presentation to analysts & investors 2016 ... 2016 fy presentation...pdf2016 full year result...

2016 Full Year Result –April 2017 Presentation to Analysts & Investors Slide No. 1

APRIL 2017

VALUE-DRIVEN RELATIONSHIP BANKING

Since 1945

2016 FULL YEAR RESULTPRESENTATION TO ANALYSTS & INVESTORS


1 Business & Operating

Highlights

2016 FY Highlights

Overview of Operating Environment

Updates on 2016 Commitments

Income Statement Highlights

2016FY Financial

Performance

Financial Highlights

Improving Financial Trend

Efficiency Metrics

Margin Analysis

Profitability

Deposit & Funding

Loan Growth & Analysis

Asset Quality

Capital & Liquidity

Balance Sheet Summary

Managing Risk

Key Performance Metrics

Presentation Outline

Outlook &

Strategy

2017 Outlook

Wema’s Strategic Objective

Guidance

Appendix

2

3

04

05

06

07

09

10

11

12

13

14

15

16

17

18

19

20

22

23

24

26


Business & Operating Highlights

2016 FY Highlights



Income Statement Highlights

04

05

06

07S

ecti

on

1


1.7mnCUSTOMER BASE

ALATDIGITAL BANK

EARNINGS

N54.25bn

18.48%

CREDITRATINGS

ALTERNATECHANNELS

BRANCH

GROWTHNATIONAL

LICENSE

IMPROVED SERVICE

RATING

No 1. bank to offer a full digital

banking experience

BBB- (NATIONAL LONG TERM RATING)

F3 (LONG TERM RATING)

BBB- (SHORT TERM RATING)

A3 (LONG TERM RATING)

ATMs 270

POS 5,508

Branches 142

ISMS ISO certified

2016FY Highlights

Continued improvements recorded in the retail space


The following changes in the operating environment impacted performance in 2016


A new world order in the form of an anti -establishment

movement

Implementation of Fiscal policies have and impacted

money supply economic growth

Oil Price & Output and Exchange rate stability

Regulatory policies and impact on industry growth

Reduced disposable income and slowing consumer

demand

• The global economy was dominated with headlines of the

growing populist movement which saw the exit of Britain from

the EU and the emergence of Donald Trump as the President

of U.S.

• Oil price recovers after an agreement to cut 1.8mbd by OPEC

and non-OPEC members. Illiquidity continues to characterize

the Nigerian FX market.

• Low oil price, incessant disruption of oil production, delay in

budget passage and implementation moved the country into a

recession. The Government able was to implement 59% of

budget (Sept’ 2016) while GDP growth rate estimated was

reported at -1.5% .

• Monetary and Fiscal policy was divergent. The CBN continued

to use supply side management to conserve foreign reserves.

• Disposable income was severely impacted due to inflation

which rose to 18.6% at year end. Wages on its part remained

sticky.



Grow the

Franchise

• Grow Deposit volumes within Retail segment of market through campus storms, prepaid accounts, partnership with

telcos on agency and mobile banking

o (Retail Deposit increased 18.92% (Y-o-Y) from ₦89.74 billion (2015) to ₦106.71 billion in 2016. However,

there was a 0.58% decline in customer deposits (N283.33 billion) in comparison to ₦284.98 billion in Dec.

2015.

• Expand branch network in new markets and additional branches in existing commercial hubs

o Opened new branches in Lagos, Port Harcourt, Abuja, Minna and Lokoja.

Objectives Tasks Status

Enhance Asset

Quality & Capital

• Improved capital and funding

o Fully repaid 7 –year loan on maturity

o Successfully raised Tier 2 capital of N6.25 billion

Improving

Efficiency

• Improving operational efficiency through better use of technology

o OPEX increased by 5.62% in 2016 below 2016 year end inflation rate of 18.6%

o Cost to income ratio at 88.32%; still above target of c. 75%-80%. However, this grew slower than inflation.

o Net Interest Margins at c. 5.93%.

