2016 FULL YEAR RESULT APRIL 2017

Transcription

1 PRESENTATION TO ANALYSTS & INVESTORS 2016 FULL YEAR RESULT APRIL 2017 VALUE-DRIVEN RELATIONSHIP BANKING Since Half Year Result Presentation to Analysts & Investors Slide No. 1

2 2017 Half Year Result Presentation to Analysts & Investors Slide No. 2

3 Presentation Outline 1 Business & Operating Highlights Global & Macro Economic Environment Banking Industry Highlights 2017 Half Year Highlights Progress on Strategic Priorities ALAT Progress Update Non-Financial Highlights Trend Overview Half Year Financial Financial Highlights 13 Improving Earnings Trend 14 Performance Efficiency 15 Margin Analysis 16 Profitability 17 Deposits 18 Loan Portfolio & Analysis 19 Asset Quality 20 Capital Ratio 21 Managing Risk 22 Key Financial Metrics 23 3 Outlook & 2017 Outlook 25 Strategy Guidance 26 Appendix Half Year Result Presentation to Analysts & Investors Slide No. 3

4 Section 1 Business & Operating Highlights Global & Macro Economic Environment Banking Industry Highlights 2017 Half Year Highlights Progress on Strategic Priorities ALAT Progress Update Non-Financial Highlights Trend Overview Half Year Result Presentation to Analysts & Investors Slide No. 4

5 N/$ % $/bbl Global & Macro-Economic Review Global Environment Global environment fraught with uncertainty and volatility arising from inability to execute reform agenda and Brexit. The Eurozone, China and Japan record improving growth, as measured by released economic data 1 with the U.S and U.K showing concerns. Normalization of rates by the U.S and other advanced economies expected. Domestic Environment Domestic economy is improving, as measured by PMI data while reform efforts continue. Oil Price, Foreign Reserve and Borrowings Oil prices continue to remain volatile (H1 17 average; $52.74/bbl.) 3 as resurgent Shale oil producers counteract production cuts led by OPEC and some non-opec members. Nigeria s oil production rises to 2.2mb/d from 1.6mb/d (Dec 16). Government issues bonds - Eurobonds, Savings bonds & Diaspora bonds as it seeks to both deepen the available investible instruments and fund its 2016 budget deficit The CBN continues with its intervention in the FX market, as gross foreign reserves increased 16.87% from $25.84 billion (Dec 16) to $30.27 billion (June 17) due to increased oil production. And the NAFEX market. Inflation, Interest rates and Markets. Inflation rate trends downward year-on-year (base effect) to 16.10% as at June Average 1mth NIBOR rate was 17.93% (Jan-Jun 17) as against 8.96% (Jan- Jun 16). Yields on NTB (av. Jan- Jun 17) closed at 20.53%, an increase of percentage points from 9.09% (Jan Jun 16). Average bond yields increased by 3.93 percentage points to 16.65% (Jan Jun 17) from 12.59% (Jan Jun 16). 1 PMI & Inflation 2 European Central Bank, Bank of England & Bank of Canada 3 Average oil price (H1 16) was $41.18/bbl. Brent Crude referenced. 3mth Avg. Brent Crude Data Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Inflation Rate & 1mth NIBOR Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Inflation 1mth NIBOR Naira-Dollar Exchange Rate Q1'2016 Q2'2016 Q3'2016 Q4'2016 Q1'2017 Q2'2017 Parallel Market Rate CBN Rate NAFEX Rate Source : Bloomberg, CBN, FMDQ, 2017 Half Year Result Presentation to Analysts & Investors Slide No. 5

6 Policy Highlights Having established the Investor & Exporters FX Market, the CBN issues directive relating to the further liberalization of the FX market. JUN MPC maintains MPR AT 14% alongside liquidity and Cash Reserve Ratio at 30% and 22.5% respectively, with consideration to headwinds impacting the global and domestic environment. JAN The CBN reviews upward foreign borrowing limit by banks from 75% to 125% of shareholders fund. Net Open Position (NOP) is also increased from 5% to 10%, arising from the devaluation of the Naira CBN commences the weekly sale of foreign exchange (FX) for Personal Travel Allowance (PTA), Business Travel Allowance (BTA) and school fees. FEB Comments Continued uncertainty in the global environment and fragility in the domestic environment ensures MPC leaves rates unchanged for the third time in MAY Policy highlights reflective of the CBN s effort to resolving the FX illiquidity. CBN commences sale of dollars ($20,000/quarter) to improve eligible imports by Small and Medium Enterprises (SMEs). CBN introduces form Q, in its bid to further improve access to FX by SMEs. Investors & Exporters window established (NAFEX) to boost FX liquidity while ensuring timely execution and settlement of transactions. APR MPC maintains MPR at 14%. Liquidity and Cash Reserve Ratio (CRR) maintained at 30% and 22.5%, as global and domestic environment continue to be characterized by headwinds. Guidelines on Bancassurance referral model revised MAR 2017 Half Year Result Presentation to Analysts & Investors Slide No. 6

