven ordinary shares held as at August 21, 2017.

While addressing stockbrokers during the bank’s fact behind the offer in Lagos recently, Managing Director of the bank, Emeka Emuwa, said the proceed of the fund will be used to enhance the bank’s regulatory capital requirement, increase working capital, and sustain growth in strategic areas that correspond to emerging opportunities in the industry.

Emuwa said: “The proceed of the fund will be used for enhancing the Bank’s regulatory capital requirement, increasing working capital and grow in strategic area that correspond to emerging opportunities in Nigeria, enhancing technological platforms through strategic investments in technology and digitalisation, and optimising customer experience with investments in customer touch points.”

Furthermore, he added that the offer will improve capital adequacy ratio for the long term, and build a strong buffer for regulatory requirements.

“The fund will also create additional and grow risk assets in strategic market segments and sectors, thereby enhancing lending capacity. We aspire to be the leading mid-tier Bank by 2018, and a top tier Bank from 2021.”

Speaking on the use of the proceeds, he said about 80 per cent of the proceeds will be used as working capital, and subsequently deployed into six-priority areas, in line to key growth sectors of the economy and federal government.

These sectors include, Agriculture, Manufacturing, Solid Minerals, Services, Construction and Real Estate, and Oil and Gas. He added that 12 per cent invested in technology, innovation and digitalisation and eight per cent invested in customer touch points.

On the issue of paying dividend, Emuwa said: “We are going through a regulatory process to eliminate negative retained earnings, as this will enable us to pay dividend in the nearest future.”

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He pointed out that since recapitalisation, the bank has sustained its positive performance trajectory, noting that incremental capital will guarantee sustained growth and shareholder returns.

According to him, Union Bank’s share price appreciated by 61 per cent in the last 12 month with 26 per cent increase year-to-date.

He added that the recent trading performance of the bank on the NSE will be a core benchmark for shareholders considering participation in the rights issue.