Wema Bank records profit growth as Q1 net income up 4.13%

Wema Bank plc recorded a single digit growth in earnings to start the year despite curbing increases in expenses. For the first three months through March 2015, the bank’s net income increased by a single digit 4.13 percent to N523.0 billion from N502.13 billion the same period of the corresponding year 2014. This is the slowest growth among the tier 11 lenders analysed by BusinessDay.

It also means the bank is feeling the hit of the high interest rate environment stoked by slump in oil price and a weak naira.

Wema Bank was able to curb expenses amid regulatory induced costs as operating expenses reduced by 2.91 percent to N4.67 billion in 2015 from N4.81 billion in 2014. The bank’s cost-to-income ratio, measure of profitability and efficiency, reduced to 79.70 percent in 2015 from 81 percent in 2014. This means the lender is cutting costs while increasing profit.

While the lender may have reduced costs, it capitulated to the CBN’s tightening stance as interest expense were up by 17.50 percent culminating in a single digit growth in net interest income by 2.70 percent to N4.17 billion from N4.06 billion in 2013.

The country’s apex bank applied rules and restrictions to stabilise the naira after it declined to a record low in February as the price of oil, the nation’s major foreign-exchange earner, fell by a half in the second half of last year.

Analysts say these macroeconomic challenges will stunt the loan growth of Nigeria lenders in subsequent quarters, given their exposure to currency risk. These loans are owned by the oil and gas explorers.

Wema Bank is focused on risk management through well diversified loan portfolio as loans to deposits ratio increased to 62.10 percent in 2015 from 57.65 percent in 2014. It also means the Nigeria lender is aggressive about lending.

Loans and advances to customers increased by 9.52 percent to N135.08 billion in 2015 as against N149.30 billion in 2013. Deposits to customers increased by 16.0 percent to N217.50 billion in 2014 from N258.95 billion in 2014. Total assets were up by 10.22 percent to N343.40 billion in the review period from N382.50 billion in 2013. The bank aims to complete a $100 million tier II capital raising exercise by the second quarter of this year to fund its growing foreign currency loan portfolio.

Its share price closed at N1 on the floor of the exchange, while market capitalisation was N37.51 billion.

 

BALA AUGIE