1 Business & Operating Highlights 09 1 Overview of the Bank 03 - - PowerPoint PPT Presentation

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2 0 1 7 F U L L Y E A R R E S U L T S

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Business & Operating Highlights

Overview of the Bank Review of Operating Environment Policy Highlights Recap of 2017 Commitments ALAT – Full Digital Bank Digital Performance – Alternate Platforms Non-Financial Highlights 03 04 05 06 07 08 09 1

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Overview of the Bank

Pioneer bank in Africa to offer a full digital banking experience

Credit Ratings 20.07% Earnings

N65.27bn

Customer Base

1.87mn

Improved Service Rating

ISMS

ISO

certified

Digital Banking

Alternate Banking Channels Branch Network Corporate Governance

151 Branches

National Banking License

Ranked 8th in Customer survey

Agency Banking partners

285 296 4,971

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2 0 1 7 F U L L Y E A R R E S U L T S Global Environment

• Global economy recorded further improvement despite concerns about

protectionism and geo-political fallouts.

• The E.U and U.K continued discussions towards the agreement of terms

(transitional period) after invoking Article 50.

• Interest rate normalization across developed countries.

Domestic Environment

• Domestic economy improved during the year, as measured by GDP, PMI

and inflation data.

• Economic reforms still ongoing, as the government aims to give full

effect to the Economic Growth and Recovery Plan (ERGP). Oil Price, Foreign Reserve and Borrowings

• Oil price rebounds as agreed production cuts by OPEC and Russia records

high compliance rate. However, rising production levels from the U.S threatens the agreement.

• Foreign FX reserve rises to c. $40 billion, arising from increased oil

production and prices.

• Increased debt issuances by the FGN during the year. The government

targets a debt portfolio in favour of foreign issuances. Inflation, Interest rates and Markets. Inflation rate trends downward year-on-year (base effect) from 18.72% (Jan’17) to 15.37% (Dec’17).

• Average 1mth NIBOR rate was 18.31% (Jan - Dec’17) as against 13.11%

(Jan - Dec’16).

• Yields on 3-mth NTB (av. Jan- Dec’ 17) closed at 17.27%, an increase of

5.74 percentage points from 11.53% (Jan – Dec’16).

• Average bond yields increased by 1.72 percentage points to 15.99% (Jan

– Dec’17) from 14.27% (Jan – Dec’16). Inflation Rate & 1mth NIBOR 3mth Avg. Brent Crude Data Naira-Dollar Exchange Rate

Review of Operating Environment

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Policy Highlights

Policy highlights reflecting some of the CBN’s activities during the year.

Comments

First MPC meeting for the year held. Key decision rates left unchanged.

Jan Feb Mar May Jul Sept Apr Jun Aug Oct

The CBN reviews upward, foreign borrowing limit by banks from 75% to 125% of shareholders’ fund. Net Open Position (NOP) is also increased from 5% to 10%, arising from the devaluation of the Naira CBN commences the weekly sale of foreign exchange (FX) for PTA, BTA & School fees. Key decision rates left unchanged at MPC meeting . Issues update on FX availability to retail end of the market Guidelines issued on Bancassurance referral model revised CBN commences sale of dollars ($20,000/quarter) to SMEs. Introduces form “Q”, in its bid to further improve access to FX by SMEs. Investors & Exporters window is established. MPC leaves decision rates unchanged CBN issues guidelines as it seeks the further liberalization of the FX market. Policy on unutilized FX issued the SMIS wholesale and retail intervention. MPC members leave key decision rates unchanged Introduction of funding for liquidity facility and intra-day facility for non-interest banks. Guidance to banks & discount houses on IFRS 9 implementation The MPC members vote to leave rates unchanged Extension of settlement banking arrangement to all clearing sessions.

Nov

Interest rate normalization and inflation consideration within the domestic environment results in MPC members leaving rates unchanged.

Dec

Regulatory reporting issued on FGN treasury bills and CBN OMO bills.

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Recap of 2017 Commitments

• Grow deposit volume through Retail and Digital Partnerships.
• Additional 400,372 retail accounts opened in 2017; an increase of 103.51%.
• Deposit volumes declined by 10.18% to N254.46billion (2016; N283.30 billion) due to the high yield

environment and repricing of deposits.

