Last week, it was a celebration galore in the camp the core investors of Union Bank removed from the office by the regulatory authorities in January 2024 . The Federal High Court in Lagos ruled that the Central Bank of Nigeria (CBN) had exceeded its authority when it dissolved the board and management of Union in 2024 Bank in January 2024 . The court, led by Justice Chukwujekwu Aneke, declared the CBN’s actions ultra vires and non-compliant with the Banks and Other Financial Institutions Act (BOFIA) 2020. The judge ordered the immediate reinstatement of the former board and management, led by Farouk Mohammed Gumel, and restrained the CBN from exercising any powers over the bank’s governance.The court’s judgment rested on two grounds: statutory authority and breach of fundamental rights. Justice Aneke held that the CBN’s actions did not conform to the procedures prescribed under BOFIA 2020, and that the regulator’s immunity provision does not apply where it acts outside its legal powers. The court also found that the core shareholders were sanctioned without a fair hearing, constituting evidence of bad faith
But the celebration was short-lived .The CBN responded to the judgment, reaffirming its oversight mandate and assuring depositors and the public of Union Bank’s operational stability. However , the apex bank maintained that its actions were part of its prudential oversight, citing severe financial distress at the bank, including a negative capital adequacy ratio and capital shortfall exceeding N224 billion. The CBN also filed an appeal and a motion seeking a stay of execution of the judgment, citing concerns that enforcing the judgment could disrupt the bank’s operations and pose systemic risks to the financial sector.
Union Bank is again in the throes of controversy. The recent Federal High Court judgment nullifying the Central Bank of Nigeria’s (CBN) January 2024 intervention in Union Bank has created governance uncertainty. The governance uncertainty stems from the CBN’s appeal and potential review of the judgment, which may impact Union Bank’s operations and recapitalization plans
Whether the old board is restored or the current board continues to manage the bank , the signal from the CBN is that the bank could not be adjudged to be healthy enough for the old board to handle without any fear though it remains a going concern . The CBN is certainly not satisfied with its level of resources and the leadership capability on risk management.
The financial health of the bank under the sacked board was not in good shape . With a capital shortfall of N51.9 billion to meet the CBN’s minimum requirement, impairment charges skyrocketing by 1208% to N58.5 billion, and a hefty N226 billion FX revaluation loss, the bank’s financial health was fragile.
A big concern over this bank is that even the new board and management have failed to display they have what it takes to pull this bank out of the wood either by resources at their disposal or by their capabilities . Nothing spectacular has changed. But this may not spring any surprise . Turning around a bank like Union Bank is not for a dilettante not for merely intellectually curious but for those not content to follow, who desire to rewrite the rules of the game ,unafraid of orthodoxy, more inclined to build than to cut , those concerned to make the difference than making career and those who absolutely committed to staking out the future first. Despite the impressive credentials flaunted by Oni , the case of Union is just too tough for her to handle . Union Bank today remains partly a laggard , partly a distressed bank after successive dillitanntes at the helm of affairs. They live big , yet the bank remains in doldrums.
Ordinary shareholders are grumbling too . .A closer look at its 2024 numbers reveals some concerning trends. Non-interest income has declined by 3%, while operating expenses have ballooned by 52%. The bank’s net income plummeted to ₦44.798 billion in 2024, a 32.4% decrease from ₦66.292 billion in 2023. Earnings per share have also taken a hit, dropping to ₦1.53 from ₦2.27 in 2023. These declines raise concerns about the bank’s profitability and shareholder value.
The bank’s dismal financial performance has left its shareholders reeling. With a paltry net interest margin, squeezed net profit margins, and a bloated cost-to-income ratio, it’s clear that management has failed to deliver. The bank’s non-performing loan ratio is alarmingly high, a stark reminder of its reckless lending practices, while its anemic earnings per share have eroded shareholder value. Year after year, this bank has underwired its competitors, leaving investors to wonder if there’s anyone at the helm. It’s time for a radical overhaul, starting with a change in leadership and a renewed focus on prudent risk management and operational efficiency
The Central Bank of Nigeria’s intervention and the ongoing recapitalization efforts add to the uncertainty. Union Bank’s recapitalization strategy hinges on prospective foreign investment, but a lingering legal dispute involving former core investor, TGI Group, clouds the process. The bank’s ability to address asset quality concerns, optimize costs, and drive strategic growth initiatives will be crucial in determining its future success
Union Bank is dire need of a board and management with foresight and intellectual leadership ,capacity to foreshorten migration paths and to compete for market position and market share . This is because , for a company to gain industry leadership, it must be competing for the future. Whether the so-called core investors in the past or the government appointed board , none has displayed the capability to move this bank from its laggard status .
