Unity Bank Plc, one of Nigeria’s tier two lender may be on the brinks of collapse as Bank’s recently Q3 2018 results contained lots of pointers that should send shivers down the spine of investors.
Informations gathered show that retail investors in the bank are likely to lose their entire shareholdings if the bank is unable to generate enough profits to cover its N242 billion hole.
The results released the very day the Nigerian Stock Exchange suspended trading in the bank’s share contained a backlog of financial statements dating to the full year ended December 2017.
Total assets amounted to N254 billion while total liabilities stood at N496 billion. However, a cause of worry to investors was the bank’s total equity which stood at a negative of about N242 billion, suggesting that the bank is technically insolvent.
The bank’s results also include a negative retained earnings of about N338 billion as at September 30, 2018. The negative retained earnings of about N338 billion confirms that the bank will not be able to pay dividends until it is able to generate enough profits to clean up the accumulated losses.
The N338 billion in negative retained earnings also indicates that the bank had provisioned for most of its loans.
Investigation by National Daily revealed that the Bank had kept its results under the lid for months as speculations increased over a possible capital injection.
Despite not releasing its results for months, the Nigerian Stock Exchange allowed the stock to continue to trade allowing the stock to rise as much as N1.9 at the start of the year.
Managing Director of the bank, Tomi Somefun last week disclosed that the bank was in talks with several investors to inject funds, including the Asian Development Bank.
She, however, did not give a timeline for when this would be concluded.
Going by the balance sheet of the bank, investors will have to cough up about at least N250 billion to give the bank a lifeline.
In the event of the bank not being able to raise fresh capital, the Central Bank of Nigeria (CBN) may be forced to inject more funds into the bank, as it did with Skye Bank. Unity bank currently has a loan of N50 billion from the apex bank on its books.