7 2017 Half Year Highlights Continued improvements recorded in the retail space N30.37bn EARNINGS No 1. bank to offer a full digital banking experience 25.19% CREDIT RATINGS BBB- (SHORT TERM RATING) A3 (LONG TERM RATING) 1.7mn CUSTOMER BASE BBB- (NATIONAL LONG TERM RATING) F3 (LONG TERM RATING) ISMS ISO certified IMPROVED SERVICE RATING BRANCH GROWTH NATIONAL LICENSE ALTERNATE CHANNELS ATMs 277 POS 5,588 Branches Half Year Result Presentation to Analysts & Investors Slide No. 7

8 Progress on Strategic Priorities Strategic Priorities Tasks Status EXCELLENCE Grow deposit volume through Retail and Digital Partnerships. o Additional 120,000 retail accounts opened between Jan. Jun o Deposit volumes declined by N20billion in a bid to reprice balance sheet. o Savings deposit increased by 5.09% from N53.41 billion (2016FY) to N56.13 billion (H1 2017). Continued refreshing of existing branch network & additional strategic openings o Re-opened Kaduna branch with expansion plans underway at Aba, Warri & Enugu branches. Abule- Egba branch completed during the review period. Launched Nigeria s first fully digital Bank (ALAT). Improving service rating across the Bank by implementing the Purple Rules (service delivery) Charter. o Industry rating improved from 13th to 8th (KPMG). The Bank is expected to attain top-5 next year. EXPERTISE Continue deployment of alternate channels POS, ATMs, mobile applications. & agency banking o ATM deployment increased by 2.59% from Jan Jun to 277. o POS machines increased by 1.45% (Jan Jun. 2017) to 5588 o Number of active cards increased by 55.46% to over 350,000 o Subscribers & transaction volume on USSD platform (945#) increased by 73.82% & % from Jan. Jun respectively. o Total of 2,517 merchants enrolled on mcash o Agency banking fully embedded into business model. EFFICIENCY Improving operational efficiency through increasing use of technology in processes o OPEX increased by 5.02% (Y-o-Y) in H and below June inflation rate of 16.10%. o Cost to income ratio at 89.30%; a decline of 0.47% from H o Net Interest Margins at 5.33% Half Year Result Presentation to Analysts & Investors Slide No. 8

9 ALAT Progress Update Since the launch of ALAT in May 2017, we have on-boarded over 26,000 customers as at June 30, ,737 Accounts opened ,360 transactions executed totaling N850M N N N 2,967 savings goals created across 1,762 customers with a total of N100.3 million N251,089, Total balance across all accounts. 9 app revisions released to customers since launch Finger Print Login (biometrics) Refer a friend (viral marketing) Sign up with a signature and selfie More partnership engagements underway Upcoming Features QR Payments Recurring bill payments Virtual card for foreign payments Cardless withdrawal 2017 Half Year Result Presentation to Analysts & Investors Slide No. 9

10 Non-financial Highlights The Launching of the First Digital Banking in Nigeria by Wema Bank - ALAT Kaduna Branch Opening His Excellency, Nasir El-Rufai, Governor of Kaduna State in attendance during the formal opening Campus Storms The Bank has been involved in over 10 University Campus storms, as we continue onboarding the younger generation 2017 Half Year Result Presentation to Analysts & Investors Slide No. 10

11 Stable and Consistent Performance Total Asset Deposit (customer) Gross earnings Loans & advances (net) 11.53% ; 5yr CAGR (Assets), 10.20%, 4yr CAGR (Deposits); 11.88%; 4yr CAGR (Gross earnings)). CAGR indicative of the period Half Year Result Presentation to Analysts & Investors Slide No. 11

