PRESENTATION TO ANALYSTS & INVESTORS 2016 FULL YEAR RESULT

Transcription

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

2 Presentation Outline 1 Business & Operating Highlights 2016 FY Highlights Overview of Operating Environment Updates on 2016 Commitments Income Statement Highlights FY 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 Outlook & Strategy 2017 Outlook Wema s Strategic Objective Guidance Appendix Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 2

3 Section 1 Business & Operating Highlights 2016 FY Highlights Overview of Operating Environment Updates on 2016 Commitments Income Statement Highlights Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 3

4 2016FY Highlights Continued improvements recorded in the retail space N54.25bn EARNINGS No 1. bank to offer a full digital banking experience ALAT DIGITAL BANK 18.48% 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 270 POS 5,508 Branches Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 4

5 Overview of Operating Environment The following changes in the operating environment impacted performance in 2016 A new world order in the form of an anti -establishment movement 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 & Output and Exchange rate stability Oil price recovers after an agreement to cut 1.8mbd by OPEC and non-opec members. Illiquidity continues to characterize the Nigerian FX market. Implementation of Fiscal policies have and impacted money supply economic growth Regulatory policies and impact on industry growth Reduced disposable income and slowing consumer demand 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 Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 5

6 Updates on 2016 Commitments Objectives Tasks Status Grow the Franchise Enhance Asset Quality & Capital Improving Efficiency Improve Organizational Capacity Deployment of Alternative Channels 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 billion (2015) to billion in However, there was a 0.58% decline in customer deposits (N billion) in comparison to billion in Dec 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. Improved capital and funding o Fully repaid 7 year loan on maturity o Successfully raised Tier 2 capital of N6.25 billion 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%. Improving service rating across the Bank by implementing the Purple Rules (service delivery) Charter. o Industry rating improved from 19th to 13 th (KPMG). The Bank is expected to attain top-10 next year 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 2016 Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 6

7 Income Statement Highlight Gross Earnings (N bn) PBT (N bn) PAT (N bn) GROWTH 18.48% INCREASE 7.54% INCREASE 11.16% Operating Income N bn Operating Expenses (N bn) Interest Expenses (N bn) GROWTH 6.09% INCREASE 5.62% INCREASE 32.77% Non-interest Income (N bn) Interest Income (N bn) DECLINE % GROWTH 13.16% GROWTH 19.71% Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 7

8 Section FY Financial Performance Financial Highlights Improving Financial Trend Efficiency Margin Analysis Profitability Deposit Asset Quality NPL s by Sector Capital & Liquidity Balance Sheet Summary Managing Risk Key Performance Metrics Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 8

9 Financial Highlights Earnings, Profit, Capital 2016FY 2015FY Gross earnings N54.25bn N45.79bn PBT N3.28bn N2.99bn PAT N2.59bn N2.27bn CAR 11.07% 15.10% 2016FY 2015FY Revenue Generation 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 Operating Efficiency 2016FY 2015FY Cost-to-income 88.32% 88.49% Yield on Assets 15.65% 14.50% Operating expenses N24.79bn N23.47bn Net interest margin 6.56% 6.92% ROAE (annualised) 5.48% 5.18% Margin & Asset Quality ROAA (annualised) 0.63% 0.60% NPL (%) 5.07% 2.67% Loan to deposits 70.77% 65.13% Coverage ratio (%) Liquidity ratio 30.30% 33.57% 2016 Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 9

10 N'bn Improving earnings trend Gross Earnings Income Mix (2016) Income Mix (2016) 2016 FY 2015 FY Non interest income 18.20% Non interest income 18.92% Interest Income Cash & cash equivalent Loans & advances Investment securities Non-interest Income FY Other income 15% Interest income 81.80% 2015 FY Other income 14% Interest income 81.08% Non-Interest Income Mix (2016) Non-Interest Income (2016) Net trading income 22% Fees & Comm 63% Net trading income 21% Fees & Comm 65% 2016 Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 10

11 N'bn 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; Personnel Dep & Amort Other Op. exp Operating lease 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 Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 11

12 Margin Analysis Yield on Assets Net Interest Margin Yield on Assets 16.00% 15.50% 15.00% 14.50% 14.00% 13.50% 15.39% 13.62% 14.25% 14.50% 15.65% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 7.23% 5.98% 7.46% 6.92% 6.56% 13.00% 1.00% 12.50% % Comments Yield on assets (YOA) rose 1.07 percentage points from 14.50% in 2015 to 15.65% in 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 Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 12

13 N'bn 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; 20% 0% -20% -40% -60% -80% -100% -120% -140% -160% PBT PAT 0.55% 3.86% 5.42% 5.18% 5.48% 0.67% 0.60% 0.63% % % o 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%). 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. ROAA ROAE 2016 Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 13

