Wema Bank Plc FY 2015 Results Presentation

Transcription

1 Wema Bank Plc FY 2015 Results Presentation 1 1

2 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. 2 2

3 section page 1 Overview of Operating Environment 4 2 Financial Highlights 10 3 Outlook 23 3

4 The Bank at a Glance (Dec 2015) Wema Bank The Bank is licensed by the CBN as a National Bank Number of Accounts 1.7 million Number of Employees 1,080 Fitch: Bbb- Credit Ratings (nga) Agusto & Co: Bbb- Channels Total Assets 136 branches 210 ATMs 4,550 PoS Terminals 397bn Total Equity 46.1bn Authorized capital of 20billion divided into 40 billion ordinary shares Listing Nigerian Stock Exchange NSE Ticker: WEMABANK National Coverage Auditors Akintola Williams Deloitte 4 4

5 Overview of Operating Environment The following changes in the operating environment impacted performance in 2015 Global developments US Fed, Brexit & Eurozone, slowdown in China and extractive economies Fiscal policies: State Bail-outs, Intervention schemes, tax policies Oil Price and Exchange rate stability Regulatory policies and impact on short term growth Subdued consumer demand Growth in the global economy remains muted; future interest rate changes will impact growth in both developed and emerging economies. The Federal Government has introduced a number of policies and schemes to stimulate growth and improve the revenue base. We expect such initiatives to continue in The regulator has used a number of means to regulate FX supply given dwindling FX revenues. The outlook for oil prices remains cautious. Regulators have made changes to the provisioning regime General Loan Loss Provision for performing loans has been increased from 1% to 2%. The Monetary Policy Rate (MPR) and Credit Reserve Ratio (CRR) have been increased by 100bps and 250bps respectively. Rising inflation concerns remain. Increasing pressure on foreign exchange liquidity has also affected the cost of goods thus, reducing disposable income. 5 5

6 2015 Full-Year Results Snapshot % change Comprehensive Income & Profit Trend Gross Earnings N45.9 bn N42.2 bn 9.5 Net Operating Income N26.5 bn N25.2 bn 5.2 Operating Expenses N23.4 bn N22.1 bn 5.9 Profit Before Tax N3.05 bn N3.09 bn -1.3 Efficiency & Return Cost-To-Income Ratio 88.5% 87.7% Return on Average Equity 5.2% 5.4% Business Capacity & Asset Quality Ratios Total Loan to Deposit Ratio 65.1% 57.7% Capital Adequacy Ratio 15.1%* 18.2% Non-Performing Loan Ratio 2.7% 2.5% *Capital adequacy reduced by 200bps due to new CBN reporting template 6 6

7 Updates on 2015 Commitments OBJECTIVES TASK Growing Business Improved Deposit growth during the year despite TSA impact o (Customer deposit growth of 9.50%) Increase lending to productive sectors o (Year-on-year Loan growth of 25%) Grow top line earnings by gradual portfolio shift o (Year-on-year Interest income growth of 6%) Capital Raise & Funding Improving capital and funding o The process for Tier 2 Capital (N15-20 billion) has commenced. Expected to be concluded in Q o Consistent repayment of existing Tier 2 capital Improving efficiency Improved operational efficiency through better use of technology o OpEx growth of 5.9%, below 2015 Inflation average of 9% o ISO and Certifications Brand Refresh and Network Expansion Deploy alternative channels Obtained National License o Expected to re-open Minna, Lokoja, Aba, Enugu and Kaduna - by H1 Additional branches being developed in existing commercial hubs o Opened 10 new branches in South-West and South-South; 5 more under construction in Lagos, PH, Abuja Continued deployment of alternative channels POS, ATMs, web and mobile applications o ATM deployment increased by 24% to 210; o POS increased by 35% to 4,550 o Number of active cards increased by 26% 7 7 7

8 The Bank has improved Perception 2015 Brand refreshed; younger and more vibrant look Banking License Obtained National Banking Authorization Capital N46billion in Shareholders funds (up 15% from 2014) Additional Tier 2 expected before end of H1 Market share Improved Market Share (of customer deposits) of >1.5% Processes Technology NPL Performance Increased number of automated processes Improved customer on-boarding process Robust mobile and internet banking platforms 2.67% NPLs Sustained Profitability 8 8 8