12 Section 2 H Financial Performance Financial Highlights Improving Earning Trend Efficiency Margin Analysis Profitability Deposits Loan Portfolio & Analysis Asset Quality Capital Ratio Managing Risks Key Financial Metrics Half Year Result Presentation to Analysts & Investors Slide No. 12

13 Financial Highlights H H FY Earnings, Profit, Capital Gross earnings N30.37bn 24.26bn N54.25bn PBT N1.43bn 1.30bn N3.28bn PAT N1.22bn 1.10bn N2.59bn CAR 12.74% 13.36% 11.07% H H FY Revenue Generation Deposits (customer) N251.74bn N253.84bn N283.33bn Loans (net) N205.71bn N171.99bn N227.01bn Interest income N25.37bn N20.16bn N44.45bn Non-interest income N5.01bn N4.11bn N9.80bn Operating Efficiency H H FY Cost-to-income 89.30% 89.77% 88.32% Yield on Assets 15.95% 13.92% 15.65% Operating expenses N11.97bn N11.39bn N24.79bn H H FY Net interest margin 5.33% 6.71% 6.56% Margin & Asset Quality ROAE (annualised) 4.96% 4.73% 5.48% ROAA (annualised) 0.61% 0.56% 0.63% NPL (%) 4.91% 2.83% 5.07% Loan to deposits 81.72% 61.90% 80.12% Coverage ratio (%) % 101% % 2017 Half Year Result Presentation to Analysts & Investors Slide No. 13

14 N'bn Improving earnings trend Gross Earnings Income Mix (H1 2017) Income Mix (H1 2016) Interest Income H1'2015 H1'2016 H1'2017 Cash & cash equiv. Loans & Adv. Invest Sec. Non-interest Income Non-Interest Income (H1 2017) Non-Interest Income (H1 2016) Half Year Result Presentation to Analysts & Investors Slide No. 14

15 Efficiency External headwinds impacting on cost management Operating Expenses Cost-to-income N'bn H1'2015 H1'2016 H1'2017 Personnel Exp. Dep & Amort. Other Opex Comments Operating expenses increased by 5.02% from N11.39 billion from N11.97 billion as at H Drivers for the increase were; High energy and power costs. Incremental costs from technology upgrades and licences. Cost to income declined marginally from 89.77% to 89.30%. We expect further streamlining of our processes, the continued on-boarding of customers on ALAT and migration of our customers to our alternative platforms should lead to reductions in our cost to serve Half Year Result Presentation to Analysts & Investors Slide No. 15

16 Margin Analysis Yield on Assets Net Interest Margin Comments Yield on assets (YOA) shows improvement, increasing by 15.58% from 13.92% (H1 16) to 15.95%. Drivers for this include; Re-pricing of risk assets. Higher yield environment recorded in Money market and Fixed Income market. The relative high interest rate environment however also impacted on the Bank s Cost of Funds.. Net Interest Margin (NIM) declined marginally to 5.33% from 5.89%, on account of high interest rates and increased cost of funding. We expect improvements in subsequently reported NIMs, due to the downward re-pricing of deposits in the month of June Half Year Result Presentation to Analysts & Investors Slide No. 16

17 Profitability Comments Despite the challenging macro economic environment, the H result highlights gains from improved operating performance. The drivers include; o Interest income expanded by 25.84% (Y-o-Y) from N20.16 billion (H1 2016) to N25.37 billion as at H o Non- Interest income recorded a 21.92% increase from N4.1 billion (H1 2016) to N5.0 billion (H1 2017). Fee based income increased from N3.09 billion in H to N3.89 billion as at H1 2017, an increase of 26.83%. We note that the high interest rates counteracted some of the gains made but was constrained by growth recorded in alternate channel incomes. o Profit before Tax (PBT) increased (y/y) by 10% from N1.30 billion to N1.43 billion. The continued improvement recorded in H1 17, highlights our growing brand acceptance in the market place. Given the launch of ALAT in the month of May, we envisage its continued acceptability amongst the youth, young entrepreneurs and young professionals Half Year Result Presentation to Analysts & Investors Slide No. 17

