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Union Bank to divest non-banking units

By The Rainbow

Union Bank has obtained the approval of the Central Bank of Nigeria (CBN) to divest its non-banking subsidiaries.

The bank will complete the divestment process within the next 18 months, it said on Friday.

The move is in line with the directive of the CBN which requires banks to stop operating as universal banks.

The banking sector regulator had  three years ago stopped issuing universal banking licences and enforced new minimum capital requirements for banks in a bid to avoid a repeat of a 2009 near collapse of several lenders, including Union Bank.

Union Bank scaled a recapitalisation hurdle after the central bank propped it up and it agreed a $750 million cash injection by a group of investors to keep it afloat.

'Following (central bank) approval, Union Bank will proceed to divest its interests in its non-banking and portfolio companies … and operate as an international commercial bank,' Union's Chief Executive Emeka Emuwa said in a statement.

Emuwa said the bank had 18 months to implement the divestment, citing that owning non-banking units had become less important with the growth in its core business and its ability to partner with other firms to cross-sell products.

Central Bank Governor Lamido Sanusi launched a historic $4 billion bailout of nine banks shortly after taking office in 2009, pledging to reform the industry and get credit flowing to the productive real sector and small businesses.

The new banking model requires lenders to sell all non-core businesses and form a holding company if they intend to carry out insurance, asset management and capital market activities.

Sanusi has said his primary objective is to ensure banks are effectively supervised and to ensure the safety of depositors' funds by prohibiting them from speculative capital market activities.

'The post-divestment structure will … reduce the overall risk profile of the bank, while increasing the protection of depositors' funds,' Union's Chief Risk Officer Kandolo Kasongo said, adding that the sale proceeds will be used to boost its balance sheet.