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Analyzing Wema Bank’s Decision to Right Issue in Q3, Off Rating Watch List



Wema Bank Set To Delight Shareholders With Improved Dividend

By Niyi Jacobs, Editor

Spotlight on Wema Bank Financial Position

Wema Bank Plc plans to boost its capital position with a right issue in the third quarter of the financial year 2021.

BUSINESS EDITOR, NIYI JACOBS, in this analysis writes on this  decision which may removes the bank from Fitch’s Rating Watch negative list.

Wema Bank Plc closed at 55 Kobo per share on Friday, currently valued below N22 billion on 33.57 billion outstanding shares on the Nigerian Exchange. That means to raise N10 billion, the lender would probably need to issue 20 billion shares.

Recently, Fitch Ratings affirmed the lender’s Long-Term Issuer Default Rating (IDR) at ‘B-‘ or highly speculative and removed it from Rating Watch Negative (RWN) last month with a stable outlook. It said the removal of the RWN on Wema’s IDRs, Viability Rating (VR) and National Ratings reflects Fitch’s expectation that, having recently received shareholder approval, plans for a significant rights issue in 3Q-2021 will likely proceed as intended and improve capitalisation and leverage to more acceptable levels”.

The rating agency said this also reflects a view that loan and asset growth will evolve at a slower pace than in recent years and near-term risks to the bank’s financial profile from the economic fallout of the pandemic have receded. It added that the stable outlook on Wema’s Long-Term IDR reflects view that the current rating has sufficient headroom to absorb moderate shocks from sustained downside risks to the operating environment over the next 12-18 months.

Meanwhile, lender’s IDRs and National Ratings were driven by its stand alone credit worthiness, as expressed by its ‘b-‘ VR.Fitch said the VR considers the concentration of the bank’s activities within Nigeria’s challenging operating environment, a small franchise, high credit concentrations and a weak funding profile.In addition, it also considers easing pressures on asset quality and profitability from the economic fallout of the pandemic and our expectation of a material improvement in capitalisation and leverage following the rights issue. “Capitalisation and leverage have weakened significantly in recent years as a result of an aggressive growth strategy, with the tangible leverage ratio declining to 4% at end-Q1-2021 from 7.6% at end of 2017, which is weaker than peers’.

Wema’s Fitch Core Capital ratio printed 14.4% at end of Q1-2021, broadly in line with peers’ but is considered in view of the bank’s particularly low risk-weight density at 27% at end of Q1-2021.The rating explained that Wema’s capital adequacy ratio of 14.8% at end of Q1-2021, which is supported by Tier 2-qualifying subordinated debt, is comfortably above the 10% minimum requirement for a bank with a national license.“The removal of the RWN mainly reflects our view that the large rights issue planned for Q3-2021 will likely proceed as intended and will significantly improve the tangible leverage ratio to over 7%, which is more consistent with peers’.

“This follows the recent approval of the resolution to raise additional capital at the annual general meeting, commitment from the largest shareholders to participate in the rights issue, and the commencement of the regulatory approval process”, the ratings said.Wema’s impaired loans -stage 3 loans under IFRS 9 – ratio increased moderately to 5.2% at end-2020 from 3% at end-2019 as a result of the pandemic.Also, Stage 2 loans also increased to 9.8% of gross loans at end-2020 from 5% at end-2020.

The bank’s impaired loans ratio declined to 3.8% and stage 2 loans declined to 6.5% of gross loans at end-Q1-2021 owing to customer repayments due to a recovery in economic activity.

Fitch said although the overwhelming majority of customers are making principal repayments following the expiry of most debt relief measures at end of Q1-2021, loan quality remains under pressure as a high percentage of gross loans (46% on a cumulative basis at end-Q1-2021) have been restructured since the start of the pandemic.The ratings noted that specific coverage of impaired loans which printed at 38% at end of Q1-2021 is fairly low due to continued recovery expectations and sound coverage by collateral. “Single-borrower concentration is significantly higher than peers’, with the 20-largest customer exposures equivalent to 39% of gross loans at end-2020”, Fitch said.

However, the rating agency added that exposure to the problematic oil and gas sector is lower, representing 17% of gross loans and exposure to the riskier upstream segment is limited.Foreign-currency lending which accounted for 11% of gross loans at end-2020 is also distinctly lower than peers’, which results in less exposure to foreign currency shortage and naira devaluation risks. “Our asset-quality assessment also considers substantial non-loan assets (64% of total assets at end of Q1-2021) that largely comprise Nigeria sovereign fixed-income securities and cash reserves at the Central Bank of Nigeria (CBN)”.

Fitch said Wema Bank profitability metrics tend to be considerably lower than those of larger peers, with operating returns on risk-weighted assets averaging 2.1% over the past four years, due to weaker net interest margins (NIMs) and a high cost-to-income ratio. “Weaker NIMs are explained by a greater reliance on more expensive term-deposit funding, whereas the high cost-to-income ratio is a function of weak revenue generation, investments in marketing and digitisation, and high regulatory costs applicable to all Nigerian banks”, it added.

