Wema Bank Slides 26% to N52 billion
Wema Bank lost more than a quarter of its market valuation due to selloffs in the stock market. Data from the Nigerian Exchange showed that the tier-2 bank market price declined to N4.05, from its peak price of N5.50 during the week.
The market valued Wema Bank Plc N52 billion at the close of business on Friday with over 12 billion outstanding shares registered with the Nigerian Exchange. It was more of a market correction, analysts told MarketForces Africa, saying most of the banks were overpriced due to improved sentiment in the local bourse.
Wema has a small franchise with 2% of banking system assets at the end of 2022, which affects its cost of funding, revenue generation, and risk diversification, Fitch Ratings said in an update. >>Futureview Analysts Place Banking Stocks on Sell Radar
The local lender maintained a leading position in digital banking, reflected in its increasing customer base and transaction volumes, which support profitability. However, reliance on expensive term deposits- although declining- remains high; these accounted for 46% of total customer deposits in 2022, Fitch said in its rating note.
Analysts noted that Wema’s funding base is weakened by a high reliance on expensive term deposits and higher deposit concentration than domestic-rated peers’. The gross loans/customer deposits ratio is very low at 46%, according to Fitch Ratings. The bank is doing well compared to its market rivals in asset quality.
Wema’s impaired loans ratio edged up to 5.7% in 2022 from 4.8% in 2021 as high inflation and foreign-currency shortages hit credit performance, the rating note stated. The bank’s stage 2 loans were only 5% of gross loans in 2022, well below domestic-rated peers’, reflecting lower exposure to the oil and gas and power sectors
Fitch said Naira depreciation has a limited impact on the bank’s impaired loan ratio as only 5% of stage 3 loans were denominated in foreign currency at the end of 2022. #Wema Bank Slides 26% to N52 billion