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Published On: Mon, Apr 16th, 2018

Wema Bank: Making hay in cloudy weather

By OKEY ONYENWEAKU

Wema Bank Plc, Nigeria’s last surviving indigenous bank, has said that in 2018 it would ride the economy’s growth curve to deliver superior performance to its various stakeholders.

Segun Oloketuyi, MD, Wema Bank

The banks Chairman, Babatunde Kasali, notes that, ‘’ internally, significant steps were taken in 2017 to ensure that in 2018, we deliver value for our shareholders. Our performance in 2017 gave us a good idea of the possibilities within the digital space. Our commitment in 2018 to technology disruption will be central to our ability to deliver on our goals for the year’’, he believes.

Although it is not certain whether the bank will meet its gross earnings and operational expectations, the managements refreshed commitment to its top and bottom line figures has drawn the attention of analysts. The bank’s 2017 audited numbers has been seen as a rat bounce. Indeed, there is a consensus amongst financial experts that the operating environment has hardly improved to suggest a strong revival of companies, even financial institutions. The disturbing conditions notwithstanding, banks, however, still appear to have gotten the better end of the recessionary stick; GT, Zenith, UBA and Access Banks were able to eke sizeable dividends for shareholders. Wema Bank’s books were significantly tamer than that of first tier rivals.

Wema, regardless, saw an improvement in its annual fortunes as gross earnings in 2017 grew from N54.36 billion in 2016 to N65.27billion in 2017. Interest income of the bank also grew 19.10% to N53.07 billion as against N44.56 billion reported in 2016.

Net Interest Income increased from N18.65 Billion in 2016 to N19.77 billion in 2017 while trading income for the reporting period grew by over 100% to N4.98 billion as against N2.12 billion in 2016. But impairment charges of N2.18billion in 2017 dragged down its profit after Tax (PAT) which decreased from N2.56 billion in 2016 to N2.26 billion in 2017.

Wema Bank’s Non-Performing Loan ratio stood 3.52 per cent (2016: 5.01 per cent) while our Capital Adequacy Ratio closed at 14.32 per cent (2016: 11.07 per cent), a little below the regulatory threshold.

It said the growth was supported by the launch of ALAT, a fully digital bank, enhancing the bank’s already existing alternate platforms, which recorded a combined growth rate of 205.67 per cent in transactions executed with an estimated 30,000 accounts opened monthly.

Commenting on the results, the Managing Director/Chief Executive Officer of the bank, Segun Oloketuyi, has noted that, “despite the slow start to the year, 2017 still recorded significant progress, highlighted by the introduction of the Investor & Exporters window for foreign exchange at the Central Bank and recovery in oil prices’, he said in the course of a recent discussion with journalists.

“Our target market is the upwardly mobile youth segment, the young entrepreneurs, the young professionals and the financially excluded, where we continue to leverage incremental innovation and integral capabilities. For us, banking should be simple, reliable and convenient.”

Oloketuyi revealed that the bank would continue to execute its OMNI channel business model with precision, as it makes inroads into Kaduna, Bauchi, Kano, Mararaba (Nasarawa), Warri, Aba, Sangotedo (Lagos) and Lagos State University.

He said, “In October, the Bank held its Extra-Ordinary General Meeting towards its proposed Capital Reorganisation Scheme.  I am delighted to announce that the exercise has been concluded, with all relevant regulatory approvals in place and duly passed and reflected in the 2017 financial year accounts. As earlier highlighted, the conclusion of the exercise would lead to an efficient balance sheet, as ploughed back profit can be capitalised to grow the business while positioning the Bank for dividend payment in the near term.”

Shareholders have not been impressed with the Bank which paid dividend last in 2004. There has also not been a good ground for capital appreciation given the bank’s stock price which skims closely to its nominal value.

‘’We are hoping that someday the bank will start paying dividends as in the old days. However, this is the time to buy its stocks and wait’’ Chairman Progressive Shareholders Association of Nigeria, Okezie Boniface remarked recently.

Performance

Pushing past domestic money market challenges, Olokotuyi’s management team has been able to lift the bank from a rut. This is reflected in the audited financial report of the bank for the period ended December 31,2016 and Q1 2017. For instance; the bank closed the previous year with a rise in profit after tax by 68 per cent. A tough act to pull off at the heart of a raging recession.

The bank had been in the red and posted a loss of N2.094billion in 2009. Up until 2010, the bank was in a darker mess, caused by a management crisis which ravaged what was left of the financial institution for years. A more critical observation shows that the bank posted a loss of N11.668billion in March 2009 while the loss position stood at N57.738billion in 2008.

Wema Bank’s management had been smart to take advantage of the licencing regime and opted for regional licence to first survive before returning to operate as a National Bank after four years. The regional operations entailed a strategy to enable it, operate within the geographical areas where it had more comparative advantage in terms of making profit at the time.

‘’We took advantage of the new licensing regime and applied for a Regional authorization with a pledge to expand in the near future, once the turnaround project was completed. The Bank’s transformation was implemented in three phases; first to stabilize the Bank, second to prepare the building blocks for growth and third to go for growth. We are now within the third phase of the transformation project” Oloketuyi had said

Wema Bank’s dilemma

The dynamics of banking in Nigeria has changed. The implication is that competition has become stiffer.

Wema Bank is a national bank that does not have branches in every part of the country. The South east of Nigeria does not seem to know Wema Bank, implying that its regional disposition has not fully been addressed. Wema was the major brand in the West, and in fact, dominated the Market when it seemed like all government parastatals of the Western region banked with it. But that has changed as G T Bank, Skye Bank, Sterling Bank, FCMB Group and First Bank have taken a huge chunk of the western market share.

Wema Bank, in fact is now embarrassingly owning just a little above 1 percent market share in the banking industry.

With 154 branches only in a few states, customers may go for national banks with more products and wider reach.

Prospects

Many analysts believe that a bank which was able to raise N7.5billion through Rights issue in 2010 when the operational environment was unstable for financial institutions must be strong.

One advantage which the bank enjoys industry observers noted is that a greater proportion of its infrastructure is in the target South-South and South-West market. BH findings reveal that the regions account for 98.8 percent of its total loan portfolio and 97 percent of deposit as at December 2010. More so a total of 137 out of the bank’s 154 branches, representing 90 percent, are located where the bank has chosen to operate.

Broad street analysts have applauded its new management for stabilizing an institution which was almost dead. But it has a big task on its hands. How the bank can compete in the same market with the industry leaders such as First Bank, Zenith Bank, G T Bank and UBA is still a puzzle.

History of a Crisis

Wema bank has had a chequered history which has been laced with bitter boardroom politics, management crisis among others. This almost snuffed life of the only surviving indigenous first -generation bank in Nigeria.

It would be recalled that the periods 2006, 2007 and 2008 were the most challenging time in the life of the bank. The bank was modestly competitive before bitter politics dominated its boardroom and drew the attention of the regulator. A group of investigators from the CBN and NDIC discovered gross mismanagement in the bank.

Many recall that after the banking consolidation the Central Bank of Nigeria(CBN) directed Government both Federal and State to scale down their stake in banks to 10 per cent. Adebisi Omoyeni swung to action to find investors to take 40% owned by Oodua States because they had also assisted in recapitalizing the bank. But the selling of the shares became controversial. Omoyeni was eventually suspended and recalled after winning a court case against CBN. He was eventually sacked after he tried to meet the Apex regulatory bank’s conditions of withdrawing a court case against it.

Going into the second half of 2017 Wema looks set to upstage pessimists’ earlier forecasts, but how far it goes in turning the tables against naysayers would depend on how well the macroeconomy performs.

 

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