EXCLUSIVE: Union Bank UK Made No Profit In 4 Years, Set For Liquidation Before Acquisition By Fidelity Bank

The newly acquired Union Bank UK by Fidelity Bank has been a loss-making company since the last four years from 2019 and its revenue as well as customer base has been on the decline, THE WHISTLER can report.

Document obtained by THE WHISTLER revealed that the Union Bank UK was already planning to wind down before acquisition by Fidelity.

On Wednesday, Fidelity Bank announced that it finally received the approval of the Bank of England’s Prudential Regulatory Authority (PRA) for a change of control of UBUK.

In 2020, Fidelity entered a share sale and purchase agreement to divest its 100 per cent equity stake in Union Bank UK Plc.

“The Board of Directors of the Bank is confident that the acquisition will unlock significant value for the Fidelity Bank Group and is taking action to ensure the seamless integration of the operations of both entities,” Fidelity said.

However, the UK-based bank is facing severe financial issues and key audit issues.

A document obtained by THE WHISTLER revealed that Union Bank UK is engrossed in a cumulative Loss after tax of $39.5m from 2019 to December 2022.

In 2019, Union Bank UK posted $11.66m loss after tax; it lost $$16.5m in 2020; $5.96m in 2021 and $5.38m in 2022. The loss before tax from 2019 to 2022 was $39.8m.

Union Bank UK’s revenue fell from $14.62m in 2019 to $3.99m in 2022, representing a 266 per cent decline in the four years. Figures posted showed $14.62m was posted as revenue in 2019 which fell to $6.26m in 2020 and $3.9m in 2021.

Total assets of UB UK drastically fell by 370.6 per cent from $454.79m as of 31 December 2019 to $97m at 31 December 2022.

As of 2022, the majority of the Bank’s assets were loans and advances to banks, being $65m at 31 December 2022 ($111m at 31 December 2021).

The bank’s return on equity was a negative 15.2 per cent in 2022, signaling shareholders are losing on their investment in UB UK.

In 2021, UB UK investors suffered 14.6 per cent loss on equity invested. They also lost 35.2 per cent and 18.9 per cent on their equity in 2020 and 2019 respectively.

While considering sales of UB UK, the board also considered the “option of the closure of the Company through a solvent wind down will be included within the decision-making process, and the capital required to enact one in stressed circumstances, needs to be maintained should the purchase by Fidelity Bank either not conclude or be significantly delayed,” the document revealed.

THE WHISTLER found that independent auditors cast doubt over the bank’s ability to survive its underwhelming performance and financing gap.

They expressed concerns that a “material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern.”

“We obtained the forecasts prepared by the Directors and tested the arithmetic accuracy of these forecasts. We obtained an understanding of the underlying assumptions used to calculate these forecasts such as the forecasted monthly losses, forecasted credit losses and cost to enact solvent wind down.

“We then challenged the Directors as to the validity of these assumptions and checked they are consistent with the current financial and strategic position of the Company. We reviewed the sensitivity analysis performed by the Company and performed our own sensitivity analysis to check that even in a stress scenario, the Company will meet the capital requirements and have sufficient liquidity buffers in place to continue operations;

“We performed a retrospective review of the prior year forecasts by comparing to current year actuals, to assess the historical accuracy of the forecasts; we reviewed correspondence with the Regulators and minutes of Board meetings, in order to ascertain whether there were other matters that may impact the Company’s ability to continue as a going concern.”