Wema Bank: Impressive Performance Rekindles Robust Dividend to Shareholders

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Wema Bank Plc reported stronger profits in its nine months ended September 30, 2021 to position the lender’s dividend payout sustainability to shareholders.

After 14 years of non-payment of dividend, the lender in 2018 financial year declared dividend of N0.03 amid its capital restructuring exercise.

Following its consistent impressive performance, the lender in 2019 and 2020 financial year also declared dividend of N0.04 respectively, to underline the management determination to reward shareholders who invested in the bank’s shares.

The nine months ended September 30, 2021 result and accounts is a continuation of the 2020 full year impressive performance that saw the bank paying dividend to its shareholders for the third year consecutively.

The bank in 2021 has maintained such intrinsic fundamentals that continued to impact on profits and balance sheets amid domestic and foreign macro economy challenges facing the banking sector and the nation’s economy at large.

The solid financial performance for the period affirms Wema Bank as one of the banks that has been consistent in achieving its strategic objectives despite the challenging business environment.

Stronger gross earnings

Extract from the Wema bank’s profit & loss figures showed 9.1per cent increase in gross earnings to N63.1billion in nine months of 2021 from N57.8billion reported in nine months of 2020, reflecting the higher interest rate environment, notably in loans and advances.

Given a low-yield environment, the bank also reported interest income that rose by 11.11per cent to N51.55billion in nine months of 2021 from N46.4billion reported in nine months of 2020

The bank benefitted from loan growth and higher yield environment as interest income on loans and advances to customers rose by 13.2 per cent to N44.39 billion in nine months of 2021 from N39.22billion reported in nine months of 2020.

Interest expenses rose by nearly 28 per cent to N23billion in nine months of 2021 from N18.06billion reported in nine months of 2020.

The growth in Wema bank’s interest expenses was driven primarily by interest expenses on “Other borrowed funds” that grew by 262.05per cent to N3.97 billion from N1.097 billion recorded in nine months of 2020 and also by three per cent increase in Deposits from customers that closed nine months of 2021 at N17.07billion as against N16.58billion recorded in nine months of 2020.

Consequently, Wema bank reported Net-interest income rose by 41.55 per cent to N28.45billion in nine months of 2021 from N20.09 billion reported in nine months of 2020.

Growth in Net-interest income also play critical role in Net interest margin that improved to 6.4 per cent in nine months of 2021 from 5.84per cent in nine months of 2020 on a faster reduction in cost of funds relative to reduction in asset yields.

The bank, however, reported Non-interest income that rose by five per cent to N12 billion in nine months of 2021 from N11.4billion reported in nine months ended September 30, 2020.

Meanwhile, the bank in its nine months of 2021 reported Net impairment loss on financial assets stood N27.64billion in nine months of 2021 from N18.24billion in nine months of H1 2020.

The bank reported 69 per cent increase in Net fee and commission income to N8.7billion in period under review from N5.16billion reported in prior period, while other “Other income” rose by 52.3 per cent to N1.63billion in nine months of 2021 from N1.07billion reported in nine months of 2020.

On expenses, Wema Bank’s Operating expenses increased by 22 to N32.4billion in nine months of 2021 from N26.6billion reported in nine months of 2020, driven largely by regulatory costs, and to a lesser extent, reflective of the high inflation environment and currency devaluation.

The breakdown of Wema bank’s operating expenses revealed “Other operating expenses” increase of 24.9 per cent to N17.09billion in nine months of 2021 from N13.68billion reported in nine months of 2020, while Personnel expenses closed nine months of 2021 at N12.38billion, 17 per cent increase from N10.57billion reported in nine months of 2020.

About N3.9billion Asset Management Corporation of Nigeria (AMCON) levy in nine months of 2021 from N2.86billion in nine months of 2020 and Nigeria Deposit Insurance Corporation (NDIC)’s N2.77billion in nine months of 2021 from N1.65billion in nine months of 2020 contributed to the bank’s “other operating expenses” in the period under review..

The bottom-line performance showed that, Wema bank Profit before income tax rose by 136 per cent to N7.2billion in nine months of 2021 from N3.1billion reported in nine months of 2020.

