Atlas Mara to bet USD200 million on Union Bank’s fintech and treasury unit

Atlas Mara to bet USD200 million on Union Bank’s fintech and treasury unit

Sub-Saharan Africa-focused financial services group, Atlas Mara said it has completed the raising of additional USD200 million to be spent on Union Bank, one of its major banks.

Atlas Mara has over 37% stake in Union Bank of Nigeria, one of Nigeria’s oldest lenders with NGN31.0 billion interest income as at the second quarter of this year.

The company said in its half year result that used to fund an increase in investment in our Nigerian associate investment, UBN, and subscribe to our share of the rights issue proposed by UBN which we expect will be completed later this year. The proceeds will also support further expansion of our Markets and Treasury and Fintech business lines.

Atlas Mara has since left loss territory in the first quarter of this year after the company reported its first profor after several quarters of losses.

For the half year, the company reported net profit after tax for the first half of 2017 was $11.5 million compared to a profit of $1.2 million reported for the prior year period, reflecting early successes in repositioning of business lines and cost reduction initiatives, implemented in late 2016 /early 2017. Q2 results of $6.4m is the strongest over the past four consecutive quarters.

Net interest income (NII) increased by 79.0% year on year on a constant currency (ccy) basis mainly supported by the inclusion of the FBZ acquisition completed at the end of June 2016. On a pro forma basis, including FBZ on a like-for-like basis, NII would have still reflected an increase of 32.2% year on year. Our businesses benefitted from increased yields and further progress in the reduction of funding costs, following our continuous focus on raising less expensive transactional deposits.

Non‐interest income (NIR) declined by 35.2% on a ccy basis, largely driven by a one off fair value gain of $15.4 million reported in H1 2016, which resulted from the depreciation of the Nigerian Naira in June 2016. This currency deprecation positively impacted the carrying value of our liabilities measured at fair value. Although we saw positive growth in the Markets and Treasury business, the growth for this period was lower than the comparative period growth as a result of lower trading volumes in Mozambique and Botswana, due to lower customer activity following the slow rate of recovery in those markets from macro headwinds experienced in 2016.

Markets business reported a 33% year on year revenue growth, reflecting the accelerated business focus to increase both volume and value of transaction flows in this business across all our operating banks.

Loan impairment charges of $10.0 million were broadly stable on the prior year net charge of $9.1 million with the NPL ratio decreasing year on year from 13.2% to 12.0%. The credit loss ratio of 1.5% at June 2017 (2016: 1.3%) was supported by improved credit processes and specific NPL recoveries, notably in Zambia and Zimbabwe totaling $10.8 million for the first half of 2017, versus $2.7 million of NPL asset recoveries recorded in the comparative prior period. This was somewhat offset by additional specific impairments in Zimbabwe and Rwanda taken on the corporate loan book of $6.3 million year to date.

Cost savings in the Shared Services & Centre, after staff rationalisation programs and the closure of the Johannesburg office in March 2017, further contributed to the noteworthy cost reduction visible in the more than 15% lower cost to income ratio reported year on year, now at 85.2%. The Centre reported a $8 million lower cost base recorded for the first half of 2017 compared to the Centre cost base reported as at June 2016.

Union Bank of Nigeria Plc (UBN) continued to demonstrate ongoing business improvements and contributed $8.7 million of net income to Atlas Mara’s results. While this was 30.4% lower than in the comparable period, this was largely due to the year on year decline in the Naira with the contribution increasing by 7.5% in ccy terms.

Loans and advances were $1.33 billion at 30 June 2017. The loan book declined by 8.0% in ccy terms year on year reflecting a cautious risk appetite in certain markets coupled with a slower recovery of economic conditions prevalent in 2016, constraining demand for credit.

Deposits were $1.89 billion at 30 June 2017, this represented growth of 2.7% on a ccy basis since June 2016.

Equity as at June 2017 totals $573.1 million (December 2016: $ 526.1 million), reflecting the positive net impact of the profit contribution for the half year, the modest equity placing undertaken in February 2017 of $13.5 million, and the positive FX translation impact of $ 17.8 million from converting our African operations into US dollars as reporting currency over H1 2017, as some currencies have strengthened against a weaker dollar since year-end.

At the end of June 2017 our book value was $7.18 per share (December 2016: $ 7.29) and our tangible book value was $ 5.31 per share (December 2016: $ 5.27).