The share price of Union Bank of Nigeria Plc has appreciated at the stock market as the bank continues to regain more investors' confidence following efforts by the management to reposition the bank for better performance.
The shares of the bank are enjoying high patronage at the stock market, which led to a capital appreciation of 23 per cent between Monday, December 14 and last Monday.
Union Bank is among the banks taken over by the Central Bank of Nigeria (CBN) over lax management, which had rendered the banks dangerously undercapitlaised. After injecting fresh funds into the bank to boost its liquidity, CBN appointed a new management led by Mrs. Funke Osibodu, who has been effecting some turnaround strategies geared towards returning the bank to its rightful position in the financial industry.
Union Bank had penultimate week cleaned up its books by providing for bad loans. The management had expressed optimism that the future of the bank remains bright, saying that the result of the different strategies initiated would manifest in its subsequent improved financial results. Based on the assurance and given the current low price, some discerning investors swooped on the shares of Union Bank last week, a development that lifted the price by 23 per cent.
The equity, which stood at N4.92 before Union Bank announced its clean-up exercise, rose by N1.07 or 23 per cent to close at N6 per share last Monday. A stockbroker said that while investors are trying to take advantage of the low price of Union Bank, those who are holding the shares are not willing to part with it given the bright future prospects. Some shareholders of the bank had last week commended the provisions for bad loans, saying it will position the bank for better future performance.
For instance, the President, Association for the Advancement of the Rights of Nigerian Shareholders (AARNS), Dr. Faruk Umar, said: “Most of the shareholders are in support of the actions the management has taken so far, which are aimed at putting the bank on a strong footing. We envisaged this performance, thus we are not surprised. The provisions being made now are for some bad assets that have been in the books for over 10 years. So it is not the creation of the current management. Osibodu and her team are only trying to revive the system and we support them.”
He had explained that it was better to write off the loans rather keep on postponing the evil day, adding that despite the provisions, Union Bank is still better than some of the other banks.
“It is better to make sacrifices now and enjoy later. If we continue to postpone the evil day, its impact may be very disastrous. The management is doing well and my appeal to other shareholders is to give them all the support needed to turnaround the fortunes of the bank so that it can regain its rightful position in the financial industry,” he said.
Another shareholder and President of Shareholders United Front (SUF), Mr. Gbenga Idowu, said the cleaning of the books was a step in the right direction.
He said: “When you are sick, you cannot reject a medicine that is meant to heal you because it is bitter. It is better for you to bear the bitterness and get well. What you should mostly be concerned about is how to get healed fast and if the bitter medicine will do that, then you have to take it. So what Union Bank is doing is good. At the end of the day, the bank will come out stronger.”