The situation of Union Bank is a pointer to the fact that the future isn’t something that just happens – it’s something companies shape, influence, and own, and it is something driven by the quality of leadership . The race to the future unfolds in stages, with companies navigating hurdles to emerge victorious. Initially, it’s a competition to imagine the future, where visionaries leverage trends and discontinuities to redefine industry boundaries. This is followed by companies accumulating competencies, testing concepts, and building coalitions to shape the industry structure. While the first stage of the race to the future is imperative for a company to gain a deeper understanding than its competitors in terms of the trends and discontinuities necessary to transform the industry boundaries and create new competitive space, the second is expected to help it to accumulate necessary competencies and overcome technical hurdles, test and prove out alternate product and service concepts , attract coalition partners with complementary resources and construct whatever product or service delivery infrastructure that may be required and to get agreement around standards , if necessary.
Any company that fails in the above two stages in the race to the future is not likely to excel in the battle for market position and share which take place within fairly well defined parameters of value, cost, price and service; where innovation is focused on product extensions, efficiency improvements, and what are usually marginal gains in differentiation.
This is because at this stage competition the issues of technological approaches, rival product or service concepts , and competing channels had largely been settled.
Finally, the battle shifts to market share, with innovation focused on incremental gains and efficiency.
To succeed across these stages, companies must clear five critical hurdles: committing to an arena (choosing where to play), acquiring competencies (building the right skills and tech), discovering mass market fit (nailing what customers want), setting standards (influencing the ecosystem), and defending share (staying ahead of rivals) – and overcoming these is key to shaping the future . These hurdles require strategic bets, smart investments, and adaptability, ultimately determining who leads and who lags in the future.
The above hurdles are what separate the champions from laggards. Companies that navigate these challenges effectively rewrite the rules of competition, capture new markets, and build lasting dominance. Those that falter get left in the dust, struggling to catch up in a rapidly evolving landscape. The stakes are high, and the outcome shapes the future.
Union Bank’s leaders have kept fighting to revive the bank’s former glory, but so far, no luck . Despite their efforts, the bank’s resurgence remains elusive.
Its leadership inability to imagine a new opportunity arena and to actively shape the emergence of that future industry structure to its own advantage are the critical factors behind its laggard status .
A look into the operations of Union Bank confirms its laggard status . Like others of its types , in the race to the future , the third stage where the product or service concept is well established ,where the dimensions of competition are well defined and the boundaries of the industry have stablished usually receives the bulk of their managers time. Their managers are known to usually spending too much time managing the present and not enough time creating the future .The issue is that to create future , a company must first be able to forget some of its past .
This is not so for the leadership of Union Bank . The inability of the leadership of Union Bank , both in the past and in the past time , to creating the future more than preserving its past , has led to continuous restructuring and reengineering as its strategies to keep its going concern.
Employing the above strategies may not be farfetched . Leaders facing stagnant growth often find themselves caught between a rock and a hard place, forced to make tough decisions to boost Return on Investment (ROI). In such circumstances, cutting costs and assets might seem like the most viable option, especially when the pressure from shareholders is intense. This approach, often referred to as the denominator route, can provide a quick fix, making the company look leaner and more efficient, and giving shareholders a short-term win. On the other hand, focusing on growing revenue and profits, known as the numerator route, requires a more nuanced approach, involving innovation, investing in new capabilities, and driving growth, which can lead to more sustainable returns.
However, the denominator route is often preferred due to its ease of execution and desire for immediate results, rather than a thoughtful strategy for sustainable growth. Be This appears to be the choice that is attractive to the Union Bank leadership , both past and present .
The limitations of this approach are evident: it disrupts lives, destroys communities, and undermines future growth. Denominator management is a short-term game that can lead to a loss of competitive edge, innovation capacity, and talent. Leaders who prioritize cost-cutting over growth risk sacrificing long-term success for short-term gains.
The challenge is to strike a balance – cutting costs where necessary while investing in growth where possible. However, this requires leaders to take a long-term view, invest in uncertainty, and trust their people to deliver, which can be daunting, especially when faced with intense pressure for immediate results.
Instead of going for the balancing act , Union Bank’s leadership has embarked on a harvest strategy, prioritizing cost-cutting over growth and innovation. While this approach may have yielded short-term gains, it’s a recipe for long-term pain. By slashing costs and assets, the bank may have boosted productivity and profits, but it’s likely to undermine its ability to innovate, adapt, and grow. The consequences are already evident: a weakened competitive edge, loss of talent, and a diminished capacity to invest in new capabilities. It’s a classic case of prioritizing short-term shareholder value over long-term sustainability
Union Bank’s restructuring efforts, aimed at boosting efficiency and cutting costs, may have yielded short-term gains, but they risk undermining the bank’s long-term growth and prosperity.
To truly succeed, the bank needs to look beyond reengineering and focus on building new capabilities, creating new markets, and driving innovation. It’s time for Union Bank to take the leap and prioritize numerator growth – investing in innovation, expanding into new markets, and building new capabilities – rather than just focusing on short-term cost-cutting measures
