- Wema eyes bond sale this year, equity next year
- Plans to pay first dividend in 10-years this year
- Shares have risen 69 percent so far this year (Updates with CFO comments)
By Chijioke Ohuocha
LAGOS, April 18 – Wema Bank plans to raise 20 billion naira from the bond market by July and aims to pay a dividend this year for the first time in a decade, paving the way for an equity sale next year, its chief financial officer said.
Tunde Mabawonku said the mid-tier bank was focused on selling debt this year after it raised 6.2 billion naira in its first tranche of a 50 billion naira ($159 million) debt programme. He said the bank would start the process next month.
“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,” 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 7 billion naira 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’s 2017 pretax profit fell to 3.0 billion naira from 3.25 billion naira 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 0.92 naira.
$1 = 314.50 naira Reporting by Chijioke Ohuocha; Editing by Adrian Croft, Susan Fenton and Jane Merriman