Wema Bank Mulls Acquisition or Merger, to Raise N40bn Through Rights Issue

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The management of Wema Bank yesterday hinted that “it is considering” the acquisition of a fintech firm or a merger with another commercial bank, as part of its growth plans.

Speaking in Lagos during the company’s half-year 2021 investors/analysts presentation (virtually), the bank’s Deputy Managing Director, Moruf Oseni, said a merger and acquisition (M&A) was part of its plan to ensure organic growth.

Oseni said the acquisition “is not limited to the financial sector space.”
Oseni said: One of our pillars is inorganic growth. It is either you merge or acquire. It is not limited to acquiring from the Nigerian financial space or with a fintech. We are looking at all possible options this time around

“A merger and acquisition in terms of inorganic growth could be with another financial player in the Nigerian bank or it could potentially be with a fintech or it could be the acquisition of the smaller fintech. But as time goes on, we will engage the market on that.

“We are looking at all possible options, whether you like it or not, no matter how efficient you are. In this game, we are playing skill to skill, and we also have huge aspirations to scale up in the shortest possible time.”

Oseni also announced Wema Bank’s plan to sell shares to existing shareholders to raise additional capital of N40 billion by September.

He said the capital raise would give the bank an expanded base of business over the coming years to compete favourably in the industry.

“The rights issuance is expected to hit the market in September, this month of August is for us to have a court-ordered meeting to get shareholders together and agree on the scheme of the arrangement,” he said.

He said the bank would embark on a road show from next week to sensitise shareholder groups and associations on growth plans.
Oseni explained that the bank would reduce its shares in issue before embarking on the rights issue to ensure enhanced growth for shareholders.

“Wema Bank today has a large number of shares in issuance, but before we float the right issue, we need to get the shareholders to reduce the shares in issue and on the back of that we then issue those rights.

“This will not change the shareholding structure of the shareholders. We just want to manage the number of shares in issue, and that will impact on our ratios. It makes sense to have more efficient shares in issue before doing the rights issuance,” Oseni said.

He also said that regulatory cost was among the issues that keep the bank awake at night and explained that Wema Bank “is capable of containing” the regulatory risk: “Are we able to navigate around it? The answer is yes. The whole thing (regulatory risk) is to make sure that the Nigerian economy is bootstrapped and that there is growth in the economy. Our job is to navigate them as they are part of the business.”

The bank said its operating cost moved from N17.6 billion to N20.8 billion largely due to regulatory costs like AMCON levy and NDIC premium.

Oseni said: “The AMCON levy grew around 50 per cent and the NDIC premium by almost 90 per cent. Between 2019 and 2020 we grew our deposit by almost 50 per cent. We will use revenue to cover the increase caused by regulatory cost. Also, costs were driven by inflation, forex and energy costs.

“We believe we have started well and will end this year very well. Although the external environment is very tough we believe the opportunities are numerous and will continue to focus on growing our businesses across retail and corporate segments as we continue to execute our three year strategy to capture all the values in it and will continue to play on our digital domain.”

The Chief Finance Officer of Wema Bank, Mr. Tunde Mabawonku, said during the virtual event, that the bank had started a process that would hopefully grow its capital base to N100 billion.
Mabawonku said: “When the CRR dropped below 15 per cent the board approved immediate implementation of the bank’s capital management plan to bring shareholders capital from existing N60 billion plus to above N100 billion mark.”

He also shared insight into the bank’s performance. According to him, the bank’s profit before tax improved from N1.7 billion in half year 2020 to N4.3 billion in 2021 half year, while its total assets crossed the N1 trillion mark and “the margins are better than this time last year.”

The chief finance officer also said that the bank had grown its deposit base to N808 billion with hope of reaching N1 trillion deposit mark
He said: “Growth is less than N500 billion in the first half of the year. But the interesting thing is that retail deposit has grown by 10 per cent.”

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