Wema Bank Plc has reported its Q2 2024 results showing pre-tax profits grew by 270.71% year on year to N19.416 billion.
This took half year pre-tax profits to N30.565 billion versus N12.059 billion in the same period last year.
This is also one of the best quarterly performances reported by the bank per the Nairametrics results tracker.
Key highlights (Q2 2024 vs Q2 2023):
- Interest Income: N76.647 billion +79.21% YoY
- Interest Expense; N39.554 billion +62.44% YoY
- Net interest income; N37.093 billion +101.37% YoY
- Net impairment loss on financial assets: N3.549 billion +175.69% YoY
- Net interest income after impairment charge for credit losses: N33.543 billion + 95.79% YoY
- Net fees and commission income: N12.839 billion +152.10% YoY.
- FX revaluation gain: N6.202 billion +1,478.78% YoY
- Operating Income: N54.793 billion +124.58% YoY
- Profit after tax: N16.924 billion +231.13% YoY.
- Earnings per share N3.16 +98.49% YoY
- Loans and advances to customers N973.929 billion +21.57%.
- Cash and Cash equivalents N267.314 billion +21.38%
- Total Assets N2.762 trillion +22.87%.
- Customers’ deposits N2.119 trillion +13.89%.
Commentary
Wema Bank’s Q2 impressive performance appears to be driven by significant increases in interest income and non-interest income.
This robust performance, combined with the strong Q1 results, resulted in an impressive half-year profit after tax of N26.595 billion, representing a 153.48% year-on-year increase.
- The growth in Wema Bank’s interest income can be attributed to the income generated from loans and advances provided to both customers and banks. This segment of interest income made up roughly 61% of the bank’s total interest income. Over the first six months of 2024, this interest income reached N94.25 billion.
- During this period, the bank’s loans and advances to customers saw a significant increase of about 22%, which translates to an additional N172.825 billion in lending. This expansion in loans and advances might have contributed to the substantial growth in interest income, reinforcing the bank’s overall financial performance.
Also, the impressive bottom-line performance of Wema Bank was further bolstered by the substantial growth in non-interest income. Net fees and commission income increased, primarily driven by fees from electronic transactions and foreign exchange transactions.
Additionally, foreign exchange (FX) revaluation gains contributed to the impressive bottom-line performance. In Q2, the bank reported a foreign exchange revaluation gain of N6.202 billion and foreign exchange trading income of N1.178 billion, reflecting year-on-year increases of 1,478.78% and 106%, respectively.
- According to the notes in the financial statements, the foreign exchange trading income primarily consists of income from trading foreign currencies, along with gains and losses from the revaluation of trading positions.
This performance is likely to be viewed favourably by investors, potentially leading to increased interest in the bank’s shares and a positive impact on the stock price.
This year, the share price has been among the best-performing banking stocks, with a year-to-date gain of 9.82%. Last year, it delivered 44% year-to-date return.
However, the bank faces challenges due to a heightened risk environment and new capital requirements, which may impact overall profitability.
In Q2, impairment charges on loans and advances to customers surged by 558.37% to N4.057 billion, raising the half-year provision to N5.188 billion compared to N904 million in H1 2023.
Additionally, the bank needs approximately N184.87 billion to meet the N200 billion new capital requirements for national banks.