• Savings deposit increased by 9.76% from N45.40 billion (2016) to N49.83 billion (2017).
• Continued refreshing of existing branch network & additional strategic openings.
• Re-opened branches in commercial hubs – Bauchi, Kaduna, Kano and Mararaba. Re-opening Warri, Aba

and Sangotedo next.

Priorities Status

• Improved service rating across the Bank through the implementing the Purple Rules (service delivery)

Charter.

• Industry rating improved from 13th to 8th (KPMG). The Bank continues to improve on service deliveries.
• Improving operational efficiency through increasing use of technology in processes.
• OPEX increased by 7.99% (Y-o-Y) in 2017; below inflation rate of 15.37% as at Dec. 2017.
• Net Interest Margin increased from 6.57% (2016) to 6.61% in 2017.
• Obtained Shareholders’ approval for capital reduction exercise.

Excellence Expertise Efficiency

• Developing new digital capabilities.
• Launched Nigeria’s first full digital bank (ALAT); developing new capabilities.
• Recorded USSD volume growth of 564% in 2017; ATM transaction volume grows by 44.79%.
• Launched agency banking in 19 States, including the Federal Capital Territory (FCT).

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app revisions released to customers since launch

• Finger Print Login
• Refer a friend
• Card details recalled (local

and international

• Sign up with a signature

and selfie

853,007

transactions executed totaling N12bn

178,574

Accounts opened

> N1bn

Average Balance in 2017

13,644

savings goals created.

More

partnership & engagements underway

N N N

Loans Recurring bill payments Virtual Dollar Card Cardless withdrawal

ALAT – Full Digital Bank

ALAT has Revolutionized the Banking Space; Close to a Thousand Accounts Opened Daily.

Others

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Alternate Platforms

Internet Platform1 Mobile Platform 2 USSD (volume)

Delivering Value through Simple, Convenient & Reliable Platforms.

ATMs (volume)

▪ Cumulative growth rate 1 & 2 ▪ The Bank launched its USSD platform (*945#) in 2016.

10 20 30 40 50 60 70 2015 2016 2017 N’Billions

2015 2016 2017

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Campus Storms

• nboarding the younger generation

Non-Financial Highlights

Kaduna Branch Opening

His Excellency, Nasir El-Rufai, Governor of Kaduna State in attendance during the formal opening

Capital Reorganization

The Launching of ALAT

the First Digital Banking in Nigeria – ALAT by Wema.

Awards Supporting the Creative Industry Expanding our Footprint

• .Bauchi Branch
• .Kano Branch
• .Maraba Branch

Kaduna Investor Conference

Leading discussions on economic growth and development in Kaduna state

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Financial Performance

2017 Full Year Financial Highlights 2017 Full Year Profit Before Tax Earnings Trend Efficiency Efficiency & Margin Analysis Cont’d Deposits Loan Portfolio and Analysis Asset Quality Capital Ratio & Funding Stable Performance 11 12 13 14 15 16 17 18 19 20 2

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FY2017 Financial Highlights

2017FY 2016FY %

Deposits (customer) N254.46bn N283.33bn (10.19) Loans (net) N215.84bn N227.01bn (4.92) Interest Income N53.07bn N44.45bn +19.39 Non-Interest Income N12.19bn N9.80bn +24.39

2017FY 2016FY %

Net Interest Margin 6.61% 6.57% +0.61 ROAE (annualised) 4.60% 5.48% (16.06) ROAA (annualised) 0.56% 0.63% (11.11) NPL (%) 3.52% 5.07% +3.06 Loan to Deposits 84.82% 87.10% (2.62) Coverage Ratio (%) 130.16% 100.00% (30.16)

2017FY 2016FY % Cost-to-Income 89.90% 88.32% +1.79 Yield on Assets 17.76% 15.65% +13.48 Cost of Risk 0.97% 0.20% +385 Operating Expenses N26.77bn N24.79bn +7.99 2017FY 2016FY %

Gross Earnings N65.27bn N54.36bn +20.07 PBT N3.01bn N3.25bn (7.38) PAT N2.26bn N2.56bn (11.72) CAR 14.32% 11.07% +29.36

Earnings, Profit, Capital Revenue Generation Operating Efficiency Margin & Asset Quality

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FY2017 Profit Before Tax

FY2017 vs. FY2016

Comments

N2.56bn N3.01bn N26.77bn N12.20bn N19.77bn N65.27bn

12.08% Jaws 3

• Gross revenue increased by 20.07% from N54.36 billion (FY2016) to N65.27 billion (FY2017). This resulted from the high yield environment and

increased transactions on alternate platforms.

