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Banking Sector

Wema Bank‘s Financial Fundamentals Remain Strong, Says CEO

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The Managing Director/Chief Executive Officer of Wema Bank Plc, Mr. Ademola Adebise, has reassured customers and shareholders that the bank has strong financial fundamentals and reliable performance metrics, riding on the back of seasoned and astute leadership.

Adebise stated this against the insinuations of weak liquidity. Wema Bank Plc posted gross earnings of about N81 billion and profit after tax of N5.1 billion for year ended December 31, 2020. The CEO explained that the strength and viability of financial institutions were not measured on the isolated performance of one outlier year, stating that, “Wema Bank has continually exhibited not just resilience, but admirable viability over the years with a 30.95 per cent increase in earnings recorded in just 2019.

“Then came 2020, and in spite of the difficulties, we succeeded in achieving impressive results in key areas such as net earnings from fees and commissions, while growing the bank’s asset base significantly.

That’s not all, customer credibility in the bank was also accentuated with a massive increase in customer deposits over the previous year. This is an audacious show of confidence from our customers at Wema Bank. These performance metrics amongst others, are testament to our smart balance sheet optimisation approach which will be affirmed by the time the audited and official 2020 Financial Report is released in the coming weeks,” he said.

According to him, the bank’s performance in the 2020 made it one of the best performing financial institutions in the land given the challenging operating environment.

“We won the BusinessDay award for the Best SME Bank of the Year for 2020. A recognition of our unrivalled support for small and medium scale businesses through loans, business advisory, and ease of payments and transactions. Also, the recently published 2020 KPMG Customer Experience Survey, showed Wema Bank making significant growth in the retail category, climbing up ten (10) places from the previous year to 2nd position, with an above industry average of 74.6 per cent Customer Experience score. This achievement is a mark of dedication to excellent customer service and refreshing support for all our customer categories.

The KPMG Customer Experience Survey grades banks over six universal pillars of Personalization, Integrity, Expectations, Resolution, Time & Effort and Empathy, and Wema Bank has showed a mastery of these pillars and have been outstanding at all of them,” he said.

Adebise added that in line with the bank’s sustainability goal of developing digital solutions for societal impact, it successfully organised the second edition of Hackaholics, a radical gathering of developers, web designers and creative thinkers to develop solutions around key themes of education, health, agriculture, fintech, gaming & betting.

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Banking Sector

Fitch Upgrades Bank Of Industry’s National Rating to ‘AAA(Nga)’

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Fitch Ratings has upgraded Bank of Industry’s (BoI) National Long-Term Rating to ‘AAA(nga)’ from ‘AA+(nga);’ and affirmed the Nigeria-based bank’s Long-Term Issuer Default Rating (IDR) at ‘B’ with a Stable Outlook.

It said the upgrade of BOI’s Long-Term National Rating of ‘AAA(nga)’ reflects the linkage between the bank and the sovereign has strengthened, as evident in the significant size of the CBN guarantees provided for BOI’s recent external funding.

The full list of rating actions shows that “BOI’s Long-Term IDR and SRF are equalised with the Long-Term IDR of the sovereign as we believe that the Nigerian authorities have a high propensity to support BOI.

Fitch said its assessment primarily reflects the following: The bank’s important and clearly defined policy role in funding economic growth in Nigeria; Its 99.9% state ownership, split between the Ministry of Finance (94.8%) and the Central Bank of Nigeria (CBN; 5.1%); and the entirety of the bank’s wholesale funding being either provided or guaranteed by the Nigerian state. However, Fitch also views the ability of the authorities to support BOI as limited by Nigeria’s ‘B’ Long-Term IDR.

BOI is Nigeria’s primary development bank, with the mandate of financing the country’s emerging industrial sector.

The bank plays an important role in supporting government policies and in providing counter-cyclical loans since the onset of the economic crisis resulting from the coronavirus pandemic.

According to the international rating agency, “BOI’s funding has increased substantially since March 2020, as the bank secured two large syndicated loan facilities of EUR1 billion and USD1 billion from syndicates of commercial banks and multilateral development banks, which are fully guaranteed by the CBN. The proceeds of the borrowings are swapped with the CBN, boosting its foreign-exchange (FX) reserves and providing BOI with Nigerian naira to support its developmental activities.”

“BOI’s management has indicated that this fundraising will serve to expand the bank’s lending to priority sectors. It might take BOI substantial time to channel the recently attracted funding to borrowers and as of end-1H21, 48% of BOI’s total assets were kept in liquid government bonds and cash, compared with 20% at end-2019.

Fitch says BOI maintains solid capitalisation and leverage metrics (end-1H21: equity-to-asset ratio of 19.4%), which is prudent for the bank’s exposure to the volatile operating environment.

“Profitability is not a key objective; however, BOI continues to generate reasonable returns on equity (1H21: 18% annualised) driven by healthy net interest margins and, so far, moderate loan impairment charges,” Fitch noted.

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Banking Sector

FirstBank Expands Its International Money Transfer Network, Reinforces its Commitment to Customer Service

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In furtherance of the need to expand diaspora remittance inflow into the country, First Bank of Nigeria Limited has increased its network of International Money Transfer Operators (IMTOs), targeted at easing the accessibility of its customers to receive money from close to 100 countries across the world in a safe and secured manner. With over 750 branches across the country, customers can receive money from the nearest FirstBank branch closest to them.

