Global Ratings Report Recognises Wema Bank’s Excellence in Banking

The recent Wema Bank’s global rating reports by Fitch Rating and  others, have shown the lender’s improving business risk profile driven by better and more sustainable profitability, writes Kayode Tokede

In middle of  2017, Wema Bank’s retained earnings was estimated at N36.7 billion that reflected an accumulated negative balance in its equity section of its balance sheet. The Central Bank of Nigeria (CBN) prudential policy (and many global frameworks) bars companies with negative retained earnings from paying dividend to shareholders in a move to protect creditors and ensure financial soundness.

The deficit had limited Wema Bank’s capacity to distribute profits and raise fresh capital, thereby restraining growth & shareholder return on their investment.
However, around October 2017, the management called an Extraordinary General Meeting (EGM) to implement a capital reorganisation scheme aimed at wiping out the accumulated deficit.

Post-cleanup, Wema Bank moved to restart dividend payments, signaling a stronger financial footing. The restructuring also positioned the bank to issue new equity, support growth, and improve shareholders return more sustainably.

For instance, Wema Bank’s profit before tax(PBT) in 2017 was around N3.01 billion, but has  increased significantly by 3,306 per cent to N102.52 billion in 2024,  while its profit after tax(PAT) moved to N86.28 billion in 2024, a growth of 3,725per cent as against N2.26 billion declared in 2017.
From the balance sheet position, Wema Bank’s total assets moved from  N388.15 billion in 2017 by 825.7per cent  to N3.59 trillion in 2024.  

In May 2017, the bank launched ALAT, Nigeria’s first fully digital bank. ALAT has played a critical role to drive financial inclusion and digital adoption- customer deposits increased to N2.52 trillion in 2024 from N254.46 billion in 2017, while loans and advances to customers grew to N1.2 trillion in 2024 from N215.84 billion in 2017.
After years of not paying dividends due to negative retained earnings, Wema Bank resumed dividend payments in April 2019 distributing N0.03 per share-its first in 14 years.

In the 2024, the management paid a final dividend of N1.00 per share, marking a 100 per cent increase over N0.05 per share declared in 2023.  The dividend payout in 2024 reflected Wema Bank’s robust 2024 performance, including a 135 per cent PBT to N102.3 billion.
Amid robust financial strength, the lender has been able to raise fresh capital and witnessed oversubscription.  
The growing fundamentals of Wema Bank  over the years has continued to attract the attention of the global community, highlighting the bank’s enhanced financial stability and growth prospects.

Fitch Revises Wema Bank’s Outlook to Positive
Fitch Ratings revised Wema Bank’ outlook to Positive from Stable, while affirming its Long-term issuer default rating (IDR) at ‘B-‘. The bank’s Nationaal Long-term rating has been upgraded to ‘Á-(nga)’ from ‘BBB(nga)’.
Fitch in its report said: “The revision of the outlook reflects our expectations that the bank’s core capital buffers will continue to strengthen over 2025-2026, supported by capital raisings and sustained higher internal capital generation, which is benefitting from higher interest rates and a shift in the deposit structure away from expensive time deposits.”
“The two-notch upgrade of the National Long-Term Rating captures the improved deposit structure, stronger core capital buffers and increased profitability metrics.
“The upgrade of the National Short-Term Rating to ‘F1(nga)’ from ‘F2(nga)’ follows the upgrade of the National Long-Term Rating.”
According to Fitch, Wema’s IDRs are driven by its standalone creditworthiness, as expressed by its ‘b-’ Viability Rating (VR). It stated that the VR takes into consideration the concentration of Wema’s operations in Nigeria, its small franchise and balance-sheet size, and high credit concentrations.
“This is balanced against healthy asset quality and capitalisation, moderate but strengthening profitability, and an improved deposit structure. The VR is one notch below the ‘b’ implied rating due to the bank’s business profile, reflecting its small franchise,”  the American credit rating agency explained.
Fitch noted that Wema Bank  had a small market share, representing two per cent of domestic banking system assets at end-2024, which constrains its revenue generation, stressing that the financial institution has a leading position in digital banking, which has reduced its reliance on term deposits.
On improving capital ratios, it explained that Wema Bank’s FCC ratio improved to 18.6 per cent at end-2024 from 14.5per cent at end-2023, supported by its N40 billion rights issue and stronger internal capital generation.
“We expect the bank’s FCC ratio to reach almost 30 per cent by end-2025, supported by N200 billion capital increases (14 per cent of end-Q1 2025 RWAs) and strong internal capital generation. We expect Wema Bank to comply with the N200 billion minimum paid-in capital requirement for banks with a national licence by end of 2025,” Fitch noted.