• The high interest environment impacted interest expense which rose by 28.54% to N33.31 billion (2016; N25.91 billion).
• Our Jaws ratio remains strong, growing at 12.08% in 2017 supported by increased penetration levels and a firm lid on operating expenses

which grew by 7.99% (Inflation; 15.37%). The task remains growing the business while bringing down funding costs.

Jaws Expands Reflective of the Growing Business

• 11.91%

• 7.27%

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Earnings Trend

Non-interest Income Gross Earnings Interest Income

Income Mix (FY2017) Income Mix (FY2016)

Interest income

82%

Non interest income

18%

Interest income

81%

Non interest income

19%

36 42 46 54 65 10 20 30 40 50 60 70 2013 2014 2015 2016 2017

10 20 30 40 50 60 2013 2014 2015 2016 2017

2 4 6 8 10 12 14 2013 2014 2015 2016 2017

Increasing Brand Acceptance Supportive of Earnings Growth

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Efficiency

Efficient Cost Management Despite Development of New Capabilities.

Operating Expenses Comments

▪ Operating expenses increased by 7.99% to N26.77 billion from N24.79 billion as at FY2017. Drivers for this include; ➢ AMCON levy increased by 6.08% from N1.98 billion (2016) to N2.10 billion (2017). ➢ NDIC Levy increased to N1.31 billion from N1.15 billion as a proportion of deposits during the period. ➢ Advertising and Marketing expenses increased from N0.43 billion to N1.21 billion due activities surrounding the launch of the fully digital Bank. ➢ Technology & Cost on Alternate Platform rose by 40.89% from N1.15 billion (2016) to N1.50 billion (2017) and is attributed to the acquisition and development of new capabilities for sustainable competitive advantage.

Drivers (N’bn)

8.93 10.03 9.79 10.35 10.01 1.39 2.18 2.25 2.31 2.32 9.12 9.89 11.37 12.13 14.45 0.50 5 10 15 20 25 30 2013 2014 2015 2016 2017

FY2016 Personnel

• Dep. & Amort

Other Op. exp FY2017

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Efficiency & Margin Analysis

Net Interest Margin Comments

▪ The year was characterized by a high interest rate environment which resulted in the following; ➢ Yield on Assets increased to 17.76% (2016; 15.65%) due to the re-pricing and restructuring of the loan book, alongside an active asset switch in favour

• f high yield government securities.

➢ Net Interest Margin (NIM) increased to 6.61% (2016; 6.57%) despite offsets from institutional Investors. Going forward, we expect the reduction in market rates and the continued growth on our digital platforms to result in improved margins. In addition, the loan book will be focused on short tenored transactions, as we take advantage of market dictates.

Yield on Assets

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Deposits

Deposits (customer) Deposit Mix (2016FY) Deposit Type (FY2017) Deposit Type (FY2016) Deposit Mix (FY2017)

▪ The high interest rate environment impacted on the Bank’s ability to grow deposits optimally. Deposits recorded a 10.18% decline from N283.33 billion (2016FY) to N254.46 billion (2017FY). ▪ The re-pricing

• f

deposits resulting from the high interest environment. . ▪ Our retail franchise continues to benefit from increasing market appeal and brand recognition. This was highlighted in the Bank’s CASA mix which increased by 3 percentage points from 46% (2016FY) to 49% (2017FY) of total deposits. ▪ Customer acquisition initiatives involving partnerships with Telco's, campus storms and our digital platforms have improved our customer base. ▪ We expect 500,000 ALAT accounts in 2018, adding to deposit growth.

