" />
Published On: Mon, Jul 31st, 2017

Wema: Declining deposits, rising profits

FELIX OLOYEDE|

Signs of a sector-wide economic recovery were reflected in the financial performance of Wema Bank Plc in the first six months of 2017 as it defied a marginal fall in deposits from customers to increase its profit-after-tax (PAT).
Although deposits from customers dropped marginally by 0.84 percent slumping from N253.84 million in H1 2016 to N251.74 million in the corresponding period of this year, it succeeded in growing its PAT 10.45 per cent to N1.43 billion during the period (H1 2016: N1.3 billion). The decline in total customer deposits was caused by a 19.47 per cent in term deposit and 8.94 per cent drop in current deposits of corporate customers, attributable to the high yields (16-18 per cent per annum) in fixed income market sucking in investment funds during the course of the year.
Wema Bank’s positive performance at the end of first half of the year was hinged on its interest income which appreciated to N25.45 billion in H1 2017, or 25.84 per cent better than the N20.16 billion it generated this time last year. The bank also increased its net fees and commission earnings by 25.83 per cent to N3.89 billion (H1 2016: N3.09 billion), while its net trading income declined 24.23 per cent to N527.06 million in H1 2017 from N695.64 million in H1 2016, other incomes rose significantly by 84.63 per cent to N589.26 million during this period against N319.15 million in the corresponding period in 2016. At the end of Q2 2017, the lender’s operating income was up 5.58 per cent to N13.4 billion instead of N12.70 in Q2 2017.
Meristem Securities Limited in an email to Business Hallmark said, “Based on the bank’s performance in H1: 2017 and expected growth in the digital banking space, we envisage that ALAT would contribute positively to growth in customers’ deposits and drive down the cost-to-income ratio. However, we do not rule out the possibility of decline in growth given the fragile state of the Nigerian economy.”
The Nigerian economy has been battling with recession since Q1 2016 and its Gross Domestic Product (GDP) contracted -0.52 per cent in Q1 2017. Analysts have expressed optimism that the country’s economy would recover at the end of Q3. Dr Biodun Adedipe, chief consultant, Abiodun Adedipe and Associates has projected that Nigeria would achieve 0.24 per cent growth rate at the end of 2017. But the Central Bank of Nigeria called for caution at the end of its Monetary Policy Committee (MPC) meeting last week, saying the economy was still fragile.
Mr Andrew Esene, research analyst, Futureview Financial Services Limited in a telephone conversation said if the economy continues on a recovery path, Wema Bank would surpass its 2016 performance at the end of the year. “If nothing goes out of the ordinary, I am very sure Wema Bank will post a better result this year than it did in 2016,” said he.
For MrAbayomiAjayi, research analyst, EDC Securities Limited, Wema Bank’s impressive performance in the first six months of this year, was buoyed by its decision to improve customer satisfaction. “2017, things would not look all that good but in 2018 we expect sterling performance from the bank,” he posited.
The commercial lender spent 45.13 percent more to generate interest income in H1 2017 as its interest expenses came to N16.89 billion (H1 2017: N11.63 billion) but it was able to trim its impairment provisions down -2.24 per cent to N8.39 billion during this period.
Wema Bank total loans to customers increased 19.60 per cent in H1 2017 to N205.71 billion (H1 2016: N171.99 billion) as term loans surged 22.23 per cent to N188.09 billion against N153.89 billion in the same period in the preceding year.
However, the bank’s total assets and liabilities were down marginally by -2.19 per centand -3.24 per cent to N391.76 billion and N333.45 billion respectively in H1 2017 (H1 2016: N383.17 billion and N344.59 billion respectively).
Meanwhile, the commercial lender made frantic efforts to cut personnel costs to N5.13 billion in H1 2017, -0.95 per cent lower than N10.35 billion it spent in H1 2016, but its other expenses were higher by 11.93 per cent to N5.69 billion due to the bank’s N554.2 million investment in technology and alternative channels, which it did not make in Q2 2016 and business expenses which ballooned 66.39 per cent to N126.9 million (Q2 2016: N76.27 million).
In an emailed response to Business Hallmark’s enquiry into the banks half year result, Mr Abiodun Aderibigbe, Wema Bank Media Relations Officer, explained that the bank deposits fell over the period because of a deliberate and strategic repricing of its liabilities in May 2017. This he said, was done to preserve margins, arising from a high inflation and interest rate environment.
He also pointed out that, “on the loan book, we recorded a 9.38% decline in net asset from N227.01 billion as at FY 2016 to N205.71 billion in HI 2017.
According to him, “this decline resulted from payments and restructuring, with repayments accounting for a sizeable portion of the decline.
Interestingly, the banks guidance for risk assets growth (loan) remained unchanged at between 1% and 2%, necessitated by what has been seen as a challenging business environment.
He pointed out that the banks continued focus on its risk assets have begin to yeild significant gains. Its non-performing loan (NPL’s) fell below the regulatory threshold of 5%, it was at 4.91% by HI 2017 (HI 2016: 5.07%)
Wema Bank’s earnings per share dropped -4.82 per cent to N6.32 in H1 2017 against N6.64 in H1 2016.
The bank’s share which traded 55 kobo on Thursday has lost -26.67 percent of its value in the last one year and its current price-earnings ratio 7.84.
Wema Bank, which has been in operations for over 70 years, had upgraded to a national bank from a regional lender last year.

