Leaving a bank where ordinary shareholders have been left high and dry, losing billions of naira over the years in the hands of mere dillittantes to reap the benefits and live a life of luxury remains very disheartening
Last week, it was a celebration galore for 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. ; he 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.
Specifically ,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.
No doubt ,Union Bank has again returned to the throes of controversy. Most importantly , the judgment nullifying the Central Bank of Nigeria’s (CBN) January 2024 intervention in Union Bank has created governance uncertainty. And this uncertainty that stems from the CBN’s appeal and potential review of the judgment may impact Union Bank’s operations and recapitalization plans and strengthen the fear over the survival of the lender.
Whether the old board is restored or the current board continues to manage the bank , the signal from the CBN is clear: 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 at the disposal of the sacked leadership and its capability on risk management .
The CBN fear may not be farfetched. Union Bank’s 2023 financial results paint a dire picture of a institution grappling with existential challenges . The bank’s staggering N58.5 billion impairment charge, a whopping 1200% increase from 2022, exposes the depths of its asset quality woes, while the N226 billion FX revaluation loss underscores its vulnerability to currency fluctuations . With a capital shortfall of approximately N351.9 billion, Union Bank faces an uphill battle
A bigger 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 with its inability to meet the recapitalization deadline.
The depth of the decay unleashed on this bank by poor leadership since the days of Barthlomew Ebong remains very ernomous. Despite the impressive credentials flaunted by the so-called core investors and the appointed managers, the case of Union is just too tough for them 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.
Union Bank’s struggles can be seen as a classic case of corporate fossilization, where its “genetic coding” – the entrenched beliefs, assumptions, and norms guiding its decision-making – has become a liability in a rapidly evolving financial landscape. The bank’s inability to adapt to changing market conditions, evident in its staggering impairment charges and FX losses, suggests a rigid adherence to outdated strategies and a failure to reengineer its corporate genetics . As the Nigerian banking sector undergoes seismic shifts, Union Bank’s “dinosaur” tendencies – its inability to pivot, innovate, or challenge established norms – threaten its very survival, serving as a stark reminder that in the corporate world, adaptation is the ultimate currency.
Union Bank’s struggles can also be attributed to a defective managerial frame of its leadership , limiting its perception of novel opportunities and non-traditional competitors. The bank’s entrenched beliefs and assumptions about the industry, customers, and competition have become a liability, hindering innovation and adaptability. With a dominant managerial frame that prioritizes maintaining margins over disrupting the status quo, Union Bank risks becoming a laggard, failing to write off depreciating intellectual capital and underinvesting in new ideas. This frame, shaped by past successes, may lead managers to believe they’re doing everything right, while ignoring emerging threats and opportunities
With the above ugly scenario, it is certain that turning around a bank like Union Bank is not for a dilettante ,not for merely intellectually curious brought in to chop .Only 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 could transform this bank .
Yetunde Oni, the current Managing Director has done nothing to convince anyone she has any key to turn the bank around. . .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.
Union Bank is dire need of a board and management with the capability to rewrite the rules of the game . A leadership with foresight and intellectual leadership ,capacity to foreshorten migration paths and to compete for market position and market share in the race to the future .
The imperative of the above is that for a company to gain industry leadership, it must show some signs of competing for the future. A leader with the capability to compete for the future displays this in the three overallping stage battles and hurdles to emerge victorious. At the first stage , it’s a competition to imagine the future, where visionaries leverage trends and discontinuities to redefine industry boundaries.
This is followed by a company’s capability to accumulate competencies, test concepts, and build coalitions to shape the industry structure.Finally, the battle shifts to market position and share, with innovation focused on incremental gains and efficiency.The battle for market position and share 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.
To succeed across those 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.
Whether the so-called core investors in the past or the government appointed board , none has displayed the capability to excel in the above battles . What , indeed, is occupying the attention of the leadership of Union Bank when others busy with that three stage battle targeted at creating the future? A look into the operations of Union Bank and its management’s mindset shows a disproportionate concentration of time on the third stage at expense of the first two pre-market battle, managing the present and not enough time creating the future .But unknown to its leadership , to create future , a company must first be able to forget some of its past .
This is the core error of Union Bank’s leadership.But world-class managers think differently. To them , the first two are where the decisive battle for industry leadership is fought . 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 ..
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 .The inability of the leadership of Union Bank , both in the past and in the present 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.
But employing the above strategies by the leadership of Union Bank may not be farfetched . Leaders facing stagnant growth like Union Bank often find themselves caught between a rock and a hard place, forced to make tough decisions to boost Return on Investment (ROI).Two routes are naturally available to boost the much needed ROI. One is by cutting costs and assets , a strategy seen as the most viable option, especially when the pressure from shareholders is intense.The approach above, 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 is another , known as the numerator route. But this 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 by a less creative leadership. This is due to its ease of execution and desire for immediate results, rather than a thoughtful strategy for sustainable growth. 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.
Only those that could strike the balance between the two routes – cutting costs where necessary while investing in growth where possible , can deliver optimal results. . However, the challenge is that 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’
Union Bank’s profit engine is sputtering, and the new leadership must take bold action to rebuild it . The bank’s traditional approach to business is no longer sustainable, and it’s time to challenge the status quo. This requires redefining the served market, innovating value propositions, and reconfiguring assets and skills to stay competitive
The new leadership at Union Bank faces a daunting task: challenging the orthodoxies that have held the bank back. To reinvent itself, Union Bank must regenerate its core strategies, reconceiving its market definition, redrawing firm boundaries, redefining value propositions, and rethinking competition assumptions . This requires a willingness to question established norms and embrace radical change. The court’s ruling presents an opportunity for the new leadership to break free from the past and chart a bold new course. Will they rise to the challenge?