Despite 135.9 per cent increase in Income tax expense to N974million in nine months of 2021 from N412.86million in nine months of 2020, Wema bank’s grew profit after tax by 136 per cent to N6.2billion in nine months of 2021 from N2.64 billion reported in nine months of 2020.

In addition to profit & loss figures, the bank closed nine months of 2021 with Earnings Per Share of 21.6 kobo, about 135 per cent from 9.20 kobo reported in nine months of 2020.

Strong Asset Quality

The bank offers its clients a wide range of corporate, investment, business and personal banking products and solutions. It is one of the biggest and most profitable banks in Nigeria.

The impressive performance of Wema bank profit & loss figures was impacted by stronger balance sheet in the period under review.

Take for instance, the bank’s Loans and Advances to Customers rose by 10.3 per cent to N397.3billion as at September 30, 2021 from N360.1billionin reported in full year ended December 31, 2020 as the bank continued to support its customers across multiple sectors of the economy.

Wema bank’s deposit from customers up by 9.3 per cent to N879.8billion in nine months of 2021 from N804.9billion reported in financial year of 2020..

Growth in loans and deposit impacted on total assets, gaining 11 per cent to N1.07trillion as at September 30, 2021 from N979.5billion in 2020.

However, Shareholders’ Funds of Wema bank rose by eight per cent to N63.9 billion from N59.3billion reported in 2020 FY.

As liquidity position of Wema bank was further sustained by expanding reach of its services on the digital platform and increased agent banking/customer acquisition.

The bank’s total nonperforming loans (NPL) declined on more efficient loan book in terms of repayment leading to a decline in the NPL ratio to 4.30 per cent from 4.67 per cent reported in nine months of 2020.

Meanwhile, Capital adequacy ratio at 11.6per cent for nine months of 2021 is higher than the regulatory requirement (10 per cent)

The bank’s management planed on boosting the capital base by N40 billion to grow risk assets underwriting.
The Bank disclosed recently that “it is considering” the acquisition of a Fintech firm or a merger with another bank, as part of its growth plans.

Performance Mirrors Resilience

Commenting over the bank’s half year results, the Managing Director, Wema Bank, Mr. Ademola Adebise in a statement said: “Our performance speaks to the spirit of resilience that runs through the organization as we have strongly bounced back from the COVID-19 impacted performance of the same period in 2020.

“As the economy opens back up fully, we expect to see a stronger performance for full year 2021.

“Over the course of the second half of 2021, the bank will continue its strong focus on the digital business, pushing for further gains in customer acquisition, consumer lending and transaction volumes while on the commercial side of the bank, we will continue to aggressively grow our commercial lending business alongside trade and other revenue lines.”

The Chief Finance Officer, Wema bank, Mr. Tunde Mabawonku in a statement on the bank’s nine months result and accounts said: “we are delighted to announce the Bank’s nine months 2021 results which shows strong growth in key financial metrics despite the challenging macro-economic environment arising from heightened inflation, supply chain disruptions and the continued pass-through impact of the Covid-19 pandemic.”

“The numbers show the Bank continues to grow and improve its market share. We have now comfortably crossed the N1trillion mark in total assets and have a share of close to 3% of industry deposits”.

According to Mabawonku: “The key measure of success for us is growth in customer numbers and customer activity – and we are glad that we are reporting strong growth here.”

“We have also unveiled our new Mission and Vision statements which align to our strategy. We want to be the dominant digital platform in Africa delivering seamless financial services. This plan started with the launch of ALAT a few years ago and is now being accelerated in the last few months.

“We are sure to close the year with an even stronger performance; we will also continue to focus on our digital business, which is a key boost for customer acquisition, consumer lending and transaction volumes while not neglecting our corporate and commercial play.

“On our commercial business, we will continue our aggressive strategy to improve our commercial lending business alongside trade and other revenue lines’.

Mabawonku recently said bank had started a process that would hopefully grow its capital base to N100 billion.

According to him, “When the CRR dropped below 15 per cent the board approved immediate implementation of the bank’s capital management plan to bring shareholders capital from existing N60 billion plus to above N100 billion mark.”

SOURCE: THISDAY

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