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High interest rate threatens Wema Bank’s N50bn bond programme

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The high interest rate regime occasioned by the expansionary monetary policy of the Central Bank of Nigeria (CBN) may compel Wema Bank Plc to suspend its N50 billion bond issuance programmes.

Chief Finance Officer, Mr. Tunde Mabanwonku disclosed this during a press conference on the bank’s financial performance in the first half of the year, saying, “We have a N50 billion bond program approved by the Securities and Exchange Commission last year, we raised N6.25 billion, so we still have availability to raise around N43 billion the market. The plan was to raise the bond this august but interest rate is still high and outlook for rates from what we see from inflation might still be high.
“With treasury bills being raised at between 16 and 19 per cent, if the bank raises the bond now will have to issue it at 19 per cent and above. We don’t want to do that and get locked in for seven years. So we will wait till rates gets better in the market. If the apex bank does not cut benchmark interest this year, we will postpone the bond issuance till the first quarter of next year.

He said: “The first thing we did was to look at our Capital Adequacy Ratio (CAR) and as at today it is 12.7 per cent. Do we foresee any major decline? No. The economy is improving, foreign exchange (forex) is available, customers are paying down and there is better liquidity in the market.
“So, we don’t see any major deterioration in non-performing loans (NPLs). In fact, our outlook is that the CAR would remain around the 12 per cent market. The minimum threshold is 10 per cent and so we are very comfortable. So, if interest rates don’t reduce, we probably will not raise the bond this year and we might have to wait till April or May this year.

“But if we don’t raise the bond, our CAR numbers would still remain above the 12 per cent mark. But what are the things we are doing to further improve on the bank: We are doing more on-lending, we are doing some refinancing. So, where Bank of Industry schemes are available, if you on-lend, it reduces your capital charge, thereby improving your CAR position.

Also speaking at the press conference, Executive Director of the bank, Mrs. Folake Sanu said that the bank aims to increase its customer base to three million by year 2020 leveraging ALAT, Its digital bank subsidiary.

She said ALAT aims at raising the bank customer base from its current 1.75 million to three million, and it is expected to raise its revenue base to $200 million by 2020.
“But we still have the branches, just in case people want to deposit cash. But you will be amazed at the various things that ALAT can do for you. If you open the account, I don’t think you will want to use any other banking software again. You will find out that it very simple and easy.
“If you want to fund your ALAT account from an existing account, what you need to do is to enter the details of your existing debit cards and it pulls funds from the account automatically rather than going to withdraw from a bank to pay into ALAT. You can fund it from any debit card in the world. So, you don’t have to be moving cash physically to fund the ALAT account,” she said.

According to Sanu, one of the things the bank also did to promote financial inclusion was the adoption of agency banking model
Yes, the ALAT opportunities are there for those that want to do digital, the *945# also remains, for those that don’t have data driven phones. But there are areas in Lagos, within Nigeria where people still want to do some cash transactions and we have the relatively under-banked or unbanked areas. So, we have some partners and we are rolling out agency banking across Nigeria.

“So, with the traditional account opening process, with  *945#, with ALAT, all of that add up to better customers’ growth for the bank.”

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