The planned recapitalisation of Wema Bank Plc received a major boost at the weekend with the approval of a N40 billion rights issue by the authorities at the Nigerian Exchange (NGX).
Wema Bank Plc plans to raise about N40 billion in new equity funds from its existing shareholders as part of efforts to strengthen its balance sheet.
The oldest surviving indigenous bank plans to float a rights issue, in a major bid to increase its equity base by a third.
Wema Bank will issue 8.572 billion ordinary shares of 50 kobo each at N4.66 per share to all shareholders on its register as at close of business on Thursday, September 28, 2023.The rights will be pre-allotted on the basis of two new ordinary shares for every three shares held as at the September 28, 2023.
Regulatory documents obtained by The Nation at the weekend indicated that NGX Regulation (NGX RegCo)- the self-regulatory organisation (SRO) that regulates activities at the NGX, has approved the rights issue.
Extant rules mandate Wema Bank to apply for and secure approval of the NGX prior to issuance of new shares, including rights, public offers and private placement.
The approval by the NGX paves the way for Wema Bank to list the shares to be issued under the rights issue as additional shares at the NGX.
The addition of the new equity funds will raise Wema Bank’s equity base to about N130 billion, as against N89.28 billion recorded in half year ended June 30, 2023.
Key extracts of the interim report and accounts of Wema Bank for the six-month period ended June 30, 2023 showed considerable expansion in the operations of the bank. Gross earnings rose from N60.30 billion in first half 2022 to N89.63 billion in first half 2023. Interest income had grown from N50.45 billion to N76.65 billion. Profit before tax stood at N12.06 billion in first half 2023, as against N6.10 billion recorded in comparable period of 2022. After taxes, net profit doubled from N5.28 billion to N10.49 billion. Earnings per share thus increased from 82.0 kobo in first half 2022 to 163.2 kobo in first half 2023.
The balance sheet size of the bank also expanded considerably with total assets rising to N1.88 trillion by June 2023 as against N1.442 trillion recorded by December 31, 2022. Customer deposits rose from N1.17 trillion to N1.39 trillion. Total liabilities increased from N1.36 trillion to N1.79 trillion. While the bank’s share capital remained unchanged at N8.698 billion, shareholders’ funds improved from N82.54 billion by December 2022 to N89.28 billion by June 2023.
Wema Bank had last year undertook a massive share reconstruction exercise with the delisting of the old issued shares and relisting of the new post-reconstruction shares.
The bank had secured shareholders and regulatory approvals to undertake a share reconstruction as part of a new recapitalisation programme. Under the share reconstruction, the bank’s issued and fully paid shares were reconstructed from about 38.575 billion ordinary shares of 50 Kobo each to 12.858 billion ordinary shares of 50 Kobo each on the basis of exchange ratio of one new post-reconstruction share for every three old pre-reconstruction shares held.
With the completion of the exchange process, the entire old share capital was delisted from the NGX and the new paid up share capital comprising 12.858 billion ordinary shares was listed at N2.76 per share.
Wema Bank had then indicated plans to raise new equity and debt capital, and the share reconstruction was meant to create headroom for new issuances.