18 Deposits Deposits (customer) Deposit Mix (H1 2017) Deposit Mix (2016FY) Savings 17% Current 27% Term 56% Deposit Type (H1 2017) Deposit Type (2016FY) Commercial/SME 68% Corporate 10% Retail 16% Treasury 6% Comments The high interest rate environment impacted on the Bank s ability to grow deposits optimally. Deposits recorded a 11.15% decline from N billion (2016FY) to N billion (H1 2017). Our retail franchise continues to benefit from increasing market appeal and brand recognition. This was highlighted in the Bank s deposit mix which recorded 35.23% increase in savings account deposit from N41.50 billion (H1 2016) to N56.13 billion (H1 2017). Customer acquisition initiatives involving partnerships with Telco's, campus storms and ALAT have improved our customer base. Going forward, we expect continued growth in retail deposits due to increasing market penetration Half Year Result Presentation to Analysts & Investors Slide No. 18

19 Loan Portfolio and Analysis Breakdown of Loans and Advances Loan Analysis H SECTOR H (N'bn) 2016FY (N'bn) Agriculture, Forestry & Fishing Capital Market Construction Education Finance and Insurance General General Commerce Government Manufacturing Oil & Gas Professional, Scientific and Technical Power & Energy Real Estate % Construction Comments 6% Power and Transportation 5% Energy and Storage Professional, Scientific & Technical Services 11% Real Estate Activities 2% Agriculture, Forestry & Fishing 2% Capital Market 1% Education 6% 1% Finance & Insurance 5% Manufacturing 12% General 19% Oil & Gas 6% Government 10% General Commerce Transport & Storage Others Total The Oil and Gas exposure is largely in the downstream trading segment. General Sector comprises mainly all the personal loans, religious organizations, NGOs and logistic companies while General Commerce Sector covers loans to commercial businesses that deal on general goods. Construction Sector contains loans that are meant for contract-based construction where repayments are obtained from contract payments whereas, Real Estate Sector covers loans for commercial and residential real estate where repayments come from rents, sales and leases proceeds Half Year Result Presentation to Analysts & Investors Slide No. 19

20 N'bn Asset Quality Efficient Risk Management culture evidenced by continued low NPL ratio FY 2016FY H1'2017 Gross loans Net loans Loan to Deposit ratio 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% NPL SECTOR H (N'bn) % Real Estate Construction Manufacturing General General Commerce Power and Gas Education Agriculture Finance and Insurance ICT Others Total Comments Gross loans declined from N billion (2016FY) to N billion (H1 2017) due to paydowns and refinancing. NPL ratio closed at 4.91%, a decline from 5.07% as reported in 2016FY. Recoveries largely accounted for the reduction in NPL ratio. Coverage ratio (incl. risk reserve) remains robust at % (100%; 2016FY), ensuring level of provision remains adequate Half Year Result Presentation to Analysts & Investors Slide No. 20

21 Capital Ratio & Funding Capital Adequacy Ratio Total Regulatory Capital N22.13 billion Total Risk Weighted Assets N billion Capital Adequacy Ratio 12.71% The minimum capital adequacy ratio for commercial bank with national authorization is 10%. Comments Capital Adequacy Ratio (CAR) as computed under Basel II requirements increased during the review period from 11.06% (2016FY) to 12.71% as at H This was due to the reduction in quantum of risk weighted assets. The second tranche of tier II capital raise will open in Q3 17. Shareholders fund has grown at a 4 year CAGR of 4.04% from N41.40 billion as at 2013FY to N48.50 billion in 2016FY. Funding Sources Other liabilities 5% Long term liabilities Current 6% tax liabilities 0% Shareholders' fund 13% Deposits from banks 10% Deposits from customers 66% 2017 Half Year Result Presentation to Analysts & Investors Slide No. 21

22 Managing Risk Risk Management remains at the core of our business model Government Remains key to economy Continuing Challenges in the Oil and Gas Sector Weakening of government revenues poses a threat to the fragile economic recovery. Despite some respite in the direction of oil prices, market remains volatile Domestic political risk is heightening due to the 2019 election cycle. Exchange Risk and Trade Finance opportunities A gradual reduction in loan portfolio can be seen as loan paydowns exceed rate of risk asset creation in keeping with the Bank s more conservative stance Technology and Cyber-risks remain at the fore of operational risks and we continue to ensure these areas of the Bank are adequately resourced. Increasing Inflation Rate and A more conservative Interest Rate loan book There has been some respite in the paucity of Foreign Exchange as oil revenues improve and dollar liquidity has improved significantly 2017 Half Year Result Presentation to Analysts & Investors Slide No. 22

