Home Business Wema Bank blames poor half year result on economic uncertainties

Wema Bank blames poor half year result on economic uncertainties

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Wema Bank Plc on Tuesday announced that its gross earnings appreciated to N20.87 billion in its first half of 2015.

The bank, in a statement issued in Lagos, said the growth represented an increase of 2.4 per cent from N20.82 billion recorded in the same period of 2014.
Wema Bank’s net interest income in the period dropped to N9.06 billion, from N9.71billion in the first half of 2014.
The bank’s profit before tax also dipped to N1.17 billion from N1.70 billion recorded in the previous year.
It added that its other operating expenses fell to N4.98 billion compared to N5.04 billion achieved in 2014.
According to the bank, loans and advances dropped to N134.57 billion, from N149.29 billion as at December 2014 while deposits went down to N234.1billion, from N258.96 billion in 2014.
The Managing Director of the bank, Mr Segun Oloketuyi attributed the poor result to a tough operating environment occasioned by economic headwinds, regulatory restrictions and political uncertainty.
“The first quarter of the year was characterized by election-related activities and political maneuverings with limited emphasis on economic matters. While the second quarter was largely characterized by the continued pressure on the currency, the tight monetary policy conditions and the low level supply of petroleum products.
“All these issues affected consumer discretionary spending and indeed the growth in our retail volumes,” he said.
Oloketuyi said that lack of economic policy clarity so far in 2015, investment decisions had been tentative.
He added that the Cash Reserves Ratio (CRR) harmonisation by the Central Bank of Nigeria (CBN) had reduced liquidity with significant impact on margins from money market investments.
“We are confident that as the new administration settles into office; its policy thrust will become clearer. Hence, it will enable us to continue to make well informed lending decisions mitigate risk exposures and further expand our customer base,” he said.
The bank’s Chief Finance Officer, Mr Tunde Mabawonku, said that the bank had continued to efficiently deploy its assets.
“Our loans to deposits ratio has moderated to 57.1 per cent compared to 57.6 per cent as at December 2014, through a cautious approach to our lending, pending policy clarity from the new administration.
Mabawonku said that the liquidity squeeze and tight monetary policy conditions affected the bank’s yields from money market investments.
He said: “Technically, banks can only lend 39 per cent of available resources, as CRR is 31per cent and liquidity remains 30 per cent.
“We therefore used the first few months of the financial year to streamline our mix of deposits and funding sources.This has resulted in slightly smaller deposit liabilities volumes but a better cost of funds.
“Our sustained net interest margin above 7.5 per cent was also an improvement and our NPL ratio also remained below the 3 per cent mark.”
Mabawonku said that the bank foresaw an improvement in economic activity and systemic liquidity once the “bail-out” talks were concluded and more clarity on the economic policy of the new administration.
He added, “Our expectation is that economic activities will pick up between August and September and the momentum will be sustained throughout the remaining months of the year.
“While general economic conditions and the regulatory environment remain tight, we believe that our lending strategies, embedded risk management culture and continuous cost savings will enable us stand firm throughout this period.”