By Alex C
Wema Bank Nigeria plc’s half-year (H1) profit more than tripled on improved efficiency despite the regulatory headwinds stocked by the Central Bank of Nigeria’s (CBN) hike in cash reserve requirements, analysis of the financial statement reveals.
This is the most impressive result recorded by the Nigeria lender after the debt crisis of 2009, that nearly brought the banking industry to the verge of collapse.
For the first six months through June 2014, the bank’s gross earnings rose by 22.12 percent to N20.81 billion, from N17.04 billion in the corresponding period of (HY) 2013.
The bank’s profit before tax (PBT) surged by 266.20 percent to N1.70 billion, compared with N464.68 million as of HY 2013.
Profit After Tax (PAT) also followed the same growth trajectory as it spiked by 287.38 percent to N1.44 billion in HY 2014, compared with N371.74 million as of HY 2013.
Net margin, a measure of efficiency, increased to 6.91 percent in HY 2014, from 2.18 percent as of HY 2013. Earnings per share (EPS) increased to 8 percent from 4 percent in HY 2013.
In spite of the impact of the regulatory policies of the CBN on lender’s earnings, Wema Bank was able to reduce cost-to-income ratio (CIR) to 79.75 percent in HY 2014, from 88.49 percent as of HY 2013.
The Apex Bank had hiked cash reserve ratio on public sector funds from 12 percent to 75 percent, a move that was made to stabilise the naira and control inflation. The Asset Management Corporation of Nigeria (AMCON) levy on banks total assets is also eating deep into banks’ earnings.
The banking sector resolution fund mandates banks to contribute 0.5 percent of their total assets to it on a yearly basis. The initial contribution was 0.3 percent.
It must be noted that Nigerian banks have the highest average (CIR) with 64.8 percent, while banks in Middle and East Africa countries reported an average CIR of 42.97 percent, according to Africa Banker in its first quarter 2014 report.
The Nigerian lender, which operates in Western Nigeria and the Federal Capital, Abuja, plans to seek regulatory approval for a national banking licence that will allow it operate in the six regions of the country. It also plans to open an additional 20 branches in Africa’s largest economy to increase the number to 149.