GCR Upgrades Wema Bank Ratings, Revises Outlook
GCR Rating has upgraded Wema Bank Plc’s national scale long-term issuer ratings to BBB (NG) from BBB-(NG) and affirmed the short-term issuer rating of A3 (NG); according to its rating note. The emerging market ratings agency also revised outlook on the bank to stable from Rating Watch Positive.
Concurrently, GCR has affirmed the national scale long-term issue rating of BBB-(NG) on Wema Funding SPV Plc’s N17.675 billion Series 2 Fixed Rate Unsubordinated Bonds; with outlook revised to stable from Rating Watch Negative, the rating note stated.
The rating upgrade on Wema Bank Plc reflects an improvement in capitalisation metrics following equity injection, GCR Ratings said on Tuesday. The rating also balances a good risk profile, stable funding base and adequate liquidity against a modest competitive position, it added.
Underpinned by capital injection through N21 billion, Wema Bank’s additional Tier 1 capital in 2023 and earnings retention improved its capital position in the financial year ended December 31, 2023, GCR said.
Wema Bank obtained approval from the Central Bank of Nigeria (CBN) on its N40 billion right issue in June 2024, and the share allotment has been finalised by the Securities and Exchange Commission, GCR recalled.
“Consequently, we expect the bank’s GCR core capital ratio to register between 17% and 18% by December 31, 2024, from 14.1% in Q1, 2024 and 15.5% in 2023.”. To comply with the new minimum capital requirement for a commercial bank with national authorisation, Wema Bank plans to raise an additional N150 billion or USD112.8 million equity capital through a combination of right issue, private placement and public offer over the next 12-18 months.
GCR said Wema Bank’s competitive position is supported by its strong digital banking presence, reflected in its increasing customer base and transaction volumes over the years, translating to better earnings.
“With a customer base of over 5.0 million, served through 149 physical branches and cash centers, as well as a strong digital platform, Wema Bank accounted for approximately 2.0% of the Nigerian banking sector’s total assets, customer deposits, and gross loans, respectively, in 2023.
“In the near term, the bank plans to leverage technology and strategic partnerships with fintechs to further drive growth, specifically in the public sector, given the sizeable opportunities with increasing revenue generation and collection by the government,” GCR said.
The rating note added that the bank’s revenue base remains largely stable, dominated by stable earnings from net-interest and non-interest income.
Wema Bank’s risk assessment is a positive rating factor, according to GCR, which noted that the bank’s credit loss ratio increased to 1.7% as of December 31, 2023, from 1.1% in 2022, to reflect additional provisions on loan portfolio in view of the prevailing macroeconomic challenges faced by businesses and households.
GCR said the stable outlook reflects expectations that the bank’s core capital ratio will range between 17% and 18% over the next 12 months, predicated on the successful inclusion of the NGN40 billion right issues in its shareholder’s funds.
“We expect the bank’s asset quality metrics to be well contained within the regulatory minimum and industry average.
“The bank’s funding structure is also expected to remain sound, although CBN’s aggressive contractionary monetary policies could impact the banking sector’s liquidity over the next 12-18 months,” the rating note said. #GCR Upgrades Wema Bank Ratings, Revises Outlook UBA Price Drops Slightly Mid-day over Selloffs
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