14 N'bn Deposits Bank Deposits Deposit Mix (2016) Deposit Mix (2015) Savings 17% Savings 13% Current 27% Term 56% Current 30% Term 57% Deposit Type (2016) Deposit Type (2015) Comments 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 Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 14

15 Loan Growth and Analysis Breakdown of Loans and Advances SECTOR 2016FY (N'bn) 2015FY (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 Transport & Storage Others Total Loan Analysis 2016 FY 16% Construction Comments 3% Power and Transportation 5% Energy and Storage Professional, Scientific & Technical Services 15% Real Estate Activities 1% Agriculture, Forestry & Fishing 2% Capital Market 1% Education 5% 2% Finance & Insurance 5% Manufacturing 12% General Construction, Real Estate, General & Oil and Gas accounted for > 10% of the loan book. 18% Oil & Gas 6% Government 9% General Commerce 0% Others Others comprises of Admin & Support Services, Arts, Entertainment & Recreation, Human Health & Social Work, Information & Communication and Water Supply, Sewage & Waste Management 2016 Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 15

16 N'bn Asset Quality Efficient Risk Management culture evidenced by continued low NPL ratio Gross loans Net loans NPL (N mn) SECTOR 2016FY (N'bn) % Real Estate 1, Construction 2, Manufacturing General & General Commerce 4, Power and Gas Transport and Storage Education Agriculture Finance and Insurance ICT Others Average Industry NPL Total 11, Comments Despite the challenging economic environment, the Bank recorded the following; NPL ratio was 5.07% in 2016 due to the various macro economic headwinds that 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 adequate provisioning for known loan impairments and losses. 1 others include administrative & support service, government, human health and professional activities 2016 Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 16

17 CAR Liquidity ratio Capital and Liquidity 30.00% 25.00% 90.00% 80.00% Shareholders' fund ; 12% Deposit (financial institutions); 9% 20.00% 15.00% 10.00% 5.00% 0.00% -5.00% % % 60.00% 50.00% 40.00% 30.00% 20.00% Other liabilities; 5% Other borrowed funds ; 7% Deposits (customers); 67% % 10.00% % 0.00% CAR Liquidity ratio Comments 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 weighted assets Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 17

18 Balance Sheet - Summary Total Assets Total Liabilities 0% 0% 1% 4% 5% 7% 11% 7% 12% 9% 4% 5% 14% 54% 67% Cash & cash equivalent Pledged assets Loans & advances Property & equipment Other asset Restricted deposit Investment securities Investment properties Intangible asset Deferred tax asset Deposit (financial institutions) Deposit (customers) Other liabilities Other borrowed funds Total assets N421.22bn as at 2016 Total assets N396.74bn as at Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 18

19 Managing Risk Risk Management remains at the core of our business model Technology related risks and operational threats Impact of decline in Government Revenue on Credit Risk Continuing Challenges in the Oil and Gas Sector 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. Credit Exposures to Sticky Economic Sectors Increasing Inflation Rate and Interest Rate 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 Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 19

20 Key Performance Metrics 2016FY 2015FY 2014FY 2013FY 2012FY Yield on Assets (%) Net Interest Margin (%) Loan to Deposit Ratio (%) Liquidity Ratio (%) Cost to Income Ratio (%) Coverage Ratio (%) Non-Performing Loan Ratio (%) Return on Average Equity (%) Return on Average Asset (%) Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 20

21 Section 3 Outlook & Strategy 2017 Outlook Wema s Strategic Objective Guidance Appendix Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 21

22 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 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 Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 22

23 Wema s Strategic Objectives Our strategic objective can be summarized into three main themes: Expertise Excellence Efficiency 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 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 2016 Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 23

24 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 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 2016 Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 24

25 Thank You VALUE-DRIVEN RELATIONSHIP BANKING Since Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 25

26 The Core of Wema s Business model Wema Bank s strategic Objective Innovation & Technology Relationship Focus Risk Management National Footprint Excellence Expertise Efficiency optimizing our balance sheet while our customers and shareholders remain at the center of our activities Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 26

27 History 2016 Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 27

28 Board of Directors Two Independent Directors Varied experience from Banking, Industry, Law and other relevant sectors Implementing strong governance and risk controls 2016 Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 28

29 Branch Developments Aminu Kano, Abuja Lekki Ajah, Lagos Trans Amadi, Rivers Awolowo Road, Lagos Ifo, Ogun Ado-Badore, Lagos Admiralty Road (Lekki), Lagos 2016 Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 29

30 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 Full Year Result April 2017 Presentation to Analysts & Investors Slide No. 30