Wema Bank Plc is one of the commercial lenders that have been badly hit by the impact of the coronavirus (COVID-19) pandemic. This has become a lot of worry to shareholders of the bank following its figures at the end of the first half of the year 2020.
Many did not envisage the disruption caused globally by the (COVID-19). So, a lot of companies were caught napping and have had tales of woes to tell. The pandemic forced Nigerian economy to be shut for five weeks.
Consequently, the economy has been projected to slip into recession by the third quarter of this year. And the International Monetary Fund (IMF) has forecasted the country’s economy will contract by -5.4 per cent in 2020.
Consequently, Wema Bank’s profit after tax (PAT) declined by 33.53 per cent to N1.49 billion in the first six months of the year, compared to N2.25 billion it made in H1’19. Its profit before tax (PBT) also fell 33.75 per cent to N1.73 billion in H1 2020.
The lender’s revenue contracted 6.57 per cent to N38.15 billion instead of the N40.84 billion it generated in the prior period, weakened by interest income which was lower by 9.23 per cent and net fee and commission income that declined 16.38 per cent during the period under review, although net non-interest income was higher by 4.5 per cent to N8.3 billion from N7.94 billion in H1 2019.
Wema Bank half-year performance worries shareholders as profit drops by 34 percent
A breakdown of the interest revenue shows that it was income from loans and advances (which plunged 9.58 per cent to 25.65 billion) that dragged it down, though the bank gave out more loans and advances during this period, growing by 16.70 per cent to N338 billion against N289 billion as of December 2019. Lower income by 21 per cent from investments securities did not also help issues.
The bank’s net trading income improved by 27.77 per cent to N4.67 billion, while other operating income hitched up marginally by 1.64 per cent to N19.33 billion.
David Adorin, managing director, Highcap Securities, explained that despite the decline in profit, the bank did not perform poorly when compared with companies in real sector which suffered losses in the first half of the year. “It is interesting because nobody expected they will make profit. The banks only had decline in profit, which is a good development. If the banks suffered losses, it would affect the country’s payment system,” he noted.
He further explained that the bank will stabilize in the third quarter of the year as there is no foreseeable threat to its performance for the rest of the year, adding that it is only the growing insecurity in northern part of the country that poses some risks.
The impairment for credit loss was lower marginally by 0.37 per cent to N11.03 billion, though many customers had tough time repaying their loans during this period due to the aftermath of the COVID-19, compelling banks in the country to restructure many of their risk assets. Expectedly, its non-performing loans (NPL) ratio worsened to 5.60 per cent from 3.55 per cent in H1 2019.
Despite the drop in the lender’s earnings, cost continued upward as operating expenses grew by 7.32 per cent in the last one year to ₦17.60 billion from N16.40 billion in H1 2019, driven by personnel cost which increased 6.33 to N7.05 billion and other operating expenses which rose by 3.39 per cent to N8.66 billion in H1 2020.
Customers’ deposits increased by 17.85 per cent to N680 billion in H1 2020 (N577 billion in December 2019), while Net Loans and advances upticked 16.70% to N338 billion in H1 2020 (N289 billion in December 2019). Consequently, total asset improved 15.27 per cent to N825 billion (N716 billion in December 2019). Loan to deposits ratio lowered to 49.70 per cent from 62.98 per cent in H1 2019, which was below the Central Bank’s 65 per cent threshold.
Wema Bank Capital Adequacy Ratio (CaR) stood at 11.0 at the end of June 2019 lower than the 14.59 per cent it had in the same period last year. Also, its earnings per share also declined to N7.80K from 11.60k in H1 2019.
When our reporter contacted Funmi Falola, Wema Bank’s head of corporate communication for the bank’s reaction, she directed inquiries to the bank’s chief financial officer (CFO), Tunde Mabawonku. But all efforts to reach the bank’s CFO proved futile as calls and text messages placed across to his mobile line were not responded to as at press time.