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For Wema Bank, The Future Is Digital, Our Expansion Is On Course – CFO



In this interview with KAYODE TOKEDE, the chief finance officer of Wema Bank Plc, Mr. Tunde Mabawonku, speaks on the bank’s competitive edge since becoming a national bank as well as shareholders’ expectations from the bank.

In 2015, Wema bank obtained a national license from the CBN. In terms of competitiveness and winning more customers, can you highlight the bank’s major achievement so far?

For Wema bank in the last two years, a lot has happened. Firstly, from the point of view of business growth, we have measured in 2015 and I believe we are around 1.3 per cent. For 2017, I think we are around 1.5 per cent shares of deposits.

We are moving up in terms of industry market shares.  In the last two years, the profitability of the bank has remained stable.

For 2014, Profit Before Tax (PBT) of 3.02 per cent; 2015, PBT of 3.09 per cent and 2016, 3.28 per cent PBT. So, year on year, there has been improvement in our bottom line.

We started 2012 with shareholders’ funds of N40 billion. As we speak, as at half year mark, we have shareholder funds of N50 billion and it is all through internal capital generation. We have not done any Tier one exercise expect the N40 billion we raised four-five years ago.

In terms of business growth, there has been improvement. In terms of accrual to capital, there has been improvement. A number of things we are also committed for our stakeholders and shareholders.

One, we wanted to grow the franchise. We wanted approval of Central Bank of Nigeria (CBN) to become commercial bank with National authorization. We have opened three branches in the last one year.

We have reopened Lokoja, Minna and Kaduna. In the next few months, Kano branch of Wema Bank will be reopened. Abia, Enugu and Onitsha will also be reopened. These branches are already in the books of the bank when we converted to regional bank.

There is no major investment in reopening those new branches. We reprint, clean those branches. National expansion is on course but the expansion is now following the money. It is where we see business that we open and not a case of we have to be in every state capital. It is where we see opportunities branches, partnership, we opened.

In terms of capital, we have two mandates. The first mandate is that we have a N50 billion capital in our book to pay CBN. It is the CBN that gave us that loan in 2009; a seven year loan.

In 2016, we started the process of paying down the N50 billion. Wema bank is the only bank that obtained a capital from CBN during the Lamido Sanusi Lamido regime and pay back, plus interest at MPR of two per cent every year.

After paying, we committed to raise tier 2 capitals. We went to the market last year September. We had a N50 billion program approved by Securities and Exchange Commission (SEC).

Out of the N50 billion, we did series one of N20billion. In the N20 billion, we got offers for N11.6 billion because rates were high and we only took N6.2 billion.

As we speak today, N6.2 billion of Tier 2 capital is sitting in Wema Bank books. But we still have room to raise N50 billion.

We are looking at possible improvement in the market by third quarter or fourth quarter; we will go back and do a second trench of debt program. Wema Bank will be doing offer of N20 billion around August or September. What we are doing is internal capital generation. The more profit we make, the better our capital adequacy ratio and the numbers.

Our capital adequacy ratio is around 11.07 per cent as at December 2016. The threshold of CBN authorization to national bank is 10per cent. We want to bring it to as high as 14 per cent by raising capital Wema Bank plans for equity in 2018. Wema bank is not doing equity in 2017. Another thing we are trying to handle is perception, perception in the sense that Wema Bank is an old generation bank and does not have the look of new generation bank.

Every year we give ourselves a mandate to renovate 20 of our branches and build five to 10 new branches in order to have a look of new generation bank

We are renovating our branches in key strategic areas to have a look of new generation bank. That has opened up patronage. We dealt with perception by opening a corporate rebrand around 2015 by changing our logo.

For Wema Bank, the future is digital. Last year we commissioned a study with one of the big consulting firm to guide us in our digital road map.

Wema Bank has traditional been a retail bank, a bank for individual, civil servant and salary earners.  We decide to zero on our strength to use digital to drive growth

On May this year, we launched Nigerian first fully digital bank, ALAT. The purpose for ALAT is for the youth, young entrepreneurs and young professionals.

The emphasis for ALAT is aggressive customers’ acquisitions. Customers’ acquisition is fully digital and banks don’t need physical channel to do it. ALAT has increased our customer base. Since the day of launch, I think we have done 30,000 customers in 60 days. Our plan for each day is to record at least 1,000 customers on ALAT.

ALAT is something fresh and vibrant for the younger generation. It has opened a new frontier for the bank in terms of customers’ acquisition.