9 section page 1 Overview of Operating Environment 4 2 Financial Highlights 10 3 Outlook 23 9

10 Financial Highlights 2015 FY 2014 FY Change Financial Highlights PBT 3.0b 3.1b PAT 2.3b 2.4b Capital Adequacy Ratio 15.1% 18.8% Earnings per Share 6k 6k Deposits 285b 259b Revenue Generation Loan book (Net) 185.6b 149.3b Interest Income 37.1b 35.5b Non Interest Income 8.9b 6.7b Cost to income ratio 88.5% 87.7% Operational Efficiency Cost of funds 5.7% 5.2% Operating expenses 23.5b 22.1b heh Net Interest Margin 7.2% 8.3% Margins & Quality Return on Equity 7% 7.3% NPLs 2.7% 2.5% 10 10

11 'billion Earnings & Profitability Trends 50 Gross earnings Cost to Income Ratio % 143% % 88% 88% 'million 'million 'million 'million million Gross earnings 22, , , , , Profit/(loss) before taxation (3,770.02) (4,942.21) 1, , , Profit/(loss) after taxation (4,228.93) (5,040.63) 1, ,372,45 2, Net Interest Margin 6.23% 4.48% 7.01% 8.25% 7.17% Cost to Income Ratio % % 95.15% 87.72% 88.50% Return on average equity % % 9.13% 7.27% 6.78% Return on average assets -1.78% -2.12% 0.68% 0.87% 0.78% Gross Earnings of 45.86billion up 9.5% in 2015 (from billion) PBT of 3.05billion in 2015 down marginally 0.01% compared to 3.09billion in

12 Improved Revenue Base in 2015 Interest Income ( billion) Interest Income Cash and cash equivalents Loans and advances to banks and customers Investments securities TOTAL INTEREST INCOME Non-Interest Income ( billion) Non Interest Income Retail banking customer fees & commissions Corporate banking customer fees & commission Other fees and charges Net Trading Income Others Total Non Interest Income Interest Income: 37.12bn in 2015 up by 5% (2014: 35.45bn) Non-Interest Income: 8.24bn in 2015 up by 22% (2014: 6.73bn) Net Trading Income increased by 109% from 2014 to Cash and cash equivalents Interest Income Loans and advances to banks and customers 8 Non-Interest Income Investments securities

13 'billion Continuous Efforts in Cost-reduction Strategies Interest Expense ( billion) INTEREST EXPENSE Deposits from banks Deposits from customers Other borrowed funds Total interest expense Interest Expensesrose by 14.8% between 2014 and 2015 due to the impact of the TSA, and harsh economic environment Total Operating Expense ( billion) OPERATING EXPENSE Personnel expenses 9,790 10,033 Depreciation and Amortization 2,250 2,180 AMCON Levy 1,916 1,827 Repairs and Maintenance 1,653 1,325 NDIC Premium 1,053 1,054 Advertising and marketing 1, Security expenses Service charge Tax and related expenses Transport & Communications Other expenses 3,718 3,628 Total 23,415 22,101 Operating Expense increased by 5.9% on the back of branding costs and other general overheads 12,000 10,000 8,000 6,000 4,000 2, Interest Expense Deposits from banks Deposits from customers Other borrowed funds Operating Expense

14 'billion Liabilities Structure Liabilities ( billion) Liabilities Deposits from banks Deposits from customers ,96 Other liabilities Other borrowed funds Total Deposit from customers increased by 26bn or 10% between 2014 and Deposits from Deposits from banks customers Liabilities Structure Deriv. financial liabilities Current tax liabilities Other liabilities Other borrowed funds Total Deposits ( billion) Deposit by sectors 'Billion 'Billion Corporate Banking Treasury Retail Banking Public Sector Commercial Banking Total Deposit from Retail and Commercial segment dominated total deposit in both years Total Deposits

15 Deposit by Type & Mix Showing improved Retail performance Deposit Mix 2015 Current Deposits 31% Savings 13% Term Deposits 56% 2014 Savings 13% Term deposits 44% Deposit liabilities grew by 9% between FY 2014 and FY Deposit mix affected by TSA policy; gradual shift to low cost funding on-going. Current deposits 43% Improved branch network and growth in alternative channels expected to improve cost of funds Commercial 64% Retail 14% Deposit by Type Corporate 11% Treasury 8% Public Sector 3% 2014 Commercial Banking 49% Corporate Banking 13% Public Sector 22% Treasury 2% Retail Banking 14% Deposit by sectors 2015 FY billions 2014 FY billions % Corporate Banking Treasury Retail Banking Public Sector Commercial Banking Total

