Nothing gladdens a shareholder like a good return on investments and the atmosphere could be ecstatic when an unexpected happens. This is the current state of the shareholders of Wema Bank who, some years back, could not have expected the current situation. The shareholders had endured years of dividend-less investment.
Last Friday however, the tide changed and the shareholders got a 24 kobo dividend per share, a high jump from the 4 kobo paid in 2020. A shareholder, Akinlade who was ecstatic, spoke glowingly of the bank and the board about the sustained dividend payment in the last three years, describing the pattern as commendable.
“You have done very well in terms of performance, and we pray for the bank to grow from strength to strength”, Akinlade said.
This new height is the result of the resilience of the management and the support from the board to the managing director, Ademola Adebise, who took over the reins of the bank in 2018, to steer the lender to profitability, ushering in a new era, and giving hope of a brighter future to the staff, the shareholders, the management and the board.
The foundation for the strong growth that is obvious today started when the bank closed the Year 2019 with a strong profit for the second year. That record of N5.2 billion profit up from the N3.36 billion profit in 2018 marked a change of direction from the rise and fall pattern of the preceding years to reasonable stability. Revenue accelerated in that year to give the bank the strongest improvement in gross earnings since 2013. The lender ended the long dividend holiday in 2018 with a cash dividend of 3 kobo per share, and keep it firing in 2019 to the attainment of stability needed to support a regime of regular dividends. Since then, the bank has never looked bank, moving from strength to strength.
The year 2020 was one of a global downturn owing to the lockdown and slowdown in business occasioned by the devasting Covid-19 pandemic, the lender, however, did not allow the drawback to sway it from its vision. Despite the prevailing situation in that year, Wema Bank turned in an N4.6 billion profit in 2020 and moved it up by 6.7 per cent, in the first quarter of 2021.
By the half-year of 2021, the lender has surprised many, pushing profit to jump a clear 367 per cent quarter on quarter, to N2.4 billion. The profit figure for the second quarter represents 65 per cent of the closing after-tax profit of N3.7 billion for the bank in June 2021.
The bank’s management added a further improved final quarter to an outstanding growth record at the end of the third quarter to take a distant lead in earnings growth in the banking industry in 2021. The bank raked in N2.7 billion profit in the fourth quarter, topping up the nine-month profit figure of N6.2 billion.
At the close of the year 2021 however, Wema Bank delivered a top industry record growth of 94 per cent in after-tax profit from N4.6 billion in 2020 to roughly N9 billion.
The 24 kobo dividend, a product of the profit growth, is the result of an outstanding performance that goes to show that Adebise is cooking a new growth impetus for the bank towards positioning it as a leading innovative financial institution through digital growth. To buttress, this is his bank’s digital bank – ALAT which is reputed as Africa’s first fully digital bank.
“I am delighted to announce our performance for the year ended 31st December 2021. The Bank’s 2021 results show robust growth in all key financial metrics despite the challenging macro-economic environment. Our year-end numbers highlight the strong growth trajectory of the financial institution. We comfortably crossed the ₦1trillion mark in total assets, with a share of approximately 3 per cent of industry deposits,” stated Adebise whose Wema Bank’s new profit height was driven by a Year-on-Year growth of 15.35 per cent in gross earnings to ₦92.14billion in 2021 from ₦79.88billion in 2020.
Close observation of the bank’s quarterly profit records shows the bank could come close to doubling the closing profit at the end of the year having recorded defiant growth in a year in which many banks struggled with challenges of low-interest margins and a resurgence of cost of funds and credit losses. It marks the strongest profit growth that the bank has seen in many years, beating even the outstanding growth of 56 per cent in after-tax profit in 2019 – when the bank closed with a N5.2 billion profit.
The bank’s exceptional growth in the 2021 financial year is a function of three major developments on both sides of cost and income in which it moved against adverse industry trends. Two major cost savings afforded the bank a good opportunity to stretch out margins.
The first is the cost of funds which only edged up by 2.7 per cent to N34.6 billion compared to high growth records in interest expenses in the financial markets in 2021. The critical accomplishment for the bank is a significant reduction in the cost of generating the naira of revenue.
It grew interest earnings by 12.5 per cent to N72.6 billion in the year compared to the 2.7 per cent increase in interest expenses. With that, the cost of funds claimed a reduced proportion of interest income at 47.7 per cent compared to over 52 per cent in the preceding financial year.
The cost-saving enabled the bank to achieve a remarkable growth of 23 per cent in net interest income, which amounted to almost N38 billion at the end of the financial year.
The second major development on the side of cost reduction for the bank in 2021 was recorded in loan impairment expenses, which dropped by 77 per cent to N1.3 billion at the end of the year. This shows a further improvement in the overall risk asset quality standard of the bank in the final quarter.
