Wema Bank Secures Fitch’s ‘B’ Rating

Wema Bank Plc has secured an upgrade of its Long-Term Issuer Default Rating (IDR) to ‘B’ from ‘B-’ by Fitch Ratings, following improvements in its capital position and profitability, driven largely by a successful capital raise and stronger earnings performance.

Fitch also upgraded the bank’s Viability Rating (VR) to ‘b’ from ‘b-’, while its National Long-Term Rating was raised to ‘A(nga)’ from ‘A-(nga)’. The rating agency assigned a Stable Outlook to the lender.

According to Fitch, the upgrade reflects Wema Bank’s stronger capitalisation after its 2025 capital raising exercise and enhanced profitability, which are expected to support the bank’s growth trajectory and cushion the impact of rapid asset expansion.

The agency noted that Wema Bank’s ratings are primarily driven by its standalone credit profile, citing its growing franchise, sound profitability, reasonable asset quality and strengthened capital base.

“Wema’s Viability Rating takes into consideration the concentration of its operations in Nigeria, its relatively small but growing franchise and balance sheet, as well as high credit concentrations. These factors are balanced by reasonable asset quality and capitalisation, sound profitability, and an improved deposit structure,” Fitch stated.

The rating agency also highlighted improvements in Nigeria’s operating environment, noting that the stabilisation of the naira, stronger banking sector profitability, enhanced foreign currency liquidity and successful capital raises across the industry have contributed to improved banking sector resilience.

However, Fitch cautioned that challenges remain, including elevated inflation, regulatory pressures and rising impaired loan ratios following the expiration of regulatory forbearance measures.

Despite commanding only about three per cent of the Nigerian banking sector’s assets as of the end of 2025, Fitch said Wema Bank has continued to expand its market presence, particularly through its digital banking operations.

The agency noted that the bank’s leadership in digital banking has significantly reduced its dependence on costly term deposits, strengthening its funding profile.

Fitch, however, noted that Wema Bank’s exposure to large borrowers remains relatively high, although it has improved considerably during the review period.

“At end-2025, the top 20 funded exposures accounted for 31 per cent of gross loans, equivalent to 1.2 times Fitch Core Capital (FCC), compared with 41 per cent and 2.2 times FCC at end-2024,” the report stated.

The agency also observed that the bank’s exposure to the oil and gas sector stood at 18.8 per cent of total loans at the end of 2025, a level considered low relative to domestic peers.

Nevertheless, Fitch stated that the bank remains highly exposed to sovereign risk, with holdings in government securities and cash reserves at the Central Bank of Nigeria amounting to 3.2 times the FCC as of the first quarter of 2026.

On asset quality, Fitch reported an improvement in the bank’s impaired loans ratio, which declined to 4.2 per cent at the end of the first quarter of 2026 from 4.9 per cent at the end of 2025. The reduction was attributed to a decline in Stage 3 loans and continued loan growth.

The agency noted that Stage 2 loans rose modestly to 1.5 per cent from 0.7 per cent but remained significantly below the industry average.

Profitability also strengthened markedly during the period under review. Operating profit relative to risk-weighted assets rose to 11.2 per cent in 2025 from 8.3 per cent in 2024, supported by a more than twofold increase in net interest income.

Wema Bank’s net interest margin improved to 12.3 per cent in 2025 from 8.8 per cent in the previous year, while operating profit relative to average total assets increased to 5.3 per cent from 3.5 per cent.

Fitch said the bank’s capital position received a major boost from a N200 billion rights issue, including N150 billion completed in September 2025.

As a result, the bank’s FCC ratio climbed to 30 per cent at the end of the first quarter of 2026, compared with 18.7 per cent at the end of 2024. The agency expects the ratio to moderate slightly to between 25 and 28 per cent by the end of 2026 as loan growth accelerates, while remaining consistent with the bank’s risk profile.

The bank’s regulatory Capital Adequacy Ratio stood at 24.7 per cent as of the first quarter of 2026, comfortably above the minimum regulatory requirement of 10 per cent.

Fitch further noted significant improvements in Wema Bank’s funding structure. Reliance on expensive term deposits declined sharply to 12 per cent of total deposits at the end of the first quarter of 2026, from 46 per cent at the end of 2022.

Deposit concentration also eased considerably, with the 20 largest depositors accounting for 19 per cent of customer deposits at the end of 2025, compared with 52 per cent three years earlier.

In addition, the bank maintained a healthy foreign currency liquidity position, with foreign currency liquid assets covering 86 per cent of foreign currency customer deposits at the end of 2025.

The rating upgrade underscores growing investor confidence in Wema Bank’s financial strength and strategic direction as it continues to expand its footprint in Nigeria’s banking sector through digital innovation, stronger capital buffers and sustained earnings growth.