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Union Bank suffers N188 billion in CRR debits as at June 2020



We expect most banks will suffer similar fate when they release their earnings.

Union Bank of Nigeria reported its total cash reserve requirement increased from N296 billion as at December 2019 to N484.5 billion as at June 30th, 2020.


This suggests the central bank has debited Union Bank N188 billion in additional CRR between January and June 2020. The bank reported a total customer deposit of just over N1 trillion thus nearly 50% of its deposits are with the CBN and cannot be assessed by the bank.


This was contained in the 6 months interim results published by the company.


Union Bank CRR Debits

The central bank of Nigeria increased its cash reserve requirement (CRR) to 27.5% from 22.5% at the monetary policy committee meeting held in January 23rd to 24th. The CRR is the amount the CBN debits from banks accounts in compliance with its monetary policy objective of mandatorily keeping cash on behalf of banks. The amount is not available for banks to use.


According to Union Bank, the CBN “had restricted balances” of N484.5 billion (December 2019: N296.043billion) with the Central Bank of Nigeria (CBN) as at 30 June 2020, representing the CRR debited in the period under review.


The bank reported a CRR of N365.8 billion suggesting an additional N118.7 billion was debited between April and June 2020 compared to N70 billion in the prior quarter.


Nairametrics reported in April that the central bank debited N1.4 trillion in CRR from banks with Union Bank debited by about N49 billion. The CBN also debited banks in May and in June.


The move shocked bankers who had expected the CBN to taper down on its tight monetary policies considering the economic headwinds. This was very well before the COVID-19 virus exploded worldwide. The CBN had attributed the reason for the CRR debits to recent inflationary pressure in the economy.


2020 Q2 Results

Meanwhile, in the bank’s quarter ending June 2020 results, it reported a pre-tax profit of N5.1 billion compared to the N6.2 billion reported same period in 2019.


Loan impairment was just N680 million for the quarter suggesting most of its loan obligations were honoured by its borrowers.

The banks earning per share for the 6 months ending June 2020 was 37 kobo unchanged from same period last year.

According to the Bank’s CEO Emeka Emuwa, “The impact of COVID-19 and associated movement restrictions on the Bank and the wider economy has been broad. The total lockdown of major commercial centers Lagos, Abuja and Ogun and partial lockdowns across the country, slowed business operations in Q2 2020. The slowdown limited growth in key income lines including fees and commissions and cash recoveries.”

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