23 Key Performance Metrics H FY 2015FY 2014FY 2013FY Yield on Assets (%) Net Interest Margin (%) Loan to Deposit Ratio (%) Cost to Income Ratio (%) Coverage Ratio (%) Non-Performing Loan Ratio (%) Return on Average Equity (%) Return on Average Asset (%) Half Year Result Presentation to Analysts & Investors Slide No. 23

24 Section 3 Outlook & Strategy 2017 Outlook Guidance Appendix Half Year Result Presentation to Analysts & Investors Slide No. 24

25 2017 Outlook Global Economy Domestic Economy Domestic Market Uncertainty expected to characterise the U.S and UK, arising from new releases of information on Russia and Brexit respectively.. We expect continued growth in Japan and China. New trade agreements and partnerships as new geo-political alliances emerge. Oil prices to remain volatile, resulting from increasing oil output from the U.S. The economy records expansion given PMI data. However, political risk alongside possible production cuts by OPEC becoming a concern. GDP growth rate expected at c. 0.80% (IMF) Inflation rate expected to moderate - long run adjustments to earlier policy shocks. Though possible reversals could occur. Foreign exchange liquidity might be impacted by global energy markets. Equity market trading levels to be dependent on the NAFEX window. Money and Fixed Income market yields expected to remain unchanged due to perceived revenue challenges Half Year Result Presentation to Analysts & Investors Slide No. 25

26 Guidance Customer Deposit growth 2016FY -0.58% 2017E 5% COMMENTS Deposit growth expected from continued brand acceptance. Positive contribution from ALAT. 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 (ALAT) Loan Growth 2016FY 22.31% 2017E 1%-2% COMMENTS Loan growth to slow as we monitor the domestic environment. Growth in Non-interest Income Cost-to Income Ratio Net Interest Margin 2016FY 19% 2017E 15% COMMENTS Increased fee income driven by transaction turnover and retail volumes. 2016FY 88.33% 2017E 80% COMMENTS Impact of further process improvements and growth in top line revenue. 2016FY 5% 2017E 6.5%-7.0% COMMENTS Benefits from improving deposit mix 2017 Half Year Result Presentation to Analysts & Investors Slide No. 26

27 Thank You VALUE-DRIVEN RELATIONSHIP BANKING Since Half Year Result Presentation to Analysts & Investors Slide No. 27

28 History Fully repositioned in pursuit of growth 2017 Half Year Result Presentation to Analysts & Investors Slide No. 28

29 The Board In the course of the year, the following changes were made to the Board Mr. Babatunde Kasali (wef. May 2017) joined the Board as Chairman, replacing Mr. Adeyinka Asekun. Ademola Adebise (wef. January 2017) was appointed Deputy Managing Director Half Year Result Presentation to Analysts & Investors Slide No. 29

30 Nigeria s 1 st Digital Bank You Don t Need a Bank Branch Schedule recurring payments and forget about it. This includes transfers, bills payments etc. Carry out Easy Transfers Buy Airtime Buy Data Do much more! 2017 Half Year Result Presentation to Analysts & Investors Slide No. 30

31 Digital Product Offerings WemaOnline A web based application which provides real time access to account holders. WemaDebit & Credit Cards (MasterCard, Visa, Verve, Interswitch) partnership with global and domestic card issuers ensures seamless payments to our customers and non-customers WemaMobile A menu driven mobile banking solution which provides 24/7 access to an account holder via his/her mobile phone. *945# Allows Wema Bank account holders to initiate transaction via their mobile phones mcash An innovative solution designed to facilitate low value retail payments by providing an accessible electronic channel. Cash on the Go A novel initiative that allows the bank customers authorize 3 rd party cash withdrawal from any Wema Bank ATM. WebPay A consolidated web payment internet gateway which involves turning customers website to an e-commerce platform. Card Control A product offering unique to the Bank that takes card security to the next level above PIN by allowing customers choose when to render both card and PIN inactive/active via their mobile or online banking platforms IMTOs Wema Bank partners with MoneyGram and Western Union, two of the world s leading International Money Transfer Operators (IMTOs) ensuring safe, secured and quick remittances Half Year Result Presentation to Analysts & Investors Slide No. 31

32 Cautionary Note 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 Half Year Result Presentation to Analysts & Investors Slide No. 32