By FELIX OLOYEDE
The economic challenges bedevilling the country due to the coronavirus pandemic and the crash in oil price was evident in the performance of Wema Bank in the first three months of 2020 as its post-tax profit weakened by 14.6 per cent to N977.30 million, compared the corresponding period last year. The government had lockdown the Lagos State and Abuja, the economic and political capitals of the country as well as Ogun State for five weeks between March 30 and May 4, due to the ravaging COVID-19.
Nigeria has recorded 7,016 confirmed COVID-19 cases, 1,907 discharged cased and 211 deaths as of May 23, 2020, while globally the confirmed cases have hit almost five million and 327,821 people have died from the pandemic globally.
The first quarter 2020 financial statement of the bank, which was recently released, showed that higher impairment provisions, operational cost blighted its bottom-line.
“There is a need to grow operating income faster than the rate at which expenses are increasing. On the other hand, the bank needs to keep an eye on administrative expenses. In conclusion, the performance of the bank is not impressive,” Moses Ojo, Head, Research and Business Development, PanAfrican Capitals Limited, said in his assessment of Wema Bank performance in Q1 2020.
The lender raked in revenue higher by 4.6 per cent to N20.78 billion, buoyed by interest income which grew 5.07 per cent, and net trading income, which increased 3.37 per cent but weakened by net fees and commission income, and other incomes which dipped by 6.11 per cent and 4.55 per cent respectively during this period.
Wema Bank’s performance in the first three months of the year was hobbled by impairment provision for its bad loans, which climbed almost 60 per cent to N566.35 million from N354.40 million in Q1 2019 and personnel cost which was up 12.46 per cent to N3.67 billion.
The bank also writhed on under the burden of higher cost in the form of depreciation and amortization of other operating expenses, which up ticked 38.78 per cent and 14.66 per cent respectively. Consequently, its pre-tax profit moved southward by 15. 1 per cent to N1.13 billion in Q1 2020, compared to N1.33 billion in the same period last year.
The bank grew total deposits by 11.59 per cent to N648.25 billion in Q1 2020 as total liabilities went up 11.75 per cent to N738.37 billion during this period. Also, Wema Bank boosted its risk assets by 8.49 per cent to N313.80 billion in the first three months of the year, from N289.24 billion in at the end of 2019, taking its total assets to 10.98 per cent to N794.50 billion in Q1 2020.
Its earnings per share, however, waned by 16.7 per cent to 10 kobo during this period under review from 12 kobo in March 2019.
Wema bank which enjoyed 40.83 per cent growth in its pre-tax profit at the end of the last financial year may not likely be able to replicate this same feat this year as the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, last week said the country’s economy would contrast more 8 per cent without government stimulus.
The bank had told its shareholders that it aims to grow short and long-term funding to support projected business growth, adding that it has also updated capital plans to provide more buffers against pandemic and other economic shocks.
“Drive aggressive growth in corporate and commercial banking through short term transactions and deals. Grow a retail customer base through ALAT & related partnerships,” it stated.
At the end of 2019, Wema Bank had a cost to income ratio of 84.66 per cent, surpassing its 75-80 per cent projection for the year.
Its non-performing loan (NPL) ratio stood at 7.38 per cent against the 5 per cent regulatory benchmark and return on average equity was 12.26 per cent. Wema Bank share price has declined 20.27 per cent to 59 kobo this year from 74 kobo in December 2019.
With the challenge at hand, it will not only walk the talk but would have to up it’s game and device new strategies to be able to weather the current storm.