16 'billion Loans by Type & Category Loans and Advances % 10% 5% 14% 14% NPLs 4% 2% 3% % Gross Loans by Type Business Segments Corporate Banking 30% Corporate Banking 32% billion billion Corporate Banking Commercial Banking 57% Retail Banking 13% Commercial Banking 59% Retail Banking 9% Retail Banking Commercial Banking Total

17 Credit Portfolio Analysis Telecoms 2% Oil Upstream 4% Government 5% Agriculture 2% Education 2% Hotel & Leisure 3% Adevrtising 6% Others 18% Personal & Professionals 8% Construction 9% Real Estate 18% Oil Downstream 13% Automobile 1% General Commerce 9% Power 2% Specialized Construction Activities 6% Others 22% Other Professionals 6% Capital Market 7% Real Estate Construction 6% Commercial Property 6% Domestic Trade 12% Hotel & Leisure 4% Oil Downstream - Marketing 5% Oil Downstream - Trading 8% Personal & Professionals 7% Total Loans as at 2015 financial year end was billion; representing a 25% growth from previous year The Bank has continued to diversify its loan portfolio. Total Oil & Gas exposure (upstream, midstream, downstream, services) was 17%

18 Non- Performing Loans Telecoms Automobile 4% Oil 0% Downstream 5% Real Estate Advertising Activities 8% 5% Agric 1% Other Sectors 21% Specialized Construction Activities9% Steel Rolling 6% Telecoms 7% Aluminium and Allied Products13% Domestic Trade 10% Fishing1% General Commerce 8% Real Estate Construction 6% Personal & Professionals 10% Hotel & Leisure 38% Power Generation 4% Oil Downstream Marketing 3% Professional. Services 5% Other Professionals 4% Hotel & Leisure 26% Food Processing 1% The NPL volume was N5.02 billion; significant share of this relates to certain legacy loans being worked out with customers The Bank s remedial assets function is making efforts to realise certain collaterals where applicable

19 Managing Risk Risk Management remains at the core of our business model Impact of decline in Government Revenue on Credit Risk Changing regulatory requirements on Risk Measurement Technology related risks and operational threats Exchange Risk and Trade Finance opportunities A continuous focus on strengthening the Bank s footprint in the retail segment of the market. As the impact of the 2016 budget trickles into the economy, we expect that we will benefit from increased disposable incomes. The Central Bank has introduced changes to the Capital Adequacy computation of banks. This changes mainly affect credit risk mitigation and eligible Tier-1 capital The growth in electronic and alternative payments has also created a new risk space for banks. Additional controls and support framework have been put in place to protect both depositors and the bank in particular. We have appointed a Chief Information Security Officer to provide leadership in this segment. Macro-economic headwinds continue to pose risks to trade finance and non-interest income for the Bank. Credit Exposures to Sticky Economic Sectors Increasing Inflation Rate and Interest Rate While Oil & Gas, General Commerce and Real Estate Sectors continue to hold the bulk of the loan book, all sectors remain within the regulatory limits of 20% of total portfolio. The inflation rate has continued to inch up steadily with its attendant impact on interest rates. We continue to position ourselves from the shift in the yield curve

20 Key Performance Metrics Net Interest Margin (%) Cost of Funds (%) Loan-to-Deposit Ratio (%) Capital Adequacy Ratio (%) Liquidity Ratio (%) Cost to Income Ratio (%) Provisions for Loan Loss ( 'billion) NPL Ratio (%) Return On Average Equity (%) Cost of Risk (%)

21 Billions Billions Billions Billions Year-on-Year Improvement in Balance Sheet Trends Total Assets Total Deposits Total Equity Loans and Advances % CAGR in Assets, 16% CAGR in Deposits; 31% CAGR in Loans 21 21

22 section page 1 Overview of Operating Environment 4 2 Financial Highlights 10 3 Outlook 23 22