Lender’s operating returns on risk-weighted assets declined to 1.7% in 2020 from 2.6% in 2019, largely reflecting a material reduction in trading income from the high levels experienced in 2019. Wema’s NIM remained broadly stable at 5.9% in 2020, with the fall in sovereign fixed-income yields and increased cash reserves at the CBN being offset by a material decline in cost of funding.Loan impairment charges, which equalled 1.2% of average gross loans in 2020, were fairly contained as a result of strong collateral underpinning newly-classified impaired loans.

Operating returns on risk-weighted assets recovered to 2.2% in Q1-2021 as a result of a significant decline in loan impairment charges.Fitch concluded that Wema’s National Ratings reflect the bank’s creditworthiness relative to that of other issuers in Nigeria. “They are at the lower end of the Nigerian national scale, primarily reflecting Wema’s small franchise, constrained profitability, adequate leverage following the rights issue and a weak funding profile”, it noted.

Money Market

Access Bank Unveils Twice Bitten Campaign



Access Bank Promotes 800 Employees as it Transitions to Holdco Structure

Olushola Okunlade Writes

Access Bank Plc, one of the topmost banks in Nigeria has unveiled a new creative slogan to drive its marketing, Twice Bitten Campaign

Twice Bitten? But not today, Block Your Account quickly. These statements decode a lot for Access Bank customers to understand what the bank is really communicating to them.

Online banking has really made financial transactions very convenient in Nigeria and across the globe. But the setback is the fraudsters operating online.

This has given lots of banks a headache. Access Bank really cares about its customers. This crusade brought about this campaign, Twice Bitten, But not today, Block your account quickly.

It is to also alert Access Bank customers on what to do whenever they are in this situation, perhaps, your account has been hacked. Maybe you lost your ATM. Maybe the customer’s ATM was stolen etc.

Twice Bitten? But not today, Block Your Account quickly campaigns guides you on what to do abruptly.

However, this crusade was unveiled three days ago. And it has quickly gained ground in the South West of Nigeria. It is also spreading to the North West of Nigeria, findings. revealed.

Access Bank is working tirelessly to curb hacking of its customers’ accounts online as far as the Twice Bitten campaign is concerned.

However, Access Bank in its bid to enhance financial inclusion has noted its intentions to significantly increase its customer base and deepen the wallet share of the banking population riding on its agency banking platform.

Access Bank agency banking ‘Access Closa’ recently hit a milestone of having 100,000 agents currently spread across Nigeria as the bank further plans to increase its footprint by having a minimum of 50 agents in each of the 774 LGAs across the country.

The Group Head, Agency Banking, Access Bank Plc, Chizoba Iheme, in a chat with journalists noted that due to the limited number of financial institutions, especially in rural areas, Access Closa is Access Bank’s strongest retail channel used in providing banking services to a large population of unserved and underserved Nigerians.

She said: “Our plan is to bank one in two Nigerians as this will see us increase our customer base and deepen our wallet share of the banking population.”

“Going by the high youth and adult population, the resources of Nigeria’s financial institutions are being overstretched in providing physical and human resources and were unable to cope with gaps that existed in meeting banking needs of Nigerians hence the need for Agency Banking as envisaged by the Central Bank of Nigeria (CBN) in 2013.”

“Therefore, Agency Banking helps financial institutions decongest crowded branches by providing a matching and more often convenient channel for their customers. In instances where reaching customers in rural areas is often highly expensive for financial institutions because transaction numbers and volumes do not cover the cost of a branch, agency banking helps in serving them.”

Furthermore, she added that becoming an agent has become a means to empower and reduce unemployment in Nigeria.

“Our commission structure allows an agent to earn up to N500,000 and more monthly in commission including incentives and opportunities for agents to grow their business and partner with a reputable brand is an attraction to the Closa brand.”

Furthermore, on risks associated with agency banking in the country and how Access Banks moves to mitigate it, she added: “There are four major risks that we have identified. These are Technological, Legal, and Fraud/Reputational. Assets.

“Technological Risk, to prevent software and hardware failures, the bank is investing in new infrastructure with the capacity to absorb service disruptions that will have minimal impact. As part of our onboarding process, the bank’s agents are required to execute a service agreement that stipulates the roles and responsibilities of each party.

Also, agents are trained at the point of activation on Anti-Money Laundering (AML) and Terrorism Financing. This training also takes place every year to reiterate the dangers and consequences associated with fraudulent actions. Besides, the bank has set a maximum daily limit on the amount and frequency of transactions that can be performed by an agent. Lastly, a quarterly risk profiling exercise is carried out on all agents for effective management,” Iheme added.

Access Bank is the leading retail bank in Nigeria with over 600 branches and more than 40 million customers. The bank offers products and services tailored to suit the lifestyle of every Nigerian irrespective of age and demographic.

