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Wema Bank Targets Equity Sale, N20b Bond Deal

By Modupe Gbadeyanka

The management of Wema Bank Plc has expressed its intention to approach the bond market to raise about N20 billion in the middle of this year with the process kicking off next month.

According to Reuters, this exercise is scheduled for July and it is partly to pay a dividend this year for the first time in a decade, paving the way for an equity sale next year.

Chief Financial Officer of the mid-tier bank, Mr Tunde Mabawonku, disclosed that Wema Bank was focused on selling debt this year after it raised N6.2 billion in its first tranche of a N50 billion debt programme.

“We would want to pay dividends first to existing shareholders before raising equity in early 2019. It could be a combination of rights issues and private placement,” Mr Mabawonku told Reuters by telephone.

The debt issue would help Wema boost its capital ratio above its internal guidance of 15 percent, from 14.3 percent, the bank said earlier. The regulatory minimum capital ratio for Wema and its peers is 10 percent.

In July, Wema Bank said it could issue debt assuming government bond yields dropped below 18 percent with falling inflation. Yields are now at around 14 percent.

It also talked about raising equity in 2018 to bolster its capital ratio and cut its operating costs as its new digital strategy gains traction.

Nigerian firms are tapping debt markets this year after the government redeemed some treasury bills, instead of rolling them over, to bring down yields. Analysts expect the central bank to cut interest rates this year as inflation slows.

Nigeria’s biggest and oldest leasing firm C&I Leasing plans to raise N7 billion in a bond issue next month.

Wema aims to revive loan growth this year by focusing on small firms after its lending dropped by 4.9 percent last year – despite the bank’s target of 1.5 percent growth. It plans to increase lending by 10 percent in 2018.

The bank said it recently obtained a $15 million loan from the Africa Development Bank and another $20 million from the Islamic Development Bank to boost lending.

Wema Bank’s 2017 pre-tax profit fell to N3billion from N3.25 billion a year earlier.

Its shares have climbed 69 percent this year, part of a broader rally in banking stocks as oil prices rose and Nigeria exited recession. They closed down 2.3 percent on Wednesday at 92 kobo per share.

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Modupe Gbadeyanka is a fast-rising journalist with Business Post Nigeria. Her passion for journalism is amazing. She is willing to learn more with a view to becoming one of the best pen-pushers in Nigeria. Her role models are the duo of CNN's Richard Quest and Christiane Amanpour.

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