By Obinna Chima
Wema Bank Plc at the weekend said it is seriously considering the situation in the interest rate environment before taking a decision on its planned bond issuance.
The bank disclosed that out of a N50 billion bond programme that had been approved by the Securities and Exchange Commission (SEC), it raised N6.25 billion last year. Therefore, there is an outstanding of N43.75 billion to raise in the market.
The Chief Finance Officer, Mr. Tunde Mabanwonku said at an interactive session with journalists in Lagos that the bank planned to start the bond issuance this August but decided to put it on hold due to high interest rate.
The CFO said: “The interest rate is still high and outlook for rate from what we see from inflation might still be very high. The first thing we did was to look at our Capital Adequacy Ratio (CAR) and as at today, it is 12.7per cent. Do we foresee any major decline? No. The economy is improving, foreign exchange is available; customers are paying down and there is better liquidity in the market.
“So, we don’t see any major deterioration in non-performing loans (NPLs). In fact, our outlook is that the CAR would remain around the 12 per cent market. The minimum threshold is 10 per cent and so we are very comfortable. So, if interest rates don’t reduce, we probably will not raise the bond this year and we might have to wait till April or May this year.â€
He explained further: “But if we don’t raise the bond, our CAR numbers would still remain above the 12 per cent mark. But what are the things we are doing to further improve on the bank: We are doing more on-lending, we are doing some refinancing. So, where Bank of Industry (BoI) schemes are available, if you on-lend, it reduces your capital charge, thereby improving your CAR position.”
Mabanwonku pointed out that between 2013 and half year 2017, the bank was able to increase its shareholders’ funds from N40 billion to N50 billion, all largely due to internal profit generation.
Earlier, an Executive Director of the bank, Mrs. Folake Sanu, who spoke about the bank’s digital banking platform- ALAT described the platform as a revolutionary app that has transformed banking activities in the country.
ALAT aims at raising the bank customer base from its current 1.75 million to three million, and it is expected to raise its revenue base to $200 million by 2020.
Sanu noted: “We still have the branches, just in case people want to deposit cash. But you will be amazed at the various things that ALAT can do for you. If you open the account, I don’t think you will want to use any other banking software again. You will find out that it very simple and easy.
“If you want to fund your ALAT account from an existing account, what you need to do is to enter the details of your existing debit cards and it pulls funds from the account automatically rather than going to withdraw from a bank to pay into ALAT. You can fund it from any debit card in the world. So, you don’t have to be moving cash physically to fund the ALAT account,” she said.
According to Sanu, one of the things the bank also did to promote financial inclusion was the adoption of agency banking model
She explained: “Yes, the ALAT opportunities are there for those that want to do digital, the *945# also remains, for those that don’t have data driven phones. But there are areas in Lagos, within Nigeria where people still want to do some cash transactions and we have the relatively under-banked or unbanked areas. So, we have some partners and we are rolling out agency banking across Nigeria.
“So, with the traditional account opening process, with *945#, with ALAT, all of that add up to better customers’ growth for the bank.”
Commenting on the bank’s NPLs, Sanu said: “If you draw the chat for industry NPLs, you will see that 2016 for all banks went up. For some, it has started coming down, while for some, it is still high. What happened? 2016 saw a major economic drop in Nigeria. The recession hit hard. All banks, the central bank and auditors took a lot more conservative approach in terms of provisioning for loan.
“Unfortunately, a number of those loans were tied to availability of foreign exchange. So, as the foreign exchange regime improves in the economy, you will see a lot of people paying down on their loans, hence reducing NPLs.
“So, we don’t foresee any increase in NPLs now that there is better liquidity from the foreign exchange market. So, our expectation is that NPLs would remain between the four to five per cent threshold this year,” she added.
Â