The year-on-year drop in credit losses extended from 56.5 per cent at the end of the third quarter. Wema Bank closed the 2020 financial year with a loan loss expense of N5.6 billion. The drop in credit losses in 2021, therefore, represents a reduction of over N4.3 billion over the review period and this earned a commendation from Tosin Olukannni, a shareholder, who lauded the board and management for keeping non-performing loans low at a time when Nigeria is going through a rough patch.
He urged both the board and management of the bank to continue in this stage to deliver good returns to shareholders in form of dividends.
The net positive impact of the cost-saving is reflected in net interest income after loan loss charges – which rose by over 45 per cent to close at N36.6 billion for the full year. The ability to convert earnings into net income/profit at several stages in the cost/income flow is the summary of the bank’s earnings story in 2021.
On the side of revenue performance, the key strength came from net fee and commission income, which led to revenue growth with an outstanding increase of 59 per cent at the end of the year to close at N13.4 billion. This means a robust addition of N4.7 billion from the income line in the final quarter to the closing figure of N8.7 billion at the end of the third quarter.
Two other income lines also contributed to holding up the bank’s revenue numbers in 2021. These include net gain on investment securities that advanced by 71 per cent to over N557 million in the year. The third leg of the bank’s earnings growth tripod is its main revenue line – interest income which grew by 12.5 per cent.
Two revenue lines failed to join the elevated pattern in the year: net trading and other income – which dropped by 60.4 per cent to N1.6 billion and 21.6 per cent to N3.2 billion respectively. Despite these, the bank still grew total non-interest income by over 11 per cent to close at N18.7 billion for the year.
Overall, it was a balanced growth from both sides of interest and non-interest earnings for Wema Bank in 2021. A further gain in growth momentum in the final quarter saw the bank through to an impressive growth of 12.2 per cent in gross earnings to N91.3 billion for the full year. This is accelerated growth in gross income from 9 per cent at the end of the third quarter in September 2021.
It is also a rebound for the bank from a drop of 11 per cent in gross earnings at the end of the preceding financial year.
The strength of Wema Bank in 2021 rests on management’s ability to combine improved earnings performance with generally reduced costs. Management was able to retain an increased proportion of its revenue as loan impairment expenses dropped and interest costs moderated during the year.
The resulting positive cost-income balance stretched out profit margins for the bank. Net profit margin improved from 5.6 per cent at the end of the preceding year to 9.7 per cent at the end of the 2021 operations.
Just as we anticipated, Wema Bank has issued one of the most improved corporate earnings stories from the banking industry for the 2021 financial year. The bank has not attained a profit margin that high in many years.
The Chief Finance Officer of the Bank, Tunde Mabawonku noted that the key measure of success for the lender is a consistent growth in its balance sheet and customer base – “and we are glad that we are reporting healthy growth in all these areas.”
Deposit Liabilities grew by 15.23 per cent to ₦927.47billion in 2021 from ₦804.87billion in 2020 while Total Asset increased by 20.23 per cent to ₦1.164.52billion in 2021 from ₦968.58billion in 2020.
Having earned over 23 kobos per share in the full year, up from about 12 kobos per share in the prior financial year, Mabawonku also added, ” 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 underpin our corporate strategy. We want to be the dominant digital platform in Africa delivering seamless financial service’.
Patrick Ajuda praised the board and management for ensuring the better and wider spread of the bank’s branch network during the review year. He also commended the bank for initiating sound and environmentally sustainable practices such as the cleaning up of waterways and the environment. He expressed satisfaction with the bank’s share reconstruction which has strengthened its financial position via capital appreciation.
Expectations In 2022
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 last December in anticipation of a better performance in 2022.
As predicted by Mabawonku, another rewarding year with a higher dividend seems in the offing for the shareholders with the pace of the lender in the first quarter of 2022.
Wema Bank right from January set the pace for another top record growth this year after finishing the 2021 financial year as a star performer. It pulled off an impressive first quarter, pooling gross earnings of N30.6 billion, which is a towering year-on-year growth of 57 per cent.
The lender is growing revenue for the second year and the strongest growth in many years looks quite likely for Wema Bank in 2022. The increase in gross earnings achieved in the first quarter is well over four and half times the increase of 12.2 per cent recorded at the end of 2021.
The bank lifted after-tax profit by 119 per cent to about N2.9 billion year-on-year in the first quarter. This is beating the applauded leap of 94 per cent in profit the bank posted at the end of 2021. Wema Bank had raised after-tax profit from N4.6 billion in 2020 to roughly N9 billion in 2021 and the strongest profit improvement looks likely for the bank with the strength of its first-quarter outing.
Mabawonku explained the bank’s progressive business development drive which owes to the deployment of cutting-edge technology.
“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.
The Managing Director, Adebise gave kudos 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 amazingly and incredibly”, Adebise said.
With the staff in high spirit to deliver on the goals of the lender using cutting edge technology, greater values surely await the shareholders at the end of the year.
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