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Published On: Sun, Jul 29th, 2018

Wema bank returns to profitability

By OKEY ONYENWEAKU

Against flagging economic headwinds caused by declining manufacturing sector growth and lower retail sector spending, Wema Bank, one of Nigeria’s oldest indigenous banks, has had to wade through several muddy waters. However, defying earlier gloomy expectations of financial analysts the bank seems to be staging a grand comeback.

Indeed, having had to muscle through a very rough patch in 2018 a number of the bank’s strategic policy revisions, seem to have panned out as its net trading position grew by a whopping 525 per cent from N527.06million in 2017 to N3.298billion in 2018. This was achieved by clever investments in Treasury Bills, from which it recorded a yield of 689 per cent, handsomely swelling its bottom line.

The bank’s net interest income rose by 7.2 per cent in the half year from N8.489 billion in 2017 to N9.089billion in 2018.

Meanwhile the bank posted N118.7million as net gain on HFT investment securities, its profit before tax was strong as it surged 26 per cent from N1.433billion in 2017 to N1.814billion in 2018.

Profit after tax also trended up to N1.569billion from N1.216billion in the corresponding period of 2017.

However, fees and commissions dropped by 23 per cent to N3billion from N3.8billion in 2017. This implies the bank may not have attracted significant corporate finance businesses in the half year.

Impairment losses on loans and advances jerked up 289 per cent to N344million from N88.4million in 2017.

At the end of the half year, the bank’s loans to customers rose 8 per cent from N205million in 2017 to N223.4 million in 2018.

The bank which just announced a new Helmsman, Ademola Adebise as its Acting Managing Director/Chief Executive Officer (MD/CEO),had failed to meet analyst expectations by posted a profit before tax of N3.01bn for the year ended December 31, 2017, compared to N3.25bn in 2016. It also reporting an increase in impairment charges from N0.42bn in 2016 to N2.18bn in 2017.

The lenders gross earnings grew by 20.07 per cent from N54.36bn in the financial year 2016 to N65.27bn in FY2017.

The bank had launched its ALAT, a fully digital bank, enhancing its 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.

The immediate past Managing Director/Chief Executive Officer, Wema Bank, Segun Oloketuyi, extolled this performance despite the slow start to the year, 2017, adding the lender recorded significant progress.

“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 assured the bank would continue to execute its omni channel business model with precision, as “we made inroads into Kaduna, Bauchi, Kano, Mararaba (Nasarawa), Warri, Aba, Sangotedo (Lagos) and Lagos State University

“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.”Oloketuyi had said

A critical assessment of the above performance shows reasonable improvement on the corresponding outcome of the previous year. But how long the bank can sustain a high-flying performance remains a major question?

Analysts believe that in a stiff and volatile macro- economic environment, the market does not expect a strong upside from listed companies. Therefore, firms may not be able to deliver wonderful results in an environment riddled by social challenges and political uncertainty. Wema Bank is not an exception, but the lender was able to punch a little above its weight with its half year 2018 scorecard.

Recently, Nigeria was said to have over taken India as the most poverty -stricken country in the world.It is also reported that portfolio investors are leaving the country in droves due to market volatility caused by the impending election which is feared may be crisis ridden.This scenario will definitely have its impact on business operation in the country.

Wema Bank had creatively survived a storm and continued operations as a bank when it could not meet the capital base of N25billion.  In 2010, Wema Bank had scaleddown to operate only within its core areas of business – South-South, South-West and FCT Abuja-becoming a regional player.

It soon reversed to a national bank status when its capital base hit N43.8 billion and met the regulatory requirements for the National Banking license as stipulated by the Central Bank of Nigeria. This made it the first lender to be granted a National Banking License having previously operated with a Regional License.

Has the national bank licence paid off?Many have asked.

Some analysts believe the National Banking status may have paid off after all. With the recent performance, the bank appears to be stabilising. This is also reflected on its share price which had traded at 50 kobo for a long time before inching to 74 kobo.

“This Approval represents a milestone for the Bank in the delivery of its Project LEAP commitments. Six (6) years ago, we took a decision to refocus the Bank’s operations on its areas of strength and build a sustainable institution. 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”

A shareholder of the Bank, Mr. Boniface Okezie told BH that despite the lenders in ability to pay dividend over the time, Wema Bank was recovering its bearing.

Similarly, Chief Executive Officer of Crane Securities limited, Mr. Mike Ezeh, reckons that Wema Bank half year performance was an improvement on its results in the last few years.

However,  a staff of the bank who would not want his on print confided to BH that the bank was focused on ensuring that it keeps improving on its key performance indicators in the future.

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, except recent presence in Aba, 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 over 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 Its 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.

Still on the Brightside Wema Bank has cuddled history by being the only surviving indigenous financial institution in Nigeria, that may not show up on its balance sheet but, according to less pessimistic observers, it gives hope in the banks endurance.

 

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