Wema Bank beats the odds

By Okey Onyenweaku

Unfazed by the recent downturn in the fortunes of some banks listed on the Nigerian Stock Exchange (NSE)Investors in Wema Bank Plc one of Nigeria’s oldest indigenously-owned deposit money institutions are sticking to the bank.
Regardless of the fact that the bank trades at a mere 4 per cent above its par value of 50kobo per share, the bank has managed to retain both investor and depositor confidence. How long this will remain is yet to be seen, but with strong first quarter (Q1) results egging the bank on, the stock market seems happy enough.
After a terrible spell in the financial wilderness Wema bank seems ready to stage a comeback, even if a mild one. Its Q1 results for the end of March 2017, was surprisingly bullish, as profit after tax leapt by a thundering 68 percent from a modest 12 per cent at full year 2016. The nominal value of the three months result reveals a rise to N0.72billion from N0.52 billion in the corresponding period of 2016.
The 72 year old bank saw its gross earnings increase by 34.89 per cent, year on year to N15.16 billion in Q1 2017 from N11.24 billion in Q1 2016. The surge in its profit appear to have been driven by a 78.8 per cent rise in non-interest income which stumped up from N1.58 billion in the first quarter of 2016 to N2.83 billion in Q1 2017.
Deposits from customers as well as loans and advances, however dropped by 2.07 per cent and 2.3 per cent respectively from what they were at the close of the business year in 2016.
Bank books show that deposits which stood at N320.76 billion in the first quarter of 2016 declined to N314.12 in 2017 as loans and advances to customers equally fell from N227.01 billion as at March 31, 2016 to N222.17 billion in 2017.

Its customer deposits, savings and current account in the first quarter 2016 had improved 38.12 and 24.52 per cents to N55.36 billion and N78.45 billion respectively, signalling an increase in market share and brand resilience.
“despite the continued challenging macro-economic backdrop, Wema Bank recorded a 34.89 per cent increase in Gross Earnings.
“This was driven by a 27.69 per cent and 78.79 per cent growth in interest income and non-interest income to N12.33 billion and N2.83 billion respectively compared to the prior year. In addition, the Bank continues to benefit from the growing market acceptance and increasing market penetration while leveraging on technology. As a result, the Bank continues to record growth in low cost deposits with a 68.06 per cent increase in Profit before Tax (PBT)’’, Segun Oloketuyi, Managing Director of Wema Bank had said.
‘’Wema Bank had recorded improved performances in 2016-year end. This is reflected in its gross earnings which grew by 17.36 per cent from N45.79 billion in 2015 to N53.83 billion.
Profit before Tax (PBT) and Profit after Tax (PAT) increased by 9.36% and 14.1% respectively to ₦3.27 billion and ₦2.59 billion against ₦2.99 billion and ₦2.27 billion in 2015’’, former Chairman of Wema Bank, Adeyinka Asekun
“In 2017, we are placing significant emphasis on ensuring our customers enjoy quality and convenient banking services. Our commitment to delivering quality service has never been greater”, former Chairman of Wema Bank, Adeyinka Asekun
‘’Total Assets as at December 2016 stood at ₦421 billion representing a 6% increase over the ₦397 billion recorded in the corresponding period of 2015 as loans to customers rose by 23% to close the 2016 year at ₦227 billion from ₦186 billion recorded in 2015.
The Bank during the year maintained its Non-Performing Loans (NPL) at 5.07% despite the challenging macro-economic environment. Furthermore, the Bank continues to record growth in its retail deposit drive, as the Wema brand gains continued acceptance.
Savings deposit grew by 27.6% from ₦35.58 billion to ₦45.40 billion while current account deposit grew by 2% from ₦86.29 billion to ₦87.85 billion,’’ Added Asekun
Shareholders have not been impressed with the Bank which paid dividend last in 2004. There has also not good grounds to harvest much returns from capital appreciation given the bank’s stock price at barely above 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 said.

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 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.