Wema Bank Plc has applied a strong revenue growth advantage to tide over surging bad loan losses and lift the bottom line two and half times year-on-year to N26.6 billion at the half year of 2024
Pressure from bad loans grew in the second quarter, as loan losses multiplied more than three times from N1.1 billion in the first quarter to N3.5 billion in the second, summing up to N4.6 billion at half year.
The bank’s half-year credit losses are three and a third times the corresponding figure of less than N1.4 billion it recorded in the same period last year.
The interim financial report of the deposit money bank for the six months ended June 2024 shows equally a much stronger second quarter than the first, accounting for 54.6 per cent of gross earnings and 63.6 per cent of net profit. The high points in the second quarter are a slowdown in interest expenses and a big leap in other income, which raised the profit margin from 11.9 per cent in the first quarter to 17.3 per cent in the second quarter.
The strength of revenue growth is going for Wema Bank for the third year running – from 42 per cent in 2022 to 70.5 per cent in 2023 and further to doubling year-on-year to N179 billion at the half-year in 2024, maintaining the record of the most rapid revenue improvement in decades so far this year.
Rapid growth in bad loan losses is being recorded for the third year running, as the expansion of the customer loan portfolio continues. The bank has grown its customer loan portfolio by about N173 billion in the six months to N974 billion (35.5 per cent annualised) after a jump of 53.6 per cent in 2023. Interest income, the bank’s principal income line, grew by 90 per cent year-on-year to N146 billion at the end of the six months of operations.
However, the non-interest earnings continue to lead revenue growth for the year with an increase of 155 per cent year-on-year to N33 billion in the half year.
Net trading income maintains the lead in revenue growth with a six-fold jump year-on-year to N1.8 billion at half year, followed by other income that grew more than four and half times to over N7 billion.
Net fee and commission income advanced by 136 per cent over the same period to close at N23.7 billion at the half year.
The slowdown in interest expenses in the second quarter helped to ease the pressure from the cost of funds that the bank experienced in the first quarter. At N82.9 billion at the half year, interest expenses grew by 89.3 per cent year-on-year, down from an increase of 123 per cent in the first quarter.
Unlike in the first quarter, interest expenses grew slightly below the increase in interest earnings, breaking the pattern of a more rapid increase in the cost of funds than interest income that has been on since 2022. Interest expenses claimed 56.7 per cent of interest income at the half year, down from 62.4 at the end of the first quarter and from over 57 per cent in the same period last year.
Net interest income improved by 92.2 per cent year-on-year to N63 billion, improving from an 80.6 per cent increase in the first quarter.
The upsurge of 233.5 per cent in loan loss expenses to N4.6 billion lowered the margin of increase in net interest income after bad loan charges to 85.9 per cent to close at N58.5 billion for the six months of operations.
A big boost however came from the strong growth in non-interest income, which lifted operating income by 106 per cent to N91.6 billion at half year, improving from 83.7 per cent increase at the end of the first quarter. Operating expenses remained a cost-saving area for the bank at the half year, slowing down relative to gross earnings at an increase of 88.5 per cent to N61 billion.
Operating cost margin went down from 36 per cent in the same period last year to 34 per cent in the half year ended June 2024.
Cost savings from interest and operating expenses countered the pressure from bad loan losses, enabling the gain in net profit margin over the review period.
Wema Bank closed the half-year operations with an after-tax profit of N26.6 billion, an increase of 153.4 per cent year-on-year, up from 79.7 per cent in the first quarter.
The bank earned N2.48 per share at the end of half-year operations against N1.63 per share in the same quarter in the preceding financial year.
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