By Mike Abbah
Wema Bank has said it plans to raise N150 billion in new capital through a hybrid of rights issuance, public offer and private placement.
The bank made this disclosure at its half-year 2024 investor and analyst conference call held recently.
During the call, the Bank’s Executive Director, Tunde Mabawonku, highlighted the bank’s strategy, stating:
“We have obtained shareholder approval to raise N150 billion in qualifying capital. We will be doing this through a combination of a rights issuance and a special private placement.
“Our expectation is to initiate this process towards the end of the year, with completion expected in Q1 2025, all within the remaining 18 months of the regulatory timeline.
“While shareholders’ funds are currently around N200 billion, our qualifying capital stands at N67 billion. To maintain our status as a commercial bank with national authorization, we need to raise this capital in the coming months, ensuring we meet our licensing requirements.”
In response to a question about potential merger discussions, Mabawonku clarified that such talks are premature at this stage.
He stated, “M&A conversations might seem a bit premature at this level. Our focus is on capitalizing in line with regulatory requirements and continuing to do business.” .
Wema Bank’s first half of 2024 results paint a picture of significant growth. The bank reported a strong 100.5% increase in gross earnings, reaching N178.63 billion, up from N89.09 billion in the first half of 2023. The bank attributes this surge to a 91% increase in interest income and a 155% rise in non-interest income.
The bank’s profit before tax (PBT) also saw an impressive 153.5% jump, climbing to N30.56 billion from N12.05 billion in the same period last year. This represents over 100% of 2023 figures. This even surpassed the bank’s pre-tax profit 5-year compound annual growth rate of 45%.
These results are underpinned by improvements in key financial ratios. For instance, Wema Bank’s Net Interest Margin (NIM) improved to 7.43% in the first half of 2024, up from 6.12% in the same period of 2023.
This uptick indicates that the bank is efficiently managing its interest-earning assets, a critical factor in maintaining profitability in a high-interest-rate environment. An improved NIM is often a sign of a well-managed balance sheet.
The Return on Average Equity (ROAE) also paints a favorable picture. Although slightly down from 39.28% in 2023, Wema Bank’s ROAE of 36.16% in the first half of 2024 remains significantly higher than the 19.25% recorded in 2022.
This indicates that the bank continues to generate substantial returns on shareholders’ equity, which should be attractive to investors considering participating in the capital raise.
Furthermore, the Non-Performing Loan (NPL) ratio, which measures the percentage of loans either in default or close to default, has declined to 3.69%. This reflects a significant enhancement in the quality of Wema Bank’s loan portfolio.
Additionally, the NPL coverage ratio has increased from 76% to 100%, showing that the bank now has more than enough provisions to cover its non-performing loans.
