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It is end of free money for banks as the precipitous drop in yields on government securities continues to undermine revenue, as interest income from treasury bills has been growing at a slow pace.
Of course, the low yield environment means profit will grow at a snail pace compared to mid 2017 through the third quarter of 2018 when treasury bills yields were high.
The tough and unpredictable macroeconomic environment does not encourage lending, as a lot of companies are scaling back on expansion plans. Moreover, it is very risky granting credit to businesses whose cash flows cannot absorb interest payment and deliver strong margins.
Data combined by Meristem Securities shows the largest Banks in the country saw cumulative gross earnings grow by a mere 3.75 percent to N1.16 trillion in the period under review.
Investors have not been swooping on bank stocks because they are yet to be convinced that President Buhari led administration’s reforms will invigorate the economy.
Nigeria’s stock index is down 0.4 percent year-to-date while emerging markets are up 2.3% and the MSCI Frontier Markets 100 is up 10.2 percent.
Nigeria’s GDP contracted 13.8 percent in the first quarter, wiping out last year’s economic gains.
Amid the challenges hindering the growth of financial institutions,Wema Bank Nigeria Plc is thriving, as it leapfrogged its peers, recording the fastest profit and revenue expansion.
For instance, Wema Bank’s interest income increased by 26.89 percent to N16.07 billion in March 2019 from N12.64 billion the previous year; this compares with a mere 3 percent increase Fidelity Bank’s interest income; First City Monument Bank (FCMB), (4.85 percent); Sterling Bank, (-3 percent), and Union Bank of Nigeria, (-15 percent).
Wema Bank’s net income expanded by 49.79 percent in the period under review, this compares with 5.15 percent growth as at the bottom line (profit) for Sterling Bank; Unity Bank, (4.13 percent); Union Bank, (0.12 percent); Fidelity, (28 percent); First City Monument Bank, (40 percent),and Stanbic IBTC Holdings, (-17 percent).
Wema Bank said that it will continue to adopt a conservative stance towards risk management as the economy is still not robust enough to accommodate risk expansion
Wema Bank is a pioneer bank in Africa to offer a full digital banking experience. Little wonder noninterest revenue hit N3.77 billion as at March 2019, this represents a 10.14 percent increase from N3.42 billion the previous year.
A breakdown of non interest revenue shows fees and commission income was up 3.92 percent to N1.69 billion in the period under review from N1.63 billion the previous year.
Total operating expenses were up 14.47 percent to N7.67 billion in the period under review as against N6.70 billion the previous year; the increase in expense as due to increased investments to develop new capabilities.
Wema Bank continues to benefit from improving brand acceptance, resulting in 22.10 increases in deposit to customers to N451.02 billion in March 2019 from N369.20 billion as at March 2018.
Loans and advances to customers were up 6.15 percent to N266.34 billion in the period under review from N252.18 billion the previous year.
Wema Bank has said that it would leverage on latest technology to drive growth. The strategic plan would enable the lender to realise its goal of doubling the key indices of its assets, deposits and profits within the next two years.
“We intend to be a strong retail bank leveraging technology and innovation. For us, what we have said is that in the next two years, we would work to double our key indices of assets, deposits and profits through organic growth,” said Ademola Adebise, Managing Director/Chief Executive Officer of the bank.
“Today, we are about N400bn, in the neighbourhood of N500bn in assets, and if we stretch that, we would be shooting for N800bn by the time we double our indices. We want to get to N1tn mark in terms of our assets, @ said Adeise
“We have all the right tools in place and we are refreshing our IT, side by side our Alat product, which is doing well out there and what we are doing now is to review it and take it to the next level. It’s not just about pumping money to excite ourselves; we know what we are doing. Shareholders are interested in returns, so we have to deploy our limited resources in a way that would benefit all stakeholders. We have a clear digital journey we are working on.” Abarise added
“To remain competitive in this market, one needs to be very innovative, and for us, we want to be innovative, agile and deploy products that appeal to the needs of the customers. We would leverage technology as much as possible,” Abarise Summed
Wema Bank Plc has recommended to its shareholders a dividend payment of three kobo per share for the 2018 financial year, its first dividend payment in 14 years.
Adebise said the bank recommended the dividend payment of three kobo per share in line with the board’s approved dividend policy.