Comments

High Interest rate Environment Impact Deposit Growth

217.73 258.96 284.98 283.33 254.46 50 100 150 200 250 300 2013 2014 2015 2016 2017

N'bn

Term

50%

Current

31%

Savings

16%

Domiciliary

3%

Term

48%

Current

29%

Savings

20%

Domiciliary

3%

Corporate

26%

Retail

23%

Treasury

10%

Commercial/SME

41%

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Loan Portfolio and Analysis

SECTOR FY2017 (N'bn) FY2016 (N'bn) Agriculture, Forestry & Fishing 4.38 2.26 Capital Market 2.43 5.12 Construction 35.39 35.41 Education 2.51 2.77 Finance and Insurance 1.72 3.33 General 22.03 27.99 General Commerce 24.00 20.70 Government 12.74 13.39 Manufacturing 8.15 11.61 Oil & Gas 43.56 41.05 Professional, Scientific and Technical 11.09 12.01 Power & Energy 11.99 10.47 Real Estate 26.98 34.21 Transport & Storage 12.44 6.99 Others4 0.67 0.78 Total 220.08 228.09

Breakdown of Loans and Advances Loan Analysis FY2017 Comments

7%

5% 5%

4%

20%

6%

11%

10%

1%

1%

1%

2%

16%

12%

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Asset Quality

Low Non-Performing Loans and Adequate Coverage

NPL

SECTOR FY2017 (N'bn) % FY2016 (N’bn) % General 3.11 40.18 3.72 31.93 Agriculture 1.45 18.73 0.05 0.43 General Commerce 1.27 16.41 0.97 8.33 Manufacturing 0.51 6.59 0.76 6.52 Finance & Insurance 0.39 5.04 0.03 0.26 Construction 0.35 4.52 2.38 20.43 Power & Energy 0.27 3.49 1.26 10.82 Oil & Gas 0.07 0.90 0.12 1.03 ICT 0.03 1.16 0.24 2.06 Real Estate 0.09 1.16 1.38 11.86 Others 0.18 2.32 1.09 9.36 Total 7.74 100 11.65 100

N'bn

FY2017 N’mn FY2016 N’mn LCY Gross Loans 195,092 208,052 FCY Gross Loans 24,983 21,788 Total 220,076 229,840 LCY NPLs 7,743 10,893 FCY NPLs 0.33 766 Total 7,743 11,650

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Capital Ratio & Funding

Capital Reorganisation (N’million) Funding Sources

2017 FY N’m 2016 FY N’m Share Capital 19,287 19,287 Share Premium 8,698 48,870 Revenue Reserves * 4,090 (39,127) Other Reserves 17,540 19,473 Shareholders’ Fund 49,615 48,503 ▪ The scheme exercise in 2017 helped to resolve the Bank’s negative retained earnings, effectively positioning the balance sheet for more efficiency. ▪ Re-opening the series II of our N50 billion Bond program which should raise our CAR to circa 15% in 2018. ▪ * Difference arose from group and Bank computation of accounts.

The Bank is a commercial bank with national authorization license at 10%.

Capital Adequacy Ratio (N’m) Total Regulatory Capital Total Risk Weighted Assets 174,776 Capital Adequacy Ratio 14.32% 25,032,755 IFRS 9 – Estimated Impact

As reported at 31 December 2017 N’m Estimated adjustment due to adoption of IFRS 9 N’m Estimated adjusted

• pening

balance on January 2018 N’m Retained Earnings * 4,166 1,591 2,575 Regulatory Risk Reserve 5,847 (1,591) 4,256 Total Equity 49,692 49,692

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Gross Earnings Deposits (customer) Total Assets Loans & advances (net)

Stable Performance

10 20 30 40 50 60 70 2013 2014 2015 2016 2017 N'bn 50 100 150 200 250 300 2013 2014 2015 2016 2017 N'bn 50 1 00 1 50 200 250 201 3 201 4 201 5 201 6 201 7 N'bn 50 1 00 1 50 200 250 300 350 400 450 201 3 201 4 201 5 201 6 201 7 N'bn

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Outlook & Strategy

2018 Economic Outlook Strategic Priorities Guidance Appendix 22 23 24 25 3

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2018 Economic Outlook

Global Economy

• Global economy to record continued

expansion. However, threats from protectionist governments and geo- politics pose real risks.

