Wema Bank may suspend N43b bond over high rates
With its aggressive pursuit of retail business using fast-paced digital solutions, Wema Bank Plc said it may call off its planned N43.5 billion bond issuance due this month over the prevailing high interest rate.
The bond issuance, which is part of its strategies to expand the bank’s growth in the retail banking, would also support projects aimed at lending to small businesses and attract development and interventions funds.
The bank’s Chief Finance Officer, Tunde Mabawonku, said the lender has a N50 billion approved bond issuance programme by the Securities and Exchange Commission, which it has so far offered N6.5 billion, leaving a balance of about N43.5 billion more but may remain locked up due to high rates environment.
“We had planned to start the bond raising this month, but now interest rate is not only high, its outlook judging from inflation, might still remain high. For us, we have checked our Capital Adequacy Ratio (CAR), and it is still high at 12.5 per cent and we do not foresee any major decline as the economy is improving.
“Foreign exchange is now available, there is stable liquidity in the market and customers are paying up, so we are still comfortable even if CAR goes down to 12 per cent. If rates do not reduce, we might not be in a hurry to raise the bond again this year until April or May next year.
The Executive Director, Folake Sanu, said the decline in the bank’s deposit portfolio was a deliberate effort to change the structure of deposit taking to curtail costs.
“We are trying to manage high costs of funds that is prevalent in the industry, focusing basically on retail market through savings and current accounts instead of bloating the deposit base with huge term and time deposits.
“Again, there was also a significant effect caused by flight to safety by customers when Skye Bank was taken over by CBN, and now we are back to base, but the most important thing is that we are trying to be efficient with the management of our deposit base,” she said.
She noted that the loan book remained diversified as there are no significant exposures to upstream oil sub-sector, power sector and foreign currency loans, the areas where a number of banks had issues during the year. “We will grow our loan book between one and five per cent for the second half of 2017.
“Small businesses remain drivers of the economy, but financing them remain challenging, so what the bank plans to do is to work with the existing intervention funds from the Bank of Industry, and Central Bank of Nigeria to grow the sector.
“Because those schemes are on single digit rate, as the economy improves, we will now take on some more as our own, but it is better to first of all take on the single digit loans, and let them get their business before you bring them into double digit loans.
“If you do SMEs today at 29 or 30 per cent, you may not break even but using the single digit for a start, and as they grow they can take some more better loans, you will see them growing,” he said.