Improve

Organizational

Capacity

• Improving service rating across the Bank by implementing the Purple Rules (service delivery) Charter.

o Industry rating improved from 19th to 13th (KPMG). The Bank is expected to attain top-10 next year

Deployment

of Alternative

Channels

• Continue deployment of alternative channels – POS, ATMs and mobile applications

o ATM deployment increased by 17.14%;

o POS increased by 17.78%;

o Number of active cards increased by 26%

o Alliance with Etisalat with the introduction of Wema Easy Savers Account


GROWTH

18.48%2016

2015

54.25

45.79

Gross Earnings (N’bn)

INCREASE

7.54%2016

2015

3.28

3.05

PBT (N’bn)

INCREASE

11.16%2016

2015

2.59

2.33

PAT (N’bn)

GROWTH

6.09%2016

2015

28.07

26.46

Operating Income N’bn

INCREASE

5.62%

2016

2015

24.79

23.47

Operating Expenses (N’bn)

INCREASE

32.77%

2016

2015

25.77

19.41

Interest Expenses (N’bn)

DECLINE

153.85%GROWTH

13.16%

2016

2015

9.80

8.66

Non-interest Income (N’bn)

GROWTH

19.71%

2016

2015

44.45

37.13

Interest Income (N’bn)

Income Statement Highlight


2016FY Financial Performance


Improving Financial Trend

Efficiency

Margin Analysis

Profitability

Deposit

Asset Quality

NPL s by Sector

Capital & Liquidity

Balance Sheet Summary

Managing Risk


09

10

11

12

13

14

15

16

17

18

19

20

Sec

tio

n 2



Earnings, Profit, Capital

2016FY 2015FY

Deposits (customer) N283.33bn N284.98bn

Loans (net) N227.01bn N185.6bn

Interest income N44.45bn N37.1bn

Non-interest income N9.80bn N8.7bn

Net interest margin 6.56% 6.92%

ROAE (annualised) 5.48% 5.18%

ROAA (annualised) 0.63% 0.60%

NPL (%) 5.07% 2.67%

Loan to deposits 70.77% 65.13%

Coverage ratio (%) 100.00 133.61

Liquidity ratio 30.30% 33.57%

Revenue Generation

Operating Efficiency

2016FY 2015FY

Cost-to-income 88.32% 88.49%

Yield on Assets 15.65% 14.50%

Operating expenses N24.79bn N23.47bn

Margin & Asset Quality

2016FY 2015FY

Gross earnings N54.25bn N45.79bn

PBT N3.28bn N2.99bn

PAT N2.59bn N2.27bn

CAR 11.07% 15.10%


Improving earnings trend

Gross Earnings

Interest Income

Non-interest Income

Fees & Comm

65%

Net trading

income

21%

Other

income

14%

2015 FY

Interest income

81.08%

Non interest

income

18.92%

2015 FY

Interest

income

81.80%

Non interest

income

18.20%

2016 FY

Fees & Comm

63%

Net trading

income

22%

Other income

15%

2016 FY

1.31 1.83 1.46 1.09 0.61

15.52 16.5321.64

30.2938.298.23

10.19

12.35

5.75

5.14

0

10

20

30

40

50

2012 2013 2014 2015 2016

N'b

n

Cash & cash equivalent Loans & advances Investment securities

25.06 25.54

35.45

37.13

44.04

Non-Interest Income Mix (2016) Non-Interest Income (2016)

Income Mix (2016) Income Mix (2016)


Efficiency

Mitigating external headwinds with internal cost efficiency

Operating Expenses Cost-to-Income

Comments

• Operating expenses grew by 6.73% to N24.79 billion vs. N23.47 billion (2015 FY). Drivers for the increase were;

Staff cost increased 5.72% from N9.79 billion to N10.35 billion. Depreciation and Amortization increased 2.67% to N2.31 billion

from N2.25 billion (2015). Operating expenses increased 6.68% from N11.37 billion (2015)

to N12.13 billion given the high pricing levels (inflation).

• Cost to income declined marginally to 88.32% from 88.49%. We expect further streamlining of our processes through alternative platforms, thereby reducing our cost to serve.

7.828.93

10.03 9.79 10.35

1.721.39

2.18 2.252.31

7.73

9.12

9.8911.37

12.13

0.51

0.50

0

5

10

15

20

25

30

2012 2013 2014 2015 2016

N'b

n

Personnel Dep & Amort Other Op. exp Operating lease

17.78

19.94

22.10

23.42

24.79


Margin Analysis

Net Interest Margin

Comments

• Yield on assets (YOA) rose 1.07 percentage points from 14.50% in 2015 to 15.65% in 2016. This resulted from better pricing of assets given the CBN’s stance through the Monetary Policy Rate (MPR). Other contributors were the high inflationary and high yield environment.

• Net interest margin declined marginally to 6.56% from 6.92% due to the high yield environment.

