The strength of Wema Bank to increase net profit by a 140 per cent to N86.3 billion in 2024 lies in accelerated revenue and the highest-ever profit margin record struck in the year. A strong final quarter accounted for one-third of revenue and 39 per cent of net profit for the year.
Gross earnings increased for the third year for the bank, growing by an all-time high margin of 91 per cent to close at N433.4 billion. The figure isn’t far from the preceding three years’ annual revenues together, marking the most rapid revenue improvement for the bank in decades.
As we expected in our outlook for the bank’s full-year earnings performance, revenue growth and low-cost advantage stretched out the profit margin for Wema Bank to a new mark and another triple-digit leap in the bottom line we anticipated has happened.
The audited financial report of the deposit-money bank for the full year ended December 2024 shows that Wema Bank attained a historic net profit margin of 19.9 percent in the year, improving further from 15.9 percent in 2023, when it broke free from a long-running low-end single-digit margin.
The summary of the bank’s earnings story in 2024 is therefore the gain of the highest speed on the revenue track and the vertical leap in the ability to convert the earnings into profit. Three years ago, in 2022, the bank converted only 8.5 kobo of the naira of its gross earnings when it closed with a profit of N11.4 billion.
The margin leaps achieved in the past two years, alongside the upturn in revenue, have seen the bottom-line surge by 217 percent to almost N36 billion in 2023 and further to the peak of N86.3 billion in 2024.
The bank’s revenue for the year consists of interest earnings of N354.6 billion and non-interest income of N78.8 billion, with balanced growth on either side. The growth leading income lines, however, are net trading income and net fee and commission income that jumped by 318.6 percent and 122.6 percent to N3.4 billion and N55.6 billion, respectively.
The critical cost-saving line that stretched out profit margin is operating expenses, which slowed down relative to gross earnings at an increase of 67.2 percent to N131.7 billion. The proportion of revenue claimed by operating costs went down from 34.7 percent in 2023 to 30.4 percent at the end of the 2024 operations.
This is the lowest operating cost margin for Wema Bank in decades and one of the lowest in the Nigerian banking space. The change of the bank’s position from one of the highest cost margins to one of the lowest is a big transformation that has happened at Wema Bank.
Apart from operating cost, the bank’s management prevented the cost of funds from encroaching on earnings in the year, which is a defiance of the general industry pattern. It is one of the very few players in the business that kept interest expenses growing below interest income, albeit slightly.
This marks the breaking of a pattern of a more rapid increase in the cost of funds than interest income, which has been the trend for the bank since 2022.
At N177.6 billion, interest expenses grew by 89 percent in the full year, slightly below an increase of 91 percent in interest earnings. That didn’t afford much cost savings, but did help to reinforce the drop in operating cost margin to stretch out net profit margin to the new peak.
The only major challenge for the bank is the pressure that mounted from bad loans. Loan impairment charges increased by triple digits for the third year running at 105 percent to N21.7 billion. This is just moderately below the sum of the preceding four years’ credit losses of N23 billion.
However, the moderate cost savings from interest expenses reduced the pressure from bad loan losses, enabling a 91.5 per cent increase in net interest income after the loan losses to N155.4 billion.
Wema Bank has entered the bracket of big loan loss charges, as its customer loan portfolio reached N1.2 trillion for the year.
The big stories for the bank in 2024 are accelerated revenue cost savings from interest and operating expenses against rising bad loan charges. The upside functions more than countered the downside force, which elevated net profit margin across quarters from 11.9 percent in the first quarter to 17.3 percent in the second quarter and from 18.2 percent in the third quarter to 19.9 percent for the full year.
The bank’s closing profit of N86.3 billion for the 2024 operations is more than the sum of all the N79.7 billion profit the bank has made since it returned to profit in 2013.
Wema Bank earned N4.03 per share in 2024 from N2.80 per share in the preceding financial year and has doubled cash dividend per share from 50 kobo to N1.0 over the period.
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