• Continued rate normalisation in the U.S

could lead to a general rate hike across countries.

• Possible

new trade agreements and partnerships as new geo-political alliances emerge.

• Oil prices should be relative stable at

current levels though we could record some volatility in the event of a non- ratification of the Iranian nuclear deal by the U.S alongside geo-political concerns.

Domestic Economy

• The

economy to record continued expansion. However, the political environment could slow down the pace of growth.

• Continued economic reforms expected albeit

at a slow pace, given consideration to the 2019 elections.

• Inflation rate expected to moderate though

with possible upturns.

Domestic Market

• Foreign exchange liquidity to remain
• stable. We believe the strategic building
• f buffers (FX reserve)

would mitigate negative shocks.

• Possible

down trading

• n

equities resulting from elections jitters and shocks from protectionist policy actions.

• Money and Fixed Income market yields

could become elevated.

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Our Strategic Pillars

Improving market share and efficiency by leveraging digital capabilities Innovation Agile Execution Partnerships & Alliances Drive profitable growth in the core Grow market share in Retail & SME Transform Customer Experience Digitize Business and Operations Build a High Performing Team

Drive aggressive growth in commercial banking Grow retail customer base by developing internal capacity and leveraging technology to deliver value adding products Be the Bank of choice in service delivery through differentiated end-to-end experiences across all customer journeys and touch points Optimise the use of technology to drive efficient business

• perations and

processes Transform

• rganization and

culture to enhance staff skills, capabilities and attitudes in

• rder to achieve

business

• bjectives

Enhance Capital & Funding

Raise additional tier 1 & 2 capital to support projected business growth

The Bank is in the final stage of it’s three-pronged strategy

Key Enablers Overall Aspiration

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Guidance

FY 2017 Actual 2017 Guidance 2018 Guidance Customer Deposit Growth (10.19%) 5% 15% Loan Growth (4.92%) 1.5% 10% Non-Interest Income Growth +24.39% 15% 25% Net Interest Margin 6.61% 6.5% - 7% 6.5% - 7% Cost to Income Ratio (%) 89.90% 80% 75% - 80% NPL 3.52% <5% <5% Return on Average Equity 4.60%

• 10%

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Appendix

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History Timeline

Fully Repositioned… in pursuit of growth

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Statement Of Profit Or Loss And Other Comprehensive Income

• (165,850)
• (165,850)

• (165,850)
• (165,850)

• Other comprehensive income for the year

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Statement of Financial Position as at 31 December,2017

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The Board of Directors

• Mr. Babatunde Kasali (wef. May 2017) joined the Board as Chairman, replacing Mr. Adeyinka Asekun .
• Ademola Adebise (wef. January 2017) was appointed Deputy Managing Director.

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Cautionary Note Regarding Forward Looking Statements

• This presentation contains or incorporates by reference “forward-looking statements” regarding the belief or current expectations of Wema

Bank Plc, the Directors and other members of its senior management about the Bank’s businesses and the transactions described in this

• presentation. Generally, words such as ‘‘could’’, ‘‘will’’, ‘‘expect’’, ‘‘intend’’, ‘‘anticipate’’, ‘‘believe’’, ‘‘plan’’, ‘‘seek’’ or similar expressions

identify forward-looking statements.

• These forward-looking statements are not guarantees of future performance. Rather, they are based on current views and assumptions and

involve known and unknown risks, uncertainties and other factors, many of which are outside the control of the Bank and are difficult to predict, that may cause actual results to differ materially from any future results or developments expressed or implied from the forward- looking statements. Such risks and uncertainties include, but are not limited to, regulatory developments, competitive conditions, technological developments and general economic conditions. The Bank assumes no responsibility to update any of the forward looking statements contained in this presentation.

• Any forward-looking statement contained in this presentation, based on past or current trends and/or activities of Wema Bank should not be

taken as a representation that such trends or activities will continue in the future. No statement in this presentation is intended to be a profit forecast or to imply that the earnings of the Bank for the current year or future years will necessarily match or exceed the historical or published earnings of the Bank. Each forward-looking statement speaks only as of the date of the particular statement. Wema Bank expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Wema Bank’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

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Thank You