What Union Bank delisting on NGX means

Union Bank of Nigeria recently announced its delisting from the Nigerian Exchange, with the goal of attracting larger private investments to reconsolidate its position as one of the top pioneer banks in the country. The CEO, Mudassir Amray, highlighted the strategic move towards privatization and emphasized the potential benefits it could bring to the bank's growth and development. In a recent interview with CNBC Africa, Joshua Odebisi, Senior Research Analyst at RMB Nigeria, shared insights on the implications of this decision and its impact on the banking sector in Nigeria. Joshua Odebisi expressed his views on the delisting of Union Bank, noting that it was a predictable move following the private takeover and acquisition of all the bank's shares. While the CEO's comments shed light on the rationale behind the delisting, Odebisi emphasized the importance of attracting private investment to drive the bank's future progress. However, he raised concerns about the limited access to financial information due to the delisting, which could impact the ability to monitor the bank's performance closely. Discussing the scheme consideration for minority shareholders, Odebisi shared his analysis of the offer of 770 kobo per share, considering the fluctuating stock price prior to the delisting announcement. He described the scheme consideration as a nominal reward for investors who maintained their holdings, pointing out that Union Bank's stock value may not have been among the top performers in the banking sector. Reflecting on Union Bank's historical significance and its current market position, Odebisi acknowledged the bank's legacy status while also highlighting its relatively slower growth compared to other Tier 1 and Tier 2 banks. He suggested that the decision to go private could present an opportunity for Union Bank to revamp its strategies and potentially reemerge in the market in the future. Shifting the focus to the broader banking sector performance in 2021, Odebisi discussed key indicators such as liquidity ratio, loan book growth, and non-performing loans. Despite challenges like currency devaluation and high inflation rates, he noted that Nigerian banks had demonstrated resilience and adaptability to the evolving macroeconomic conditions. Odebisi attributed the sector's stability to prudent risk management practices and strategic lending decisions, which had helped maintain low non-performing loan ratios. He emphasized the importance of aligning loan portfolios with appropriate currency denominations to mitigate foreign exchange risks and ensure sustainable revenue generation. Odebisi commended banks for their cautious approach to lending and emphasized the positive impact on their asset quality and overall stability. In conclusion, Odebisi acknowledged the ongoing uncertainties in the macro environment but expressed confidence in the banking sector's ability to navigate challenges and sustain growth momentum. Despite external pressures, Nigerian banks have demonstrated resilience and prudence in managing risks and capitalizing on opportunities for sustainable profitability and long-term success.