• Friday, May 24, 2024
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Wema Bank: Lender’s relentless hunger for growth, profitability

Wema Bank: Lender’s relentless hunger for growth, profitability

In its recently released 2023 audited financial result, Wema Bank recorded impressive results across the different metrics considered, achieving financial growth, perhaps its best performance ever recorded.

A look at the bank’s growth trajectory not only reflects an innovative brand but also a resilient lender that has transitioned through several faces of Nigeria’s economy and stood strong year-on-year

For a brand dating back to the 1950s, topping the positive financial trends chart this deep into the 21st century could be dubbed a feat, and, given the bank’s progression over the years, this success is expected to spiral as the lender grows.

Growth and success

Perhaps the most telling indicator of a business’ success is its profit, not just in the volume but more importantly, in the progression. Profit is simply the amount of money a business has earned beyond its cost. It is the money made after accounting for operational costs and other expenses. The most successful businesses are those that have both profitability and growth.

An investor looking to make maximum returns would consider the numbers constituting a company’s profit as well as the trend in its financial performance. Upward trends tell the investor that a business is worth investing in and downward trends prompt skepticism, even if the numbers are high. Essentially, to weigh a business’ strength and potential, both profitability and growth must be considered.

Profit can be gross or net. The gross profit, known as Profit Before Tax (PBT), refers to a company’s total profit over a period—yearly, quarterly, etc. The net profit, known as Profit After Tax (PAT), refers to a company’s profit after tax deductions have been made. Both PBT and PAT are essential metrics of profit measurement, each of which reflects the financial strength of any business. While PAT tells you the real profit a company is left with, PBT allows you to measure the business’ profitability regardless of the existing tax laws. It could be argued that PBT is more reflective as tax obligations differ across businesses; however, both metrics are important indicators of business’ success and long-term survival.

Wema Bank’s full-year 2023 audited financial report shows that PBT stood at N43.59bn, as against the previous year’s (2022) N14.75bn, a 196 percent increase. The bank’s 2023 PAT rose to N33.66bn from the previous year’s N11.21bn, an impressive 202 percent increase in net profit in one year.

For a bank that set its target at N30bn PBT, the financial results show that it not only exceeded its PBT target but more remarkably, laced it with a margin even in PAT, thereby exceeding expectations.

The audited report also shows a 72.2 percent increase in gross earnings from 2022’s N131.08bn to N225.75bn in 2023.

While PBT is the company’s profit before tax deductions, gross earnings refer to the total revenue the company made—no expenses deducted.

Gross earnings are all a company earned within a given period from which salary payments, operational costs and other expenses are deducted to arrive at a profit. The 72.2 percent increase in the bank’s gross earnings not only reflects its profitability before overhead cost but also indicates sound financial health and is equipped to weather economic fluctuations.

Other metrics that measure the bank’s financial health include total deposits, total assets and loans, all of which bespoke the lender’s financial health according to its 2023 financial performance.

Total deposits refer to the sum of all funds that are held by the bank, be it security deposits, custom deposits or other kinds of money that the bank holds for others. An increase in total deposits indicates that the bank’s customer base and earning power are increasing; a sign for investors and prospective shareholders to weigh the merits of investing in the bank.

Wema Bank recorded a 59.6 percent increase in its total deposits from 2022’s N1.166trn to N1.861trn in 2023. Its worth climbed significantly in 2023 with a 58.5 percent increase in total assets, from N1.434trn in 2022 to N2.273trn in 2023. Total assets refer to the combined value of all that a person, business or entity owns, especially if it can be exchanged for cash.

The more assets owned, the higher the market value and sustainability projection for the business’ future. Investors, shareholders and consumers weigh the assets of a business to predict how equipped it is to handle its financial obligations and grow. With over N2trn in assets and coming from less than N1.5trn the previous year, Wema Bank has shown it has capacity for growth. The bank surpassed the N1trn industry benchmark—a feat achieved within the first three quarters of 2023.

Beyond the results, the bank’s loan disbursement volume increased by 53.6 percent, from 2022’s N521.43bn to N801.10bn in 2023. One of the bank’s unique selling points is its diverse range of tailored low-interest personal, group and business loan options—both with and without collateral. The bank’s positive track record of supporting lives and businesses across Nigeria with funding and financial support has made it the go-to for thousands of Nigerians across the country.

It is no surprise that the bank’s loan disbursement volume increased in 2023.

Worth mentioning also is the reduction of the bank’s non-performing loan (NPL) rates in 2023.

The bank’s success in reducing the NPL rate is reflective of a stronger, safer and more profitable future for the bank as it grows.

Wema Bank has become a reference in the business world and is increasingly dominating the financial services industry with its extensive range of tailored solutions that cater to the evolving needs of Nigerians across various sectors of the economy.

But how did the bank go from N5.94bn PBT in 2020 to as high as N43.59bn in just three years? It made innovation intrinsic and stayed determined to exceed expectations and reset the standards. From the shareholders’ point of view, the best time to invest in Wema Bank was last year and the next best time is now.