AGUSTO & CO. UPGRADES WEMA BANK PLC TO “BBB+”
In its June 2024 report, Agusto & Co. upgraded Wema Bank Plc from a “Bbb” rating to a “Bbb+” rating, indicating improved creditworthiness. This upgrade suggests that Wema Bank has shown positive developments in its financial health and risk profile over the past year.
Key Developments:
- Market Performance: In 2023, Wema Bank’s share price rose by 44%, increasing its market capitalization to N72.006 billion. This trend continued in Q1 2024, with market capitalization rising to N109.294 billion, a 52% growth. As of June 4, 2024, Wema Bank’s stock remains the best-performing banking stock year-to-date with a gain of 20.54%.
- Financial Growth: The bank reported a profit before tax of N43.64 billion for the year ended December 31, 2023, driven by gross earnings of N226.915 billion, with 82% from interest income.
- Loan Management: The proportion of impaired loans decreased from 6.1% in 2022 to 4.3% in 2023. However, foreign currency loans increased, necessitating careful monitoring due to potential exchange rate fluctuations.
- Capital Adequacy: Shareholders' funds increased by 68.6% to N139.3 billion following a successful N40 billion rights issue. The capital adequacy ratio improved to 16%, but under stress testing, it declined to 8.2%. A N150 billion capital exercise is planned for June 2024 to meet CBN’s new capital requirement by June 2025.
Investor Considerations:
The upgrade and positive financial indicators suggest Wema Bank is a potentially attractive investment, but investors should consider the risks, especially regarding exposure to the oil and gas sector and the impact of exchange rate fluctuations on foreign currency loans.
In its June 2024 report, Agusto & Co. upgraded Wema Bank Plc from a “Bbb” rating to a “Bbb+” rating, indicating improved creditworthiness. This upgrade suggests that Wema Bank has shown positive developments in its financial health and risk profile over the past year.
Key Developments:
- Market Performance: In 2023, Wema Bank’s share price rose by 44%, increasing its market capitalization to N72.006 billion. This trend continued in Q1 2024, with market capitalization rising to N109.294 billion, a 52% growth. As of June 4, 2024, Wema Bank’s stock remains the best-performing banking stock year-to-date with a gain of 20.54%.
- Financial Growth: The bank reported a profit before tax of N43.64 billion for the year ended December 31, 2023, driven by gross earnings of N226.915 billion, with 82% from interest income.
- Loan Management: The proportion of impaired loans decreased from 6.1% in 2022 to 4.3% in 2023. However, foreign currency loans increased, necessitating careful monitoring due to potential exchange rate fluctuations.
- Capital Adequacy: Shareholders' funds increased by 68.6% to N139.3 billion following a successful N40 billion rights issue. The capital adequacy ratio improved to 16%, but under stress testing, it declined to 8.2%. A N150 billion capital exercise is planned for June 2024 to meet CBN’s new capital requirement by June 2025.
Investor Considerations:
The upgrade and positive financial indicators suggest Wema Bank is a potentially attractive investment, but investors should consider the risks, especially regarding exposure to the oil and gas sector and the impact of exchange rate fluctuations on foreign currency loans.