Yield on Assets

15.39%

13.62%

14.25%

14.50%

15.65%

12.50%

13.00%

13.50%

14.00%

14.50%

15.00%

15.50%

16.00%

2012 2013 2014 2015 2016

Yield on Assets

7.23%

5.98%

7.46%

6.92%6.56%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

2012 2013 2014 2015 2016


Profitability

Comments

Wema Bank in 2016 recorded gross earnings growth of 18.48% (y/y)

to N54.24 billion despite the challenging macro economic

environment. In light of this;

o Profit before Tax (PBT) increased (y/y) by 7.54% to N3.28billion as

operating expense grew faster than operating income (6.74% vs,

4.04%).

o Profit after Tax (PAT) increased 11.16% (y/y) to N2..59billion.

The improvement recorded in 2016 resulted from our growing brand

acceptance in the market place, increased market penetration, the

encouragement of customers to our alternate channels and conscious

cost management.

We continue to review our business model – positioning for

opportunities while focusing on the continued roll-out of innovative

product offerings. We expect continued roll-outs, particularly in Q2’17.

-4.94

1.95

3.09 3.053.28

-4.99

1.60

2.37 2.33 2.59

-6.00

-5.00

-4.00

-3.00

-2.00

-1.00

0.00

1.00

2.00

3.00

4.00

2012 2013 2014 2015 2016

N'b

n

PBT PAT

-2.16%

0.55% 0.67% 0.60% 0.63%

-133.59%

3.86% 5.42% 5.18% 5.48%

-160%

-140%

-120%

-100%

-80%

-60%

-40%

-20%

0%

20%

2012 2013 2014 2015 2016

ROAA ROAE


Deposits

Bank Deposits

Deposit Type (2016) Deposit Type (2015)

Deposit Mix (2016) Deposit Mix (2015)

As at 2016, the Bank achieved the following;

Savings account deposits increased by 41.70% to N53 billion

from N37.4 billion.

Going forward, we expect continued growth in retail deposits as the

Bank records increased market penetration.

Comments

175.03

221.13

262.20

284.98 283.38

0

50

100

150

200

250

300

2012 2013 2014 2015 2016

N'b

n

Term 56%

Current 27%

Savings 17%

Term 57%

Current 30%

Savings 13%


Loan Growth and Analysis

• Construction, Real Estate, General & Oil and Gas accounted for > 10% of the loan book.

• Others comprises of Admin & Support Services, Arts, Entertainment & Recreation, Human Health & Social

Work, Information & Communication and Water Supply, Sewage & Waste Management

SECTOR2016FY

(N'bn)

2015FY

(N'bn)

Agriculture, Forestry & Fishing 2.26 2.94

Capital Market 5.12 7.97

Construction 35.41 10.62

Education 2.77 4.03

Finance and Insurance 3.33 2.30

General 27.99 24.01

General Commerce 20.70 17.69

Government 13.39 10.08

Manufacturing 11.61 8.91

Oil & Gas 41.05 32.10

Professional, Scientific and Technical 12.01 11.44

Power & Energy 10.47 3.28

Real Estate 34.21 39.89

Transport & Storage 6.99 2.06

Others 0.78 8.02

Total 228.09 185.35

Breakdown of Loans and Advances Loan Analysis 2016 FY

Comments

Transportation

and Storage

3% Power and

Energy

Professional, Scientific &

Technical Services

5%5%

Manufacturing

5%

Oil & Gas

18%

Government

6%

General

Commerce

9%

General

12%

Finance & Insurance

2%Education

1%

Capital Market

2%

Agriculture, Forestry &

Fishing

1%

Construction

16%

Real Estate

Activities

15%

Others

0%


Asset Quality

Efficient Risk Management culture evidenced by continued low NPL ratio

Despite the challenging economic environment, the Bank recorded the following;

NPL ratio was 5.07% in 2016 due to the various macro economic headwindsthat characterized the economy and which impacted on the loan book.

Exposure to foreign loans remains low at c. N6.23 billion.

Coverage ratio (incl. risk reserve) remains robust at 100%, ensuring adequateprovisioning for known loan impairments and losses.

1 others include administrative & support service, government, human health andprofessional activities

Comments

0

50

100

150

200

250

2012 2013 2014 2015 2016

N'b

n

Gross loans Net loans

Average Industry NPL

NPL (N’mn)

SECTOR 2016FY (N'bn) %

Real Estate 1,381.26 11.86

Construction 2,383.29 20.46

Manufacturing 756.71 6.50

General & General Commerce 4,693.21 40.29

Power and Gas 121.18 1.04

Transport and Storage 458.55 3.94

Education 153.10 3.94

Agriculture 51.19 0.44

Finance and Insurance 32.24 0.28

ICT 24.95 0.21

Others1 336.41 2.89

Total 11,650.07 100


Capital and Liquidity

As at 2016, the Bank recorded the following;

CAR was above the regulatory limit of 10% despite the introduction of regulatory changes.