23 Macro-Outlook for Budget The Federal Government will embark on an expansionary fiscal policy in order to stimulate the economy as contained in the 2016 budget document. Oil price Stabilisation and recovery are expected to characterise the international oil markets in We expect the on-going geo-political dynamic to continue between OPEC members and non-opec members. Diversification Foreign income augmentation will be a focal point in 2016 and the non-oil sector is expected to grow significantly. Direct investments are expected in agriculture, infrastructure, solid minerals while clear policy directives will return investment to other areas especially financial services. Growth We expect a slow growth in the first half of the year as the various policy initiatives will take time to materialise. We expect more pressure on interest margins and increased regulatory scrutiny. 23

24 Outlook for 2016 The Bank s 2016 growth strategy is largely centred around 4 key objectives Grow the Franchise Improve Organizational Capability Significant growth in customer acquisition, conversion and retention. Deployment of small and efficient branches; Continuous use of alternative platforms. Grow our SME base through further partnerships with funding agencies. Enhance Asset Quality and Capital Sustain focus on quality obligors with strong and sustainable fundamentals in stable growth sectors. Improve our capital structure to provide buffers for growth. Enhanced portfolio monitoring and consistent sensitivity to macro/industry variables to determine early warning signs and take proactive measures for safety. Continuous bank-wide learning and development. Enhance brand visibility and awareness. Cost containment through improved technology use and process enhancement Transform Service Delivery Implement Purple Rules (service delivery) Charter. Embed service standards across the network. Continued deployment of alternative channels to reduce cost to serve. Continuous process reviews. 24

25 Guidance Headlines Comments Customer Deposit Growth 10% 10-12% Deposit growth expected to remain double digits; largely from a realignment of volumes from institutional to retail and commercial sources Retail Penetration (Personal accounts - share of deposit) 14% 15-20% Improved retail volumes from campus storms, prepaid accounts, partnership with Telcos on agency and mobile banking Loan Growth 25% 5-10% Slow and cautious loan growth; will pick up in H2, 2016 Growth in Income Non-Interest 10% 15% Increased fee income driven by transaction turnover and retail volumes Cost to Income Margin 88.5% 75-80% Impact of further process improvements and growth in top line revenue Net Interest Margin 7.17% 7.00% Expected improvement in cost of funds with improvement in branch network and retail growth 25

26 ADDITIONAL INFORMATION 26

27 TIMELINE Timeline Listed on the Nigerian Stock Exchange Acquired National Bank of Nigeria Plc Successfully completed private placement; CAR at 27% Divestment from Associated Discount House Incorporated in Nigeria; longest surviving indigenous bank Obtained Universal Banking License Divestment from 7 subsidiaries in compliance with CBN regulations Total Assets & Contingencies grew to N397 billion Celebrated 70 years of building successful relationships and creating value for all stakeholders Obtained National Banking License 27 27

28 Experienced, Skilled and Diverse Board Two Independent Directors Varied experience from Banking, Industry, Law and other relevant sectors Implementing strong governance and risk controls Adeyinka Asekun (Chairman) 2. Segun Oloketuyi (MD/CEO) 3. Ademola Adebise (ED) 4. Moruf Oseni (ED) 5. Wole Akinleye (ED) 6. Folake Sanu (ED) 7. Ade Adefioye (Non-Exec) 8. Abubakar Lawal (Non-Exec) 9. Samuel Durojaye (Non-Exec) 10. Tina Vukor-Quarshie (Independent) 11. Omobosola Ojo (Independent) 12. Abolanle Matel-Okoh (Non-Exec) 28 28

29 Geographical Coverage Wema Bank has received final approval from the Central Bank of Nigeria to convert our Banking License from Regional Authorization to National Authorization The Bank now operates as a full-fledged Commercial Bank in all geo-political Zones and the Federal Capital Territory. The Bank is fully prepared to scale up its operations to cover locations in the North and Eastern parts of the country We expect to re-open Five (5) branches in the next 3 months in Kaduna, Lokoja, Minna, Aba & Enugu Previous coverage area New branches to be opened 29 29

30 New Branch Developments Aminu Kano, Abuja Lekki-Ajah, Lagos Trans-Amadi, Rivers Awolowo, Lagos Ifo, Ogun Ado-Badore, Lagos 30

31 Thank You