We will continue to drive ALAT and ensure that existing digital platforms uptime are 99 per cent; ATM, POS terminal and mobile cash money transfer (Mcash).

We need to get the best in terms of industry efficiency. We believe by doing ALAT, improving on perception, capital, slow and gradually, we will continue to improve market share of the bank. In the last three years, our rating has remained constant and stable.

How has Wema bank benefited from CBN’s foreign exchange windows?

Our customers now have access to foreign exchange. Customers are now able to clear their signed obligations. The key benefit has been the convergence of various rates. It has led to more clarity and you see foreign investors comfortable.

But mostly for us is that customers now have foreign exchange to clear their obligations. We expect Non-Performing Loans (NPL) to go down if the liquidity continues in the foreign exchange market.

 Why is it that bigger banks have huge advantage on customer’s acquisition over smaller banks?

Small and big bank financial institutions are competing on the digital space. What will differentiate each bank is quality of products, speed to market, responsive and agility.

Wema Bank can have a better product than the next bank but if we don’t communicate it quickly, the next bank might have a weaker product but bigger, can sell much more.

What we did with ALAT was to go out, shock the industry. This is a new product that none of the banks in Nigeria has it. No bank has product as robust as ALAT.

Up until April this year, Wema Bank was the only bank that does off-sight personalized card delivery. We go to market to open account. Instantly, customers get their name on the debit card. To compete with bigger banks is all about agility, having a better product.

Soon, ALAT for current account will be rolled out. Again, loan will be accessed on ALAT and credit to customers account instantly.

For shareholders who invested in the bank, what is the selling point?

Wema Bank has not paid dividend in a while. Firstly, we have negative retained earnings. We are in the final stage of regulating approval. Out of the five regulators, we have received approval from four which means one more has to approve and we hope to get approval in 30 – 60 days. Once we get the final approval, then we take from our share premium to retained earnings. That should clean up the negative retained earnings. The shareholders fund will remain the same. The shareholders have approved the process but we await the regulator to give go ahead.

Before October, we will be calling an Extra-Ordinary General Meeting. Pending that happened; we will continue to grow internal capital. By the time we get approval and cleaned up, we will be in a position to start providing returns.

Once investors see that the regulators have finally given approval, it will open up a new opportunity for shareholders and the bank.

What is your take on Bankers committee and CBN commitment of 5% PAT on agriculture?

As a bank for agric, we decided to play it safe. The bulk of our agric transactions have been those that have partnership with fund providers. Wema bank does participate in a lot of lending schemes. The BOI scheme, CBN among others; those give us more comfort.

While Nigeria is driving agric self-sufficiency, a lot of these schemes are still traditional and mechanical. A lot more automation is needed to do it well. A lot of instance collateral are not there.

Wema Bank has been cautious in the agric space but when we see a successful player, we partner with them.

The five per cent PAT investment in agriculture is a recommendation for now. CBN cannot mandate and we will work within the guideline.

We also push it to CBN that they should provide the necessary support for banks

If you recall, 10-15 years ago, there was Small and Medium Enterprises (SMEs) scheme that banks must take out of PAT and do SMEs.  We all did it then, it failed.  Banks feed back to CBN is that lets have a proper regulating framework too drive this.


 With unstable global oil prices and illiquidity, are you think thinking it is high time banks diverted into agriculture?

I totally agree it is high time banks divert into agric and SMEs. As it is now, it is a case of what sector are we giving loans? What we push to government is enabling environment. Interest rate is high. Treasury bill yield today is around 22 per cent. If government is borrowing at 22 per cent, a lot of   agric that borrows at 22 per cent will collapse.

The CBN is borrowing from banks at 22 per cent and the same CBN is saying banks invest in agric. Agriculture at double digit will not succeed. What we need is environment where the rates are lower. The lower the rate the better for agric business. The MPR at 14, no agric business will survive under that rate. The operating environment has to be good. Banks can lend but we also need to create enabling environment to do business.


Why is Wema Bank targeting 2 per cent loan growth in 2017?

The outlook for economy this year has been a cautious one. How quickly FG will sign the 2017 budget, unstable foreign exchange and global oil prices. A lot of uncertainties are still there. So, we decided to grow the loan book gradually. We used to do longer tenure credit. But for 2016-2017, let’s do a shorter circle. Rather than do a 180-day loan, we are doing a 90-day loan for us to get our money back and give someone else. We can only do longer term loan where the economy outlook is certain.




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