Liquidity ratio was above the regulatory limit of 30%.

We note that the Bank’s CAR which was reported as 15.10% (2015FY) declined to 11.07% in 2016, due to the growth recorded in risk weightedassets.

Comments

Deposit (f inancial

institutions); 9%

Deposits

(customers); 67%

Other borrowed

funds ; 7%

Other liabilit ies;

5%

Shareholders' fund

; 12%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

-20.00%

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

2012 2013 2014 2015 2016 Liq

uid

ity

rati

o

CA

R

CAR Liquidity ratio


Balance Sheet - Summary

7%

11%

4%

14%

54%

0%

4%

0% 1%

5%

Cash & cash equivalent Restricted depositPledged assets Investment securitiesLoans & advances Investment propertiesProperty & equipment Intangible assetOther asset Deferred tax asset

9%

67%

5%

7%

12%

Deposit (financial institutions)Deposit (customers)Other liabilitiesOther borrowed funds

Total LiabilitiesTotal Assets

N421.22bn

Total assets

as at 2016

N396.74bn

Total assets

as at 2015


Risk Management remains at the core of our business model

Impact of decline

in Government

Revenue on

Credit Risk

Continuing

Challenges in the Oil

and Gas Sector

Technology

related risks and

operational threats Exchange Risk

and Trade Finance

opportunities

• Expected decline in industry loan quality amidst global low

commodity prices and with government as the major business

driver. However, the Bank is poised to maintain high asset

quality through improved efficiency in loan collections and

monitoring, as well as lending to highly structured and stable

companies with good track record.

• The bank has reined in lending to this challenged sector and

existing loans are given more attention and monitoring to arrest

deterioration.

• Appropriate controls and regular vulnerability/ penetration

tests being conducted on our electronic and alternative

payment platforms to protect depositors and the bank against

cyber-attacks and consequent operational losses.

• Illiquidity and volatility in the foreign exchange market continue

to pose significant threats to trade businesses and other

income lines .

• Continuous review of our credit risk appetite and tightening of

risk tolerance limits on sectors/borrowers with negative

outlooks.

• In response to rising inflationary trends, we will continue to

insulate our interest margins against any rate shocks via

strategic gapping of rate sensitive assets and liabilities.

Managing Risk

Increasing

Inflation Rate and

Interest Rate

Credit Exposures

to Sticky Economic

Sectors



2016FY 2015FY 2014FY 2013FY 2012FY

Yield on Assets (%) 15.65 14.50 14.25 13.62 15.39

Net Interest Margin (%) 6.56 6.92 7.46 5.98 7.23

Loan to Deposit Ratio (%) 70.77 65.59 57.65 47.02 42.31

Liquidity Ratio (%) 30.30 33.57 32.80 76.61 64.53

Cost to Income Ratio (%) 88.32 88.49 87.72 95.15 142.56

Coverage Ratio (%) 100.00 133.61 119.38 113.0 217.25

Non-Performing Loan Ratio (%) 5.07 2.67 2.49 3.87 14.20

Return on Average Equity (%) 5.48 5.18 5.42 3.86 -133.59

Return on Average Asset (%) 0.63 0.60 0.67 0.55 -2.16


Outlook & Strategy

2017 Outlook

Wema’s Strategic Objective

Guidance

Appendix

Sec

tio

n 3 22

23

24

26


2017 Outlook

Global Economy Domestic Economy Domestic Market

• Uncertainty is expected to characterise

the U.S and EU economy due to the rise

in nationalism.

• New trade agreements and partnerships.

• Oil prices to remain volatile and low,

resulting from increased oil output from

the U.S, surging dollar prices and waning

Chinese demand.

• Delay regarding the budget passage and

implementation in 2017.

• GDP growth rate expected at c. 0.80%

(IMF)

• Increased institutional and structural

reforms due to the launch of the

Economic Recovery and Growth Plan

(ERGP).

• Inflation rate expected to moderate -

long run adjustments to earlier policy

shocks.

