Union Bank of Nigeria (UBN) has fallen into a regulatory breach, with its Capital Adequacy Ratio (CAR) slipping below the 10% minimum threshold required for banks with national authorization, according to GCR Ratings.
In a Dec. 30th report, GCR said the evolving outlook reflects potential changes in UBN’s business and financial profile stemming from planned consolidation with Titan Trust Bank (TTB), the imminent capital injection and the expected phase-out of the regulatory forbearance, which the bank significantly benefits from.
“UBN’s core capital ratio remains weak at 9.9% as of 30 June 2025 and fits within the low band of our assessment. Looking ahead, the bank’s ongoing capital raising initiatives to meet the new regulatory capital requirements for its current licence should support its capitalisation assessment within the next 12 months, barring any material adverse impact from the expiration of regulatory forbearance,” GCR Ratings said.
The rating also balances the bank’s weak capitalisation and risk profile against a stable funding structure, adequate liquidity and good competitive position.
UBN’s risk profile is also seen as a ratings weakness, reflecting the significant concentration risks by obligor, stage 2 loan classification, foreign currency, and sectoral concentration.
Specifically, the twenty largest obligors accounted for 79.2% of gross loans as of 30 June 2025 (December 2024: 74.9%), with four names currently in breach of the single obligor limit (SOL) of 20% of shareholders’ funds.
The subsisting SOL breach could be remedied by imminent capital injection.
Foreign currency (FCY) loans to gross loans also remain high at 60.6% in June 2025 (December 2024: 60.2%); the bulk of which represents restructured stage 2 loans largely to the oil and gas sector.
As such, the stage 2 loans constituted a significant 65.6%, the bulk of which currently enjoys regulatory forbearance. Looking ahead, the asset quality metrics could weaken due to the quality of the loan book and the potential adverse impact of the expiration of regulatory forbearance on the bank’s risk profile.
As of 30 June 2025, the bank reported a balance sheet size of N4.1 trillion (USD2.8 billion), representing approximately 2.8% of the Nigerian banking industry’s total assets.
Looking ahead, UBN’s increased value proposition through digitalisation, planned capital injection and the recent regulatory approval for business combination with TTB could support earnings generation capacity and its competitiveness over the next 12-18 months.
As of 30 June 2025, customer deposits declined by 4% to N2.9 trillion (USD2.0 billion), reflecting the bank’s deliberate reduction in expensive term deposits to lower funding costs.
As at the same date, current and savings account (CASA) deposits accounted for 80.8% of customer deposits (December 2024: 81.2%), contributing to a lower cost of funds of 7.5% relative to 9.4% in December 2024.
This development marks a critical turning point for the lender, which has been under intense regulatory and public scrutiny following its acquisition by Titan Trust Bank and subsequent investigations into its ownership structure.
A breach of this nature typically triggers immediate “prompt corrective action” from the Central Bank of Nigeria (CBN).
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