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Wema Bank plans N20bn bond issue this month

By on August 3, 2016

Wema Bank Plc, which aims to expand its branch network this year, is planning to issue N20bn ($63m) in bond this month, its Chief Finance Officer, Mr. Tunde Mabawonku, has said.

The bank is issuing local currency bonds after scrapping plans last year to issue a $100m seven-year dollar bond because of currency risks.

“We expect to open in a couple of weeks. We are awaiting final regulatory approvals and we expect to conclude the process this quarter,” Mabawonku told Reuters by telephone.

He said Wema, which won regulatory approval last year to switch from a regional to a national bank, was planning to reopen across the country branches, which it had closed to become a regional player.

Wema obtained shareholders’ approval in May to issue bonds or preference shares this year to raise N20bn in the first tranche of a N50bn programme, but market conditions then deteriorated.

The naira has dropped by 40 per cent since June, when the Central Bank of Nigeria ditched its 16-month-old peg of N197/dollar in a bid to lure back foreign investors who had fled after a plunge in the price of oil, the nation’s economic mainstay.

Mabawonku said the mid-tier lender was watching debt markets closely for rates, adding that it had a target break-even rate at which it wanted to issue the notes.

The Federal Government’s one-year treasury bill is offering around 18 per cent yield, according to traders. Yields on fixed income securities have been rising in recent months with the CBN mopping up naira liquidity to lure back foreigners.

The CBN’s Monetary Policy Committee had last week Tuesday lifed interest rates by 200 basis points from 12 per cent to 14 per cent to help fight inflation, which hit a 10-year high of 16.5 per cent in June.

“Yes the economy has slowed but there are still business opportunities,” Mabawonku said.

He added, “We are opening locations in areas where we are not present and we see that the population is under-banked.”

Wema, which has more than 100 branches, has also said it is aiming to buy a mid-sized commercial lender to build scale.

Last week, Wema reported an 11 per cent rise in its half-year pre-tax profit to N1.30bn.

 

[Punch]