(Adds detail, quote, share price, background)
By Chijioke Ohuocha
LAGOS, April 6 Nigeria's Union Bank
plans to raise 50 billion naira ($164 million) by the end of the
second quarter via a rights issue to boost its capital adequacy
and tap opportunities to lend to agribusinesses, its chief
Emeka Emuwa said on Thursday that the bank targeted a
capital ratio higher than 18 percent after the fund raising,
compared to 13.4 percent as of the third quarter of 2016.
"We are en route to a capital raising," Emuwa told an
analysts' call. "We see opportunities to leverage our capital
not just to be in regulatory compliance but to be able to tap
opportunities that we see in the medium term."
Emuwa said the total value of Union Bank's loans rose 40
percent last year, but that was largely due to Nigeria's
currency devaluation which affected dollar loans to the upstream
oil and gas sector. Without the devaluation loans grew 13
percent, he said.
Nigerian banks have had to change their business models to
survive after previously lucrative loans to oil companies turned
sour following the slump in crude prices, which pushed Africa's
biggest economy into recession.
Union Bank, which was acquired from the government by a
consortium of private equity investors in 2011, is looking for
opportunities as Nigeria tries to foster new industries and cut
down on imports it can no longer afford.
"We see opportunities in agro-business, food processing,
fast-moving consumer goods," Emuwa told the call. "Anything that
is aligned with how the economy is evolving, manufacturing of
consumer goods, manufacturing of goods by replacing what is
previously being imported are areas where we see opportunities."
The bank will pursue opportunities as they present
themselves, he said.
The government has been touting agriculture and solid
minerals as ways to diversify the economy's overreliance on oil
and broaden tax collection to help insulate it from future
shocks. However, the shift will not happen overnight, analysts
Union Bank reported a pretax profit of 16 billion naira for
2016 last week, down from 18.5 billion naira a year earlier,
sending its shares lower.
Emuwa said the bank has 3.9 billion naira exposure to
Etisalat Nigeria, the local arm of Abu Dhabi-listed telecoms
firm Etisalat which has been discussing with 13 local
lenders about renegotiating the terms of a $1.2 billion loan.
Union Bank's shares, which have fallen 25 percent since the
start of last year, were down 0.19 percent at 4.80 naira on
Nigeria's central bank said in a report on Thursday that it
expects credit default by borrowers to be a major economic risk
this year after bad loans soared to a more than six-year high as
economic recession hurt consumers.
($1 = 305.20 naira)
(Editing by Susan Thomas and Susan Fenton)