GCR Ratings upgraded Wema Bank’s National Scale
GCR Ratings (GCR) upgraded Wema Bank ’s national scale long and short-term  issuer ratings to BBB+(NG) and A2(NG) from BBB(NG) and A3(NG) respectively.
Concurrently, GCR upgraded the national scale long-term issue rating on Wema Funding SPV Plc’s N17.675 billion Series 2 Fixed Rate  Unsubordinated Bonds to BBB(NG) from BBB-(NG). Outlooks on the ratings remain Stable.
The ratings agency said the upgrade is supported by the  bank’s strengthened capitalisation, driven by equity injection, and improved earnings generation and retention.
The ratings also balance the bank’s stable funding structure, sound liquidity, modest competitive position, and weakening asset quality  metrics, exacerbated by the macroeconomic challenges.
GCR maintained that Wema Bank’s competitive position is largely enhanced by its strong digital presence, which continues to  support a growing customer base of over 5 million and increased transaction volumes.
“With a balance sheet size of N3.6 trillion ($2.5 billion) as of December 31, 2024, the bank accounted for c.2.0per cent of the Nigerian   banking industry’s total assets, customer deposits, and gross loans.
“Operating revenue grew by 48 per cent to  N255.8 billion ($161.4 million) in 2024, with the relatively stable net-interest income contributing a sizable  69.2per cent of the total operating revenue.
“Looking ahead, Wema Bank’s expansion drive, increased deployment of technology, and strategic partnerships could support its operational scale and earnings generation   capacity over the next 12-18 months,” GCR said in its report.
GCR said Wema Bank’s capitalisation assessment improved over the review period, following the successful N40 billion ($27.6 million) capital injection in 2024 and the strong earnings generation and retention.
As a result,  GCR said Wema Bank’s core capital ratio improved to 19.2per cent as of December 31, 2024 (December 2023: 15.5per cent).
“Looking   ahead, the bank’s ongoing capital raise of c. N150 billion through a rights issue and the planned private  placement is expected to further strengthen the GCR core capital ratio above 20per cent over the next 12-18  months, barring any major naira devaluation. However, we view negatively the loan loss reserve coverage of  stage 3 loans at 55.1per cent as of 31 December 2024, considered to be low,” the largest rating agency in Africa, added.

