Wema Bank: Positioned for Stronger Return on Investment
Kayode Tokede
Wema Bank Plc continued its growth momentum on the keen interest of driving shareholders’ return on investment and stock price appreciation.
The lender continued its impressive performance in unaudited first quarter (Q1) ended March 31, 2022 to underlined the relentless spirit and hard work of the management and staff.
Despite challenges in the banking sector, Wema bank in its unaudited Q1 2022 reported double-digit growth in profit to emerge as the highest growth in terms of percentage among listed banks on the Nigerian Exchange Limited (NGX).
Wema Bank in the period under review reported a profit before tax that increased to N3.3 billion as against N1.5 billion made in prior period, reflecting a growth of 119 per cent.
Profit after tax also increased year-on-year (Y-OY) to N2.86 billion in Q1 2022, representing an increase of 118.95 per cent from N1.30 billion in Q1 of 2021.
The growth in profits was driven by double-digit growth in gross earnings, interest income and Non-interest income.
In the period under review, Wema Bank recorded gross earnings of N29.14 billion, representing a year-on-year increase of 62 per cent as against N17.96 billion recorded in the first quarter of 2021.
Other highlights of the bank’s Q1 2022 result include a qualitative rise in interest income to N23.53 billion year-on-year, an increase of 58 per cent compared to the N14.92 achieved in Q1 of 2021.
About 39.5 per cent increase in Loans and advances to banks and customers to N18.22billion in Q1 2022 from N13.06 billion in Q1 2021 contributed to the bank’s significant increase in interest income.
Further breakdown of interest income reported by Wema Bank showed 156 per cent increase in Investments security to N6.58billion in Q1 2022 from N2.57billion in Q1 2021.
Interest expenses grew by 95 per cent to N14.95 billion in Q1 2022 from N7.66 billion in Q1 2021, driven primarily by expenses on customers deposit to N11.97 billion in Q1 2022 from N4.41 billion reported in Q1 2021.
Gross earnings, interest income
The interplay between gross earnings, interest income and interest expenses positioned net interest income to N10.07 billion in Q1 2022, representing an increase of 15 per cent from N8.77billion reported in Q! 2021.
Wema Bank reported N9.8billion net interest income after impairment charge for credit losses in Q1 2022 from N8.6billion in Q1 2021.
However, net fee and commission income grew by 59 per cent to N4.05billion in Q1 2022 from N2.56billion in Q1 2021 over 45 per cent and 17 per cent gain from fees on electronic products and account maintenance fees to N787.9million and N634.59 million in Q1 2022, respectively.
Therefore, operating income gained 32 per dent to N15.39billion in Q1 2022 from N11.62billion in Q1 2022. On operating expenses, Wema Bank reported 20 per cent increase in Q1 2022 to N12.09 billion from N10.12 billion in Q1 2021.
The growth in operating expenses was driven by 12.1 per cent increase in Personnel expenses to N4.4 billion in Q1 2022 from N3.9billion in Q1 2021, while Other operating expenses grew by 25.3 per cent to N6.75billion in Q1 2022 from N5.38 billion reported in Q1 2021.
From balance sheet position, the bank grew its deposit base year-to-date by six per cent to N1.022 trillion from N968 billion reported in 2021 full year result and accounts for period ended December 31, 2021.
Also, on the positive side its loans and advances which rose from N418 billion in 2021 to N433 billion in Q1, 2022. Total assets in the first three months of 2022 rose by eight per cent to N1.25trillion as of March 31, 2022 from N1.16trillion reported in full financial year result and accounts for period ended December 31, 2021.
The bank had reported a superlative result and dividend pay out to shareholders in the 2021 financial year.
Improved 2021 performance
With the growth in profit, Wema Bank once again paid shareholders a dividend of N0.24 per 50 kobo ordinary share in 2021 financial year.
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 group’s profit before tax for the period rose by 108.3 per cent to N12.38 billion from N5.9 billion in 2020, while profit after tax also rose significantly by 94 per cent to N8.9 billion in 2021 from N4.6 bilion reported in 2020.
The growth in profits was driven by a Year-on-Year growth of 15.35per cent in gross earnings to N92.14 billion in 2021 from N79.88 billion in 2020.
Net-Interest Income grew to N39.87billion in 2021 from N30.86 billion in 2020; growth of 29.22 per cent. Non-interest Income also increased from N16.83 billion in 2021 to N18.83 billion representing a growth of 11.91 per cent.
The bank in 2021 display a performance capped with strong growth in key financial indices especially in total assets that crossed the N1 trillion mark.
Wema Bank reported 20.23 per cent increase in total asset N1.16 trillion in 2021 from N968.58 billion reported in 2020.
Extract from balance sheet position revealed that Wema Bank grew its deposit liabilities up by 15.23 per cent to N927.47 billion in 2021 from N804.87 billion in 2020.
The bank’s retail deposits make up 31.6per cent of the total whilst corporate deposits make up 68.4 per cent. Current deposits both increased by 14.2 per cent to N242.5 billion (FY 2020: N212.3 billion) and, while savings deposits grew by 26.8 per cent to N152.3 billion (FY 202: N120.1 billion) due to deliberate effort to grow deposits and improve deposits mix. Term deposits grew by 6.1 per cent to N456.1 billion (FY 2020: N429.8 billion) due to growth in customer activities supported by our digital strategy
In addition, loans and advances to customers rose by 16.33 per cent to N418.86 billion in 2021 from N360.08 billion in 2020.
Conclusion
Commenting on the bank’s performance, the Managing Director, Chief Executive officer of the bank, Mr. Ademola Adebise in a statement attributed the impressive performance to the relentless spirit and hard work of the employees.
“Our human capital resource remains the single most important factor in our upward trajectory and improved figures in recent times. They have been cracking difficult business puzzles and providing business solutions that solve business problems in an amazing and incredible fashion, “Adebise said.
On his part, the bank’s Chief Finance Officer, Mr. Tunde Mabawonku, explained how the bank employed progressive business development drive and the deployment of cutting-edge technology to deliver superior banking services to their customers.
“We have deployed digital banking assets to optimize customer satisfaction as well as to reduce cost and inefficiency. ALAT has been strengthened and has been well received by the business community as well as the youth segment of the market. We hope to build on these successes and deliver greater value and services to our esteemed customers and deliver better returns to our shareholders”, Mabawonku said.
Mabawonku noted that, “a key measure of success for us is a consistent growth in our balance sheet and customer base – and we are glad that we are reporting healthy growth in all these areas. Looking forward, we expect that the strong growth will be sustained despite the tough business climate as we execute our customer experience improvement initiatives built around a digital first banking strategy and become first in class in that sphere.
“The bank 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 lending business alongside trade and other revenue lines. We have also unveiled our new Mission and Vision statements, which underpins our corporate strategy. We want to be the dominant digital platform in Africa delivering seamless financial service.”