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Money Market

Winners Emerge In Stanbic IBTC Reward4Saving Promo Season 2



Stanbic IBTC Opens New Branch In Lekki Free Trade Zone

Winners Emerge In The Stanbic IBTC Reward4Saving Promo Season 2

Olushola Okunlade Writes

Stanbic IBTC Bank Plc, a subsidiary of Stanbic IBTC Holdings Plc has rewarded several of its new and existing customers with cash prizes of ₦100,000 in the maiden draw of season 2 of its savings promo, Reward4Saving.

The first draw of this season, which took place at the Stanbic IBTC Head office on Walter Carrington Crescent, Victoria Island, Lagos State, saw 70 customers win cash prizes of ₦100,000 each. The Bank aims to maintain this throughout the 12-month promo time by which a total of 840 customers would have been rewarded with ₦100,000 during the monthly draws.

The Bank also aims to reward 28 customers with ₦1 million each in the quarterly draws, and seven customers with ₦2 million each in the grand finale draw.

Speaking at May 2022 draws, the Chief Finance Officer of Stanbic IBTC Holdings, Kunle Adedeji, said the bank recognizes saving as an important aspect of its customers’ journey to financial freedom, and it is for this reason that Stanbic IBTC has decided to continue with the second season of the Reward4Saving Promo to reward and inspire more customers to reach for their dream of financial freedom by improving their savings culture.

“Our aim is to promote a savings culture by rewarding our existing and potential customers as they save for the future. As an end-to-end financial solutions provider, Stanbic IBTC is committed to creating channels and means of financial empowerment for its millions of customers while rewarding them for their dedication. Simply put, we put our money where our mouth is.

Reward4Saving 2.0, as we like to call it, is themed “Bigger and Better”. This is because we have increased the expected wins to allow more customers from across the geo-political zones of the country to walk away with cash prizes worth a total of N156 million, with individual wins ranging from N100,000 to a whooping N2 million.,” he added.

The Chief Finance Officer further stated that existing and prospective customers can take advantage of this opportunity by saving a minimum of ₦10,000 in their savings account or @ease wallet, for at least 30 days. One electronic raffle ticket is issued for every N10,000 saved, thereby increasing the chances of winning. New customers would also be rewarded with ₦500 worth of airtime and three months of free interbank transactions when they open a Stanbic IBTC Bank account. Stanbic IBTC Bank is a subsidiary of Stanbic IBTC Holdings and a part of the almost 160-year-old Standard Bank Group.

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Money Market

100 Undergraduate Candidates Set To Benefit From Stanbic IBTC’s University Scholarship



Stanbic IBTC Opens New Branch In Lekki Free Trade Zone

Stanbic IBTC Holdings PLC, a member of Standard Bank Group, awarded scholarships to 100 Nigerian youths who had excelled in University Tertiary Matriculation Examination (UTME) and had gained admission for the 2021-2022  academic session.

The grants, which would provide the students with the financial aid needed to fulfill their educational needs and pursue their dreams, demonstrated the financial institution’s commitment to the growth of the Nigerian education sector.

Each of the successful candidates, who had recently gained admission into universities, would receive scholarships valued at N400,000. The grants would be disbursed in tranches of N100,000 across four academic years.

The financial institution stated that it focused on empowering bright-minded individuals with the capacity to gain adequate knowledge needed to become great men and women in life.

The initiative which commenced in 2019 now has had almost 200  recipients. The beneficiaries were chosen across the six geo-political zones in Nigeria through fair screening processes.

According to Dr. Demola Sogunle, Chief Executive, Stanbic IBTC Holdings, the scholarship was borne out of the need to empower hardworking and diligent young Nigerian undergraduates, who aspired to pursue their tertiary education in any state or federal university in Nigeria.

“We believe that everyone deserves a chance to access quality education and we believe in rewarding students who have shown remarkable academic excellence. This initiative will go a long way in easing the financial burdens of these undergraduates who participated in the UTME and gained admission into various Nigerian state and federal universities for the 2021-2022 academic session. We are pleased to announce the 100 winners of this year’s scholarship scheme for undergraduates in 33 universities across the 36 states and the FCT. We wish them great success in their academic journey” he said.

Asides from the first tranche of disbursement, subsequent disbursements would be subject to beneficiaries maintaining their enrolment in their respective universities and degree programs they were admitted into, adhering to the academic and administrative policies of the university, and the provision of a letter of good conduct issued by their respective departments. Beneficiaries would also be required to maintain a Cumulative Grade Point Average (CGPA) of at least a second class upper range, among other requirements.

Demola further added that education remained one of the keys to facilitating a nation’s prosperity, hence the introduction of the scholarship initiative. Stanbic IBTC remains committed to driving value-added initiatives like the University Scholarship program to contribute to the educational development of the Nigerian youth.

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