Leave a comment

XHTML: You can use these html tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Most Shared

Recent posts

  • CBN ruins Black Market business, says Gwadabe

    Central Bank of Nigeria (CBN’s) foreign exchange management policies have begun to put severe pressure on Nigeria’s parallel foreign currency market as ‘Black marketers’ begin to see their trading margins disappear. Indeed with more stable supply of forex and growing investor confidence on rising oil prices (currently at $74 per barrel) , the business of […]

  • Manufacturers groan despite improved bank liquidity

    By FELIX OLOYEDE Nigerian manufacturers are still credit-starved despite the improved liquidity of the banking sector. Although credit to the private sector has been rising, manufacturers have claimed that access to funds still pose a serious problem. Broad money in circulation increased 8.14 per cent to N2, 401.91 trillion in February 2018 compared to N2, […]

  • MAN, LCCI disagree over CFTA

    By UCHE CHRIS President Buhari seems to be coming under increasing pressure from both home and abroad over his refusal to sign the Continental Free Trade Area treaty last month at the meeting African Union Heads of states and government in Addis Ababa, Ethiopia. Also Nigerians particularly the business community are sharply divided over the […]

  • Gov. Wike: More garlands for Mr. Projects

    By OBINNA EZUGWU On Sunday April 15, 2018 at the Civic Centre, Victoria Island, Lagos, Rivers State governor, Nyesom Wike was the cynosure of all eyes as he stood firm and composed to the cheering of the audience at the capacity hall to receive the prestigious Zik Prize for good governance. It was indeed an […]

  • The Sterling Bank spreadsheet… an uppity lenders burden

    By TESLIM SHITTA-BEY Despite not stirring excitement in recent years, Sterling Bank Plc has run a recession gauntlet and come out looking marvelous. The bank in 2017 grew its gross earnings by slightly under twenty per cent to 19.79 per cent between 2016 and 2017.  The banks gross earnings (a measure of its business volume) […]

  • Melaye released after being detained, police deny involvement

    Kogi West senator, Dino Melaye has been released from detention reports reaching Business Hallmark indicate. The Senator was released after being detained by officials of the immigration service at the Nnamdi Azikiwe International Airport, Abuja on his way to Morocco The officials allege that he was detained based on an order from Interpol. However, the […]

  • Breaking: Senator Dino Melaye arrested at Abuja airport

      Senator Dino Melaye on Monday morning arrested after checking in at the international wing of the Nnamdi Azikiwe Airport, Abuja. The embattled senator representing Kogi West on the platform of the APC, tweeted that he was picked up on his way to Morocco for an official engagement sponsored by the Nigerian government. Melaye was […]

  • Big Brother Naija 2018: Miracle claims N25m cash prize, brand new SUV

    Miracle Ikechukwu Igbokwe has emerged the winner of Big Brother Nigeria #BBNaija, reality show. Miracle beats one of the most controversial housemates, Cee-C to win the ultimate grand prize of N25million cash, a brand new SUV among other prizes. Miracle is a young pilot and also a model. A total of 170 million votes were […]

  • Economy: Nigeria receives massive vote of confidence – Adeosun

    …We will continue to build reserves and save for the rainy day – Emefiele From OKEY ONYENWEAKU, Washington D.C, USA Minister of Finance, Kemi Adeosun Saturday in Washington D.C, USA said Nigeria has been praised for her good economic outlook.  Speaking to Journalists during a combined briefing with the Governor, Central Bank of Nigeria, Mr. […]

  • Nigeria-US Investment Summit not included in our schedule, says Adeosun, Emefiele

    The Minister of Finance, Kemi Adeosun and the governor of the Central Bank of Nigeria, Godwin Emefiele, have explained the reasons why they were absent at the Nigeria-Us Investors Summit which was held in Washington, DC on Saturday. The summit is organised by the Embassy of Nigeria in the United State and the absence of […]

  • Nigerian banks must grow risk-weighted assets to remain competitive, says Coronation Merchant Bank report

    FELIX OLOYEDE Ability to create risk asset creation in the real sector would set apart leaders of the Nigerian banking industry over the next three years, a new report from Coronation Research, a part of Coronation Merchant Bank Group has stated. The report released last week claimed that while the quality of asset in the […]

  • Nigerian equities market sheds 0.28%

    The equities market closed negative last week as Nigerian Stock Exchange All-Share Index (NSE ASI) dropped by 0.28 per cent to 40,814.89 basis points. Similarly, all other indices finished lower with the exception of NSE Consumer Goods, NSE Premium, NSE-Main Board, NSE 30, NSE Banking, NSE Oil/Gas, and NSE Pension indices, which appreciated by 1.08 […]

  • SEC expresses worry over spate of delisting companies

    FELIX OLOYEDE The spate of highly capitalised companies delisting from the Nigerian Stock Exchange (NSE) calls for some concern, the Securities and Exchange Commission (SEC) has stated. The Acting Director General, Ms. Mary Uduk, while briefing pressmen on the outcome of the first Capital Market Committee (CMC) in 2018 on Friday, noted that this trend […]

  • Borno Mosque Attack: Four killed, eight injured Sunday morning

    Four people have been killed and eight others injured in a suicide attack on a mosque in Bama Local Government Council, Borno state. The State Emergency Managment Agency (SEMA) chairman, Yabawa Kolo, confirmed the death toll on Channels Television. The incident occurred when two suicide bombers, a male and female between the ages of  13 and 14 invaded […]

  • Buhari returns to Abuja from London

    President Muhammadu Buhari has returned to Abuja after his visit to the United Kingdom, where he held bilateral talks on Nigeria – British relations and also participated in the Commonwealth Heads of Government Meeting ( CHOGM). The President on April 9 left Abuja for London after he announced his intention to seek re-election in the […]

  • World Bank jacks up share capital by $13 billion

    World Bank shareholders have approved an increase in the bank’s lending capacity  after the United States backed a reform package that curbs loans and charges more for higher income countries like China. World Bank President Jim Yong Kim said neither China nor any middle income countries was happy about the prospect of paying more for […]