Over the years, FirstBank has been in partnership with Western UnionMoneyGram, Ria, Transfast, and WorldRemit. The bank is also in partnership with other IMTOs which include Wari, Smallworld, Sendwave, Flutherwave, Funtech, Thunes and Venture Garden Group to promote remittance inflow into the country, thereby putting Nigerians and residents at an advantage in receiving money from their families, friends and loved ones across the world.

Beneficiaries can receive remittance in US dollars in any of our over 750 branches spread across the country. Customers without an existing domiciliary account can have dollar account automatically created for their remittances. You can also receive inflow directly into your account through Western Union.

In addition, FirstBank has launched its wholly owned remittance platform named First Global Transfer product to promote the international transfer of funds across its subsidiaries in sub-Saharan Africa. These subsidiaries include FBNBank DRC, FBNBank Ghana, FBNBank Gambia, FBNBank Guinea, FBNBank Sierra-Leone, FBNBank Senegal.

Reiterating the Bank’s resolve in promoting diaspora remittances, regardless of where one is across the globe, the Deputy Managing Director, Mr Gbenga Shobo said “at FirstBank, expanding our network of International Money Transfer Operators is in recognition of the significant roles diaspora remittances play in driving economic growth such as helping recipients meet basic needs, fund cash and non-cash investments, finance education, foster new businesses and debt servicing.

We are excited about these partnerships, as it is essential to ensure our customers are at an advantage to receive money from their loved ones and business associates, anywhere they are, across the world.”

FirstBank pioneered international funds transfer and remittances over 25 years ago and has been at the forefront of promoting cross border payments in the country, having started the journey with Western Union Money Transfer. The Bank’s wealth of experience and operation in over 750 locations nationwide gives it the edge in the market.

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Banking Sector

Global Banking Sector Grows 40% Reviving Pandemic Losses in Just 12 Months

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European Investment Bank - Investors King

In 2020, the global banking sector took a hit following the economic impact of the coronavirus pandemic, which was reflected in the overall market capitalization. However, with the ongoing global recovery, the banking industry has regained most of the losses incurred during the health crisis. 

According to data acquired by Finbold, in just 12 months between Q2 2020 and Q2 2021, the global banking sector’s market cap has surged 39.62%, adding €2.1 trillion from €5.3 trillion to €7.4 trillion. On the path to recovery, the market cap slightly plunged in 2020 Q3 to €5.2 trillion before gaining 17.3% the next quarter.

Among the Western European banks, Spain’s BBVA bank recorded the highest total shareholder return rate at 19.7% between April 2021 – July 2021, followed by Société Générale from France at 13.8%, while Banco Santander, also from Spain, ranks third at 12.1%. United Kingdom’s Barclays is the worst performer with a TSR of -8%. Data on the global banking sector’s market cap is provided by Banking Hub.

How banking sector sustained growth

The registered market capitalization is supported by the large-scale reopening of economies due to the vaccine rollout. Additionally, the banks, especially from major economies like the United States and Europe, have reaped from policies meant to cushion the economy from the adverse effects of the pandemic. Notably, the decisions by most banks to retain a low-interest-rate environment has been beneficial to banks.

Worth noting is that during the pandemic, banks found themselves in a tight spot. Historically, the banking sector has been considered the custodian of the economy but the pandemic also plunged the banks into a crisis. The banking sector’s profits were adversely affected considering they are bound to the business cycle and interest rates.

At the same time, banks also put in place measures like approaching loans with caution due to uncertainty in repaying which directly impacted profits. However, banks were tapped to facilitate the distribution of stimulus packages boosting their capital reserves in return.

Worth pointing out is that institutions like the European Central Banks allowed banks to continue using their capital buffers flexibly with a planned extension until 2022. With such moves helping banks sustain growth, it eliminates the worry of straining capital buffers while the health crisis is still impacting the banks’ balance sheets.

Furthermore, the crisis highlighted the need for banks to keep huge reserves of capital that can be activated in the wake of economic turmoil. Although most banks have historically relied on assets for future cushion, a crisis like the coronavirus calls for more capital because selling assets in such an environment is challenging.

Besides the policies, the banking sector recovery was partly aided by existing operational risk management arrangements. The pandemic tested all financial market participants and most leading banks successfully invoked business continuity plans. The plans ensured that the financial markets continued to run smoothly and orderly.

The sector’s recovery has also been accelerated by other factors like the increased adoption of pre-pandemic trends like digitalization and sustainability. Digitization of operations has been backed by consumers who are willing to conduct transactions online. At the same time, the digital shift has presented a competitive factor in the sector, with institutions that had established online presence benefiting the most.

Notably, the recovery was at some point under threat during the third quarter of 2020 amid concerns of the pandemic’s second wave. However, the sector sustained the gains with the rollout of the vaccine. Furthermore, moving into 2021, the industry appears not to be bothered by the Delta variant.

The future of the banking sector

By sustaining the market capitalization for two consecutive quarters, it can be assumed that the banking sector response to the health crisis is bearing fruits. However, it is still early to determine if the recovery is sustainable.

The rally will be tested, especially when central banks eliminate all the policies meant to cushion the economy. However, in the long run, banks will have to tailor their operations towards changing consumer behaviour.

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