The board of directors of Wema Bank Plc, one of the surviving old generation banks in Nigeria, frmally got approval from shareholders to go ahead with their planned capital reduction. The request was granted today Friday October 20, 2017, at an Extra-Ordinary Meeting (EGM) in Lagos.
The approved scheme of capital reduction means that the bank will reduce the share premium account from N48,870,107,000 to N8,698,231,000 by transferring the sum of N40,171,876,000 to the capital reduction account. Following the endorsement of the Capital Reduction plan, the next step is for the bank to approach the Federal High Court for approval on the resolutions passed by the Shareholders.
The approval is expected to be received within the next few weeks, which will lead to the passage of all accounting entries before the 2017 financial year end. Addressing shareholders concerns if it will affects their holdings in the bank; The Managing Director Segun Oleketuyi explained that no shareholders holding will be reduced as a result of the capital reduction exercise.
But rather it will help to eliminate the negative balance on the banks revenue reserves account as at December 31, 2016 and enhance the bank capacity to declare and pay dividend to shareholders. On his part the chairman of the bank Babatunde Kasali noted that the capital reduction exercise will lead to an efficient balance sheet, as profit in subsequent years will be capitalized.
According to Kasali “I have never been more convinced that our future is bright. Having successfully recapitalized the bank and put in place strategies and structures to drive growth, including securing a national banking license. I am confident that we will maximize value for all shareholders in the not too distant years”
However, Wema Bank in the past reported significant operating losses due to the high incidence of non-performing loans and the write off of legacy loans, which culminated in the accretion of negative balance in the banks revenue, reserves account. As at December 31, 2016, the negative balance in the bank’s revenue account stood at N39,137,546,000.
Meanwhile the bank was able to improve on its third quarter financial performance for the period ended September 30, 2017. The bank gross earning went up by 16.79 percent from N37.89 billion in third quarter of 2016 to N45.38 billion in third quarter of 2017.
According to the bank Chief Financial Officer Tunde Mabawanku, this was supported by increased contribution from non-interest income which rose by 35.74 percent from N5.96 billion in third quarter 2016 to N8.09 billion in third quarter 2017.
The bank noted that high interest rate environment continued to impact earnings, as interest expense increased year on year. In spite of this, the Bank recorded a growth in profit before tax by 20.81 percent to N1.80 billion, while profit after tax to N1.53 billion.
On the bank growth strategy, Oleketuyi said it’s geared towards increased partnerships and branch openings. “To this end, I am pleased to announce the opening and reopening of our branches in Lekki-Ikate and Bauchi respectively. We expect further additions to our existing footprint in Aba, Enugu, Warri, Sangotedo (Lekki), Alaba and Ogba in fourth quarter of 2017 and during first quarter of 2018”.