Shareholders, depositors panic as Wema Bank battles liquidity crisis


These are not the best of times for one of Nigeria’s old generational banks, Wema Bank Plc, as the financial institution is said to be under the surveillance of the Central Bank of Nigeria (CBN) following illiquidity of its liquidity ratio, THE WITNESS is reporting.
The development, THE WITNESS gathered has raised fear among the bank’s shareholders and depositors.
This is even as, commercial lenders in Nigeria are averse to extending loans to the bank because of its capital which has fallen below the regulatory threshold. Results of the bank posted to the Nigerian Stock Exchange (NSE) shows that it did not get a single deposit from banks in the 2020 financial year compared to the N3.64 billion it attracted from them in the previous year.
Wema Bank’s liquidity ratio stood at 14.53% as of September 2020 instead of 32.04% it had the same period the prior year, while the benchmark liquidity ratio is 30%.
The bank’s Capital Adequacy ratio (CaR) was 11.35% as of the third quarter of 2020 compared to 14.78%, which was below the industry average of 11.5%, while the regulatory threshold is 15%.
The bank may urgently shore up its capital by raising fresh capital if it would continue to be a going concern.
Speaking with our correspondent, Mr. Moses Ojo, Chief Economist/Head, Investment Research at PanAfrican Capital Holdings, explained that Wema Bank was barred from some investments that could have a positive impact on its performance because of its precarious financial position, which profitability static. “Its capitalization has eroded. It is at risk,” he noted.
“Having looked at the bank and seeing it is one of the weakest lenders in the country, other banks will be wary to do business with it or giving them loans. They know the stand of each bank in the system,” Ojo added.

Meanwhile, the unimpressive performance of Wema Bank was again replicated at the end of the 2020 financial year, heightening shareholders’ concern over the lender’s recent poor run of results.
The unaudited 2020 financial statement of the bank released recently showed that as a group it struggled to generate income as it shrunk 14.79% to N80.85 billion on the back of the huge 73.18% decline in net trading income and 8.41% drop in interest income during this period.
Wema Bank could not grow operating income which went down 2.49% to N42.97 billion in 2020, although net fee and commission income were up 5.09% at the end of last year.
It made progress in cutting down the value of its toxic assets by 31.72% to N4.18 billion compared with N6.13 billion in the previous year, resulting in 35.24% growth in recovery from bad debt to the tune of N326.27 million in 2020.
But this could not spur the lender to ramp up profit, which declined 2.66% to N5.06 billion in 2020 instead of N5.20 billion in the prior year.
The bank experienced four consecutive dips in the four quarters of last year, which has made shareholders express worry over this downturn.
The cut in expenses in the last financial year- interest cost reduced 24.60%, personnel expenses dipped 5.83% and other operating expenses went down 1.34%- could not bolster its profit during this period.
However, Wema Bank assets improved 37.82% to N986.64 billion in 2020 compared with N715.87 billion in the previous year, helped by loans and advances to customers which grew 27.49% to N368.75 billion.
Despite the sluggish performance last year, the bank’s total liability rose 40.49% to N928.22 billion bolster by deposit from customers which grew 40.68% to N812.10 during this time.
Though Wema Bank stocks benefited from the NSE impressive performance last year, which saw it post 18.56% appreciation in the last one year, it has suffered 42.62% capital depreciation in the last five years to N0.61 as of 12.02 pm on Tuesday, March 9, 2021.
Its shareholders last got a dividend at the end of the 2018 financial year, when they were paid 3 kobo per share.
Industry watchers have however attributed the lender’s woos to the poor performance of the its Managing Director/CEO, Mr. Ademola Adebise.
Mr. Adebise was appointed in September 2018 as the bank’s head-honcho to turn around the fortunes of the lender following the retirement of Mr. Segun OIoketuyi.


For full details visit: http://www.dailyrecordng.com/shareholders-depositors-panic-as-wema-bank-battles-liquidity-crisis/

Why panic when you can simply transfer your funds to another bank?

They should allow another bank buy it

Solsix:
They should allow another bank buy it

Access bank after reading this comment

I hope this is not the beginning of the end for Wema Bank