Wema Bank stock is selling N0.79 per share, Is it a good buy with the company seeing 43.64% growth in profit

Wema bank stock price is dirt cheap and if the stock price remains under 1 Naira, maybe it’s time to check Wema bank’s business model to see if there is any chance of growth in this bank.

Wema Bank offers banking for Nigerians and they charge monthly maintenance fees, bank transfer fees, and they also charge money when they give out loans.

Also, the bank participates in Fixed Income deposits and they make money through that too.

It’s very evident that Nigerian banks make a lot of money from clients, both business and regular bankers.

Wema Bank’s 52 weeks high is 90 and that is a few change away from its current stock price. In the bank’s current earning report, it earned N39.82bn (H1 2021).

Wema Bank financial statement.

The Chief Finance & Strategy Officer, Tunde Mabawonku said “We are delighted to announce the Bank’s H1 2021 results. The performance shows growth in key financial metrics despite the challenging macro-economic environment arising from the covid 19 pandemic.”

§  Wema Bank recorded YoY growth of 149% in profit before tax (PBT) to close the quarter at N3bn;

§  Gross earnings grew by 4.94% y-o-y to ₦82bn in H1 2021 (H1 2020: ₦37.95bn).

§  Net fee and commission income increased by 71.7% y-o-y to ₦40bn in H1 2021(H1 2020: ₦3.1bn), due to 112.6% increase in credit-related fees, 151.5% increase in management fees, 147.7% growth in fees on financial guarantees.

According to Mr. Mabawonku, “The key measure of success for us is growth in customers and customer activity – and we are glad that we are reporting strong growth here.”

§  Total liabilities grew by 4.9% to ₦9bn in H1 2021 (H1 2020: ₦909.2bn), driven by deposits from customers which grew by 0.5% to ₦808.8bn in H1 2021 (FY 2020: ₦804.8bn)

§  Cost of funds declined to 5.3% from 6.4% in H1, 2020. NPL numbers remained below 5% at 3.55% while Capital Adequacy of 13.24% is above the regulatory minimum of 10%.

 Income Statement

§  Gross earnings increased by 4.94% (Y-o-Y) to ₦82bn in H1’2020 from ₦37.95bn in H1 2020

§  Reported Profit before Tax (PBT) and Profit After Tax (PAT) of ₦30bn and ₦3.70bn, an increased by 148.8% in H1’2021 (H1’2020; ₦1.72bn PBT, ₦1.49bn PAT)

§  Net-Interest Income grew by 55.2% to ₦31bn ( H1’2020: ₦11.80bn)

§  Non-Interest Income declined to ₦64bn from ₦8.30bn in H1’2020

Statement of Financial Position

§  Deposit Liabilities up by 0.5% to ₦87bn (FY 2020: ₦804.87bn)

§  Net loans grew by 3.63% to ₦15bn (FY 2020: ₦360.08bn)

§  Total Asset increased by 4.76% to ₦02trn (FY 2020: ₦979.52bn)

Key Ratios

§  ROAE of 14.03% in H1’2021 (H1’2020; 6.25%)

§  ROAA of 0.82% in H1’2021 (H1’2020; 0.42%)

§  55% NPL ratio (H1’2020; 5.58%)

§  CAR is 13.24% (H1’2020; 11.00%)

 Is it time to buy Wema bank stocks at this price per share?