Union Bank of  Nigeria (UBN) Plc is targeting as much as N65.5 billion in pre-tax profit in the course of three financial years as the board of the bank consolidates on successful recapitalisation of the 95-year old bank and huge subscriptions to its ongoing rights issue.

In a three-year forecasts made available to shareholders, the board of the bank said it expected that shareholders would have as much as N46.5 billion in net earnings, which the board and shareholders could decide on at general meetings.
Profit after tax, otherwise known as net earnings after tax or post-tax earnings, exclusively belongs to shareholders who may decide to wholly or partly distribute the sum in cash payouts or bonus shares or plough back such into the business.

UBN is offering about 1.41 billion ordinary shares of 50 kobo each at N6.81 per share in the ratio of five new ordinary shares for every nine ordinary shares held as at the September 30, 2011. The application list opened on December 14 and would remain open till January 20, 2012.

According to the indicative timetable for the offer, receiving agents will make returns on February 3 while the parties would forward the allotment proposal to the Securities and Exchange Commission (SEC) late February. Union Bank is expected to receive the net proceeds of the rights issue by March 2012.

According to the forecasts included in rights issue document, profit before tax is expected to be about N65.5 billion for the three-year period between 2012 and 2014.

Profit before tax is expected to be N13.1 billion in 2012 and thereafter N24.6 billion and N27.7 billion in 2013 and 2014 respectively.

Net earnings distributable to shareholders is expected to be N9.16 billion in 2012 and subsequently rise to N17.9 billion and N19.4 billion in 2013 and 2014 respectively.

Breakdown of net earnings showed that basic earnings per share would be 47.58 kobo, 89.31 kobo and about 101 kobo in 2012, 2013 and 2014 respectively, indicating the probable level of dividends that the earnings of the bank might be able to support.

Gross earnings of the bank is estimated at N121.72 billion in 2012 and thereafter to N147.85 billion and N169.22 billion in 2013 and 2014 respectively.

The performance of the bank is expected to be driven mainly by its core banking operations with interest incomes estimated to rise from N98.41 billion in 2012 to N119.56 billion in 2013 and spiral further to N133.24 billion in 2014.

Net interest income is projected at N70.35 billion in 2012 and it’s expected to subsequently rise by 23 per cent and 12.4 per cent to N87.09 billion and N97.89 billion in 2013 and 2014 respectively.

The board noted that it had taken all reasonable assumptions into consideration and the forecasts had been prepared in consistent with the accounting policies normally adopted by the bank.

According to the board, it expected the growth in trading securities to increase as a result of capital injection from the core investors and rights issue while the impact of the growth in loans and advances over the period would equally result in increase in interest income.

The board said it expected the deposit base of the bank to grow at an average of 13 per cent over the years.
The forecasts however, were based partly on the success of the ongoing rights issue. However, there were already indications that the issue might be a huge success despite the strike as several shareholders have indicated interests in picking their rights while many have put in for additional shares.

Recent updates from parties to the rights issue including the issuing houses, registrars, stockbrokers and officials of the bank indicated that the parties were confident that the rights issue would be a huge success.

The ongoing rights issue would give pre-scheme shareholders more equity stake in the recapitalised Union Bank. In what was considered by several pundits as the best deal of the recent recapitalisation exercises, pre-scheme shareholders of Union Bank had received three new shares for every 16 shares held to reclaim 15 per cent equity stake in spite of the N116 billion negative shareholders’ funds.

The rights issue would further increase pre-scheme shareholders’ equity stake to 21.5 per cent in the fully recapitalised Union Bank.

Under its recapitalisation deal, Union Bank would receive about $500 million equity capital and $250 million Tier 2 capital from a consortium of international investors to retain its nearly century-old brand and regain its competitive verve as one of the strongest and reliable banks in Nigeria.

African Capital Alliance (ACA) is leading other partners including many reputable fund managers, investment funds of The Netherland and United States Governments and Nigerian investors under the Union Global Partners Limited, a special purpose vehicle formed for the recapitalisation of the bank.

The Asset Management Corporation of Nigeria (AMCON) had already raised UBN’s capital base from negative to zero through investment of N305 billion in the bank. AMCON has thus become the first major investor in the bank owning about 20 per cent with the funds already deposited with the bank since October.

The board of Directors of the Overseas Private Investment Corporation (OPIC), the US government’s development finance institution, has also approved the $250 million tier 2 capital.