Agusto & Co. upgraded Wema Bank Plc  to “A-” from Bbb+.
Agusto & Co. underpinned Wema Bank’s upgrade to improved business risk profile driven by better and more sustainable profitability, improved operating efficiency, good liquidity profile and strong shareholders’ support as reflected in the successful rights issue exercise.
According to Agusto & Co. Wema Bank in 2024 continued its growth trajectory despite  the raging macroeconomic headwinds.
The firm in its 2025 final entity rating report said: “The loan book grew by 49.9 per cent year-on-year to N1.2 trillion and remained relatively diversified by sector. Partial pay down by an oil exploration and production   company moderated the foreign currency (FCY) loans by 15.8per cent with FCY loans representing a conservative 18.3per cent (FYE 2023: 22.9per cent) of the loan book.
“Thus, reducing the vulnerability of the bank to  further naira depreciation. However, the loan book is concentrated as 20 customers accounted for   33.9 per cent (2023: 29 per cent) as at December 31 , 2024. This makes the bank susceptible to the financial  performance of a few obligors; which we consider a rating negative. The impaired loans ratio  improved to 3.9per cent (2023: 4.4per cent) as at 31 December 2024, below the five per cent maximum threshold largely on the back of the N885.9 million write off and loan growth.
“The impaired loan ratio would   have been higher at 5.9per cent without the write-off and loan growth. However, the cumulative loan loss  provisions (including additional provisions in the regulatory risk reserves) covered the impaired  loans by 96.8per cent as at FYE 2024, which we consider acceptable (FYE 2023: 107.1per cent).
“We believe the prevailing headwinds will continue to test the resilience of the bank’s credit risk management   framework.”
“Wema Bank’s shareholders’ funds was bolstered during the year under review by the regulatory  approval of the N40 billion rights issue exercise concluded in December 2023 and the reserve  accretion emanating from the improved profitability.
“As a result, the shareholders’ funds expanded  by 84.1per cent to N256.5 billion as at 2024. Capital adequacy ratio (CAR) improved to 19.7per cent (2023: 16 per cent), surpassing the 10 per cent regulatory minimum. However, the proposed N200 billion minimum  paid-up capital directive depicts a potential N132.9 billion capital shortfall. A  N150 billion rights issue exercise is ongoing and a N50 billion private placement is scheduled for June 2025.
“Thus, management expects compliance with the minimum paid-up directive before December 31, 2025,  ahead of the March 2026 31, deadline. The outcome of the rights issue is yet to be determined as at  the time of this review.”
It noted  that the bulk of the  deposits 80.8per cent in 2024 from  69.6per cent in 2023 is from the South-west region of the country reflecting a  skewness in the bank’s coverage.
“Management has mentioned ongoing plans to diversify geographically and deepen its presence in regions where the Bank has a low coverage.
“The contractionary stance of the monetary authority, which raised the prevailing interest rate, resulted  in a 130 basis points increase in the weighted average cost of funds to 6.1per cent in 2024. Tenored  deposits continue to be a sizable portion of the deposit mix at 30.5per cent as at December 31, 2024  despite its commercial banking heritage.
“As at December 31, 2024, the bank’s liquidity ratio stood  at 33.4per cent (2023: 35.2per cent) and the liquidity coverage ratio was 135.1per cent(2023: 135.5per cent). We consider Wema Bank’s liquidity profile to be good and the ability to refinance is satisfactory in our view.
Wema Bank’s profitability has shown marked and consistent improvement in the last three years.  Profitability stood better with pre-tax return on average assets (ROA) of 3.1per cent (2023: 2.1per cent) and  51.8per cent (2023: 39.3per cent) pre-tax return on average equity (ROE).
“We consider Wema Bank’s profitability good relative to its peers and in addition, the ROE exceeded the 33.2per cent annual average  inflation rate in 2024. In the near term, we expect the profitability ratios to be upheld by the planned loan growth, expanding investment securities portfolio and high yield environment.
“Though we note that the initial expansion in capitalisation from the rights issue might be a drag on  profitability in the near term,” it added.
Agusto & Co.  noted that Wema Bank occupies a modest position within Nigeria’s competitive banking landscape, despite its legacy as  the country’s oldest indigenous bank.
As at December 31, 2024, Wema Bank controlled an estimated 2.2per cent (2023: 2 per cent) of the banking industry’s asset base and net loans. In addition, the bank recorded an improvement  in its share of the industry’s pre-tax profits to 1.8 per cent (2023: 1.2per cent).
“We view positively the improvement, though we believe that its market share of pre-tax earnings is relatively modest, given its considerable loan  portfolio size,” the report by Agusto & Co.  stated.
Agusto & Co.  explained further that, “Going forward, we expect Wema Bank to maintain its positive growth trajectory, driven by its persistent focus  on retail expansion through the ALAT digital platform and other alternative channels.”
“In addition, we note that  the bank is actively expanding its presence in the South-Eastern and Northern regions, which is expected to  increase the market share over the medium term. Nonetheless, we believe that improving its scale and relevance in the industry will require stronger competitive positioning and sustained improvements in  profitability.”
According to Agusto & Co., Wema Bank is positioning for further expansion, with a N200 billion planned additional capital through  rights issue and private placement before December 31, 2025.
The bank is also set to deepen and boost its  retail business arm and presence in the Northern and South-east region while targeting accessible  opportunities within its corporate segment and the public sector for deposit mobilisation.
“This approach will  be supported by an emphasis on the ALAT platform and other technology-driven solutions to drive the retail  business, coupled with efforts to streamline the costs associated with branch openings. By leveraging these  digital platforms, Wema Bank aims to increase its deposit base by 40 per cent to N4 trillion before December 2025.”
“The bank is also set to deepen and boost retail business while offering digital solutions to support public sector revenue collections across the various tiers of government.
“Going forward, Wema Bank intends to focus on generating more loans in the midstream oil segment, power,  retail and manufacturing sectors. In line with this, the Bank expects its loan portfolio to surge to N1.6 trillion  by 2025. Wema Bank also intends to keep non-performing loans (NPL) below the five per cent threshold.”
“Nonetheless, we believe that this target may be threatened by the raging macroeconomic headwinds,  necessitating intensified monitoring of the loan book and prudent lending to high-quality obligors to avert  potential future deterioration.”
“We also anticipate a decline in ROE for 2025, on the back of the planned  capital raise. In addition, while gross earnings are projected to increase to N788.6 billion, we believe the overall profitability may be tempered by elevated operational costs arising from the challenging and high inflationary  environment. Nonetheless, the bank’s PBT is expected to reach N150.4 billion in 2025 based  on management disclosures.”
“Overall, we expect asset quality to remain satisfactory while capitalisation should  improve based on the capital raising exercise the Bank has embarked upon in line with regulatory  requirements. We believe Wema Bank’s profitability will remain good in the near term.
“Based on the aforementioned, Agusto & Co. hereby attaches a ‘stable’ outlook to the rating of Wema Bank,” the report added.