• Relative stability returning to the FX

market. However, sustainability of the

policy remains a source of concern

• Equity markets to remain subdued, as

investors remain cautious due to

uncertainty.

• Money and Fixed Income markets

expected to remain investors safe

haven.


Our strategic objective can be summarized into three main themes:

Improving operational efficiency – this

centers around doing more with less

resources.

Reducing and eliminating wastages

Minimizing reversals and identifying ways

of optimizing the physical, technology and

human capital of the Bank.

Keeping Cost of funds under control

Reduction in NPL through efficient

accounts management and recovery

Improving the quality and liquidity of the

Bank’s risk asset portfolio – emphasis on

aggressively ramping up recovery and

ensuring better yields on our loan portfolio

Serving Customers through Technology and

Alternative platform.

Increased revenue base through adoption of

alternative channels

Improving cost of funding (short and long

term) – Getting better at mobilizing low cost

funds, despite the expected high interest

rate regime and also raising additional long

term debt capital and better access to

foreign lines.

Closeness to Existing and Potential

customers

Adopting Technology and automation to

monitor Customers’ behaviors and needs

Provide value proposition and partnership

through customers engagement

Expertise Excellence Efficiency

Wema’s Strategic Objectives


Guidance – Focus on Digital Offering to grow customer base

Customer Deposit

growth

2016FY

-0.58%2017E

10%COMMENTS

Deposit growth expected from continued brand

acceptance and the realignment of volumes

from institutional to retail and commercial

sources.

Retail Penetration(Personal Accounts – share of Deposit)

2016FY

12.54%2017E

15%COMMENTS

Improved retail volumes from campus storms, the

alliance with Telcos & Fintechs, mobile and

digital banking.

Loan Growth

2016FY

22.31%2017E

1%-2%COMMENTS

Loan growth to slow as we monitor the domestic

environment.

Growth in Non-interest Income

2016FY

19%2017E

15%COMMENTS

Increased fee income driven by transaction

turnover and retail volumes.

Cost-to Income Ratio

2016FY

88.33%2017E

80%COMMENTS

Impact of further process improvements and

growth in top line revenue.

Net Interest Margin

2016FY

5%2017E

6.5%-7.0%COMMENTS

Benefits from improving deposit mix


Thank YouVALUE-DRIVEN RELATIONSHIP BANKING

Since 1945


The Core of Wema’s Business model

Wema

Bank’s

strategic

Objective

…optimizing our balance sheet while our customers and shareholders

remain at the center of our activities.

Innovation & Technology

Relationship Focus

Risk Management

National Footprint

Excellence

Expertise

Efficiency


History


• Two Independent Directors

• Varied experience from Banking, Industry, Law and other relevant sectors

• Implementing strong governance and risk controls

Board of Directors


Branch Developments

Aminu Kano, Abuja Lekki – Ajah, Lagos Trans –Amadi, Rivers

Awolowo Road, Lagos Ifo, Ogun Ado-Badore, Lagos Admiralty Road (Lekki), Lagos


Cautionary Note Regarding Forward Looking Statements

• This presentation contains or incorporates by reference “forward-looking statements” regarding the belief or current expectations of Wema Bank Plc, the Directors and other

members of its senior management about the Bank’s businesses and the transactions described in this presentation. Generally, words such as ‘‘could’’, ‘‘will’’, ‘‘expect’’, ‘‘intend’’,

‘‘anticipate’’, ‘‘believe’’, ‘‘plan’’, ‘‘seek’’ or similar expressions identify forward-looking statements.

• These forward-looking statements are not guarantees of future performance. Rather, they are based on current views and assumptions and involve known and unknown risks,

uncertainties and other factors, many of which are outside the control of the Bank and are difficult to predict, that may cause actual results to differ materially from any future

results or developments expressed or implied from the forward-looking statements. Such risks and uncertainties include, but are not limited to, regulatory developments,

competitive conditions, technological developments and general economic conditions. The Bank assumes no responsibility to update any of the forward looking statements

contained in this presentation.

• Any forward-looking statement contained in this presentation, based on past or current trends and/or activities of Wema Bank should not be taken as a representation that such

trends or activities will continue in the future. No statement in this presentation is intended to be a profit forecast or to imply that the earnings of the Bank for the current year or

future years will necessarily match or exceed the historical or published earnings of the Bank. Each forward-looking statement speaks only as of the date of the particular

statement. Wema Bank expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect

any change in Wema Bank’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

presentation to analysts & investors 2016 ... 2016 fy presentation...pdf2016 full year result...

Documents