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Q3: Wema Bank profit grows 73% against the odds

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Ademola Adebise, MD, Wema Bank

Wema Bank, one of Nigeria’s oldest indigenous banks, moved its corporate financial numbers massively in the third quarter (Q3) of the year. The banks third quarter 2018 result is a throwback to the days when the bank was one of the leading financial intermediaries in the South Western part of the country.

The lender posted a 70 percent growth in Profit Before Tax (PBT), from N1.80billion in Q3’2017 to N3.07billion in Q3’2018. Profit after Tax (PAT) rose by 72.55 per cent to N2.64billion in Q3’2018 from N1.53billion in Q3’2017.

Gross earnings grew by 7.96 per cent from N45.38billion in Q3’2017 to N48.99billion as at Q3’2018 this was supported by increased contribution from non-interest income which rose by 24.85 per cent from N8.09billion in Q3’2017 to N10.10 billion, as at Q3’2018. Net loans increased by 13.44 per cent from N215.8billion (2017FY) to N244.8billion (Q3’2018).

Deposit volume increased by 42.36 per cent to N362.3billion (FY 2017 N254.5billion), this was driven by the continued brand acceptance and customer acquisition initiatives involving branch network expansion and service improvements.

The Bank also recorded significant growth in Agency Banking partnerships, with the number of agents increasing by 27 per cent to 1076 agents as at Q3’2018 across all the 36 states of Nigeria.

At the close of business in the third quarter, Ademola Adebise, the Managing Director/Chief Executive Officer of Wema Bank, noted that “The bank’s focus remains on the Retail market segment driven by its success in digital on-boarding.”

He also pointed out that the bank has set out to double all indices by leveraging on digital innovation while it looks to further deepen its partnerships in the Commercial end of the market with new.”

“Partnerships are important to the success of our franchise and we have created structures that will help broaden our market share,” Adebise added.

As part of its efforts to reposition itself for continued growth, the Bank opened its Series II Bond Issuance Program of N20Billion on September 28, 2018.

The Bond issuance, which is a 7-year bond (Callable after 5 years) 2018-2025, was a huge success.

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In building a robust retail bank, Wema has expanded its footprint over the past few years, increasing its presence in the North and Eastern regions of the country and aggressively growing its agent banking business to reach the financially excluded and branch-starved communities.

The Bank hopes to continue to build on the success recorded in the last few months and close the financial year with improved year-on-year growth.

Wema 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.

“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.”, said the bank

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 sterling 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 third quarter 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.

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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 a 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 since 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.

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

Prospects

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 and sundry management crises among other operating problems. This almost snuffed life out of the only surviving indigenous first -generation bank in the country.

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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 remember 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 bank’s endurance.

 

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