1

2016 HALF YEAR RESULTSPresentation to Analysts and Investors

July 2016

2

section page

1 Business and Operating Highlights 3

2 H1 Financial performance 8

3 Outlook & Strategy 19

1.7 millionCustomer Base

CardControl

EarningsN24.3bn

16.65%

CreditRatings

AlternateChannels

BranchGrowthNational License

Improved Service Rating

Giving customers totalcontrol of their Payment cards

BBB- (national long term rating)

F3 (long term rating)

BBB-(stable)

BBB- (short term rating)

A3 (long term rating)

ATMs 246

POS 5,359

Branches 142

ISMS ISO certified

H1’2016 HIGHLIGHTS

Continued growth recorded on growing the retail space

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4

The following changes in the operating environment impacted performance in H1’2016

Global developments continue to have an

impact on local economy - Brexit

implementation, slowing growth in Asia

Implementation of Fiscal policies have

impacted on money supply and economic

growth

Oil Price & Output and Exchange rate

stability

Regulatory policies and impact on industry

growth

Reduced disposable income and slowing

consumer demand

• Growth in developed economies remains slow; US

numbers however show some resurgence. Brexit

fears impacted on Eurozone exchange rates. Political

stability has improved outlook.

• Slow pace of implementation of fiscal initiatives and

budget spend impacting on economic growth. GDP

has declined in consecutive quarters. Economic

activities expected to pick up in 3rd -4th quarter.

• Oil production continues to be affected by disruptions.

However, price has stabilized in recent months.

Exchange rate has remained volatile. The new rate

regime is still being implemented. Stability expected

by end of Q3.

• The Monetary Policy Committee has decided to

increase MPR given the impact of depreciated

exchange rate on inflation and consumer prices.

Additional requirements on capital adequacy also

expected.

• Inflationary pressure has affected disposable income

and this will invariably impact the level of savings.

Exchange rate impact has also affected discretionary

spending.

Overview of Operating Environment

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5

Updates on 2016 Commitments

OBJECTIVES TASK

Grow the Franchise • Grow Deposit volumes within Retail segment of market through campus storms,

prepaid accounts, partnership with telcos on agency and mobile bankingo (Customer Deposit improved 17% (Y-o-Y) from ₦237.43 billion in the previous period

to ₦277.87 billion in H1 2016; however, there was a decline of 2.49% in comparison to

₦284.98 billion in Dec. 2015.)

• Expand branch network in new markets and additional branches in existing

commercial hubs o Opened new branches in Lagos, PH & Abuja, also opened Lokoja branch

Enhance Asset

Quality and Capital

• Improving capital and funding

o Awaiting final SEC clearance for Tier 2 Capital.

o Consistent repayment of existing Tier 2 capital

Improving efficiency • Improved operational efficiency through better use of technologyo OPEX growth of 2.7% in 2016 below H1 inflation average of circa 9.2%o Net Interest Margins of 6.71%.o Cost to income ratio of 89.8% still below target of c. 75%-80%.

Improve

Organizational

Capability

• Improved service rating across the Bank by iimplementing the Purple Rules (service

delivery) Charter.o Industry rating improved from 19th to 13th, expected to reach top-10 next year

Deploy alternative

channels

• Continued deployment of alternative channels – POS, ATMs and mobile applicationso ATM deployment increased by 17.14%;o POS increased by 17.78%;o Number of active cards increased by 26%

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6

INCOME STATEMENT HIGHLIGHT

GROWTH

16.27%

H1 2016

H1 2015

24.3

20.9

Gross Earnings (₦’bn)

GROWTH

8.33%

H1 2016

H1 2015

1.3

1.2

PBT(₦’bn)

GROWTH

11.11%

H1 2016

H1 2015

1.1

0.99

PAT(₦’bn)

GROWTH

3.42%

H1 2016

H1 2015

12.69

12.27

Operations Income (₦’bn)

INCREASE

2.70%

H1 2016

H1 2015

11.4

11.1

Operations Expense (₦’bn)

INCREASE

37.96%

H1 2016

H1 2015

11.63

8.43

Interest Expense (₦’bn)

DECLINE

135.94%

H1 2016

H1 2015

0.062

(0.171)

Impairment (₦’bn)

GROWTH

20.59%

H1 2016

H1 2015

4.1

3.4

Non-interest Income (₦’bn)

GROWTH

15.43%

H1 2016

H1 2015

20.2

17.5

Interest Income (₦’bn)

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section page

1 Business and Operating Highlights 3

2 H1 Financial performance 8

3 Outlook & Strategy 19

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FINANCIAL HIGHLIGHTS

H1’2016 H1’2015 2015FY

Gross earnings N24.3bn N20.9bn N45.9bn

PBT N1.3bn N1.2bn N3.1bn

PAT N1.1bn N0.99bn N2.3bn

CAR 13.36% 18.90% 15.10%

EPS 6K 5k 6k

Financial

Highlights

Deposits N277.87bn N237.43bn N284.98bn

Loans (net) N172.0bn N134.6bn N185.6bn

Interest income N20.2bn N17.5bn N37.1bn

Non-interest income N4.1bn N3.4bn N8.7bn

Cost-to-income 89.8% 90.4% 88.5%

Cost of fund 6.56% 6.28% 5.70%

Operating expenses N11.4bn N11.1bn N23.4bn

Net interest margin 6.71% 7.72% 5.91%

ROAE (annualised) 4.74% 4.51% 5.18%

ROAA (annualised) 0.56% 0.55% 0.60%

NPL (%) 2.83% 2.90% 2.67%

Loan to deposits 61.90% 56.70% 65.13%

Coverage ratio (%) 101% 96.37% 109%

Liquidity ratio 31.37% 33.20% 33.57%

Revenue

Generation

Operating

Efficiency

Margin &

Asset Quality

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9

IMPROVING EARNINGS TREND

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10

OPERATING EXPENSES

COMMENTS

Operating expenses grew by 2.61% to N11.39

billion. This was due to the impact of higher energy

prices and inflation.

Cost-to-income declined by 0.74% to 89.77%

(H1’2016) compared to 90.44% (H1’2015), as the

Bank remained focused on cost management. The

deliberate and strategic expansion migration of

customers to e-platforms are expected to minimize

cost further.

Net interest margin declined by 13.2% due to

increased cost of funding.

Cost of fund increased by 4.46% (YoY) to 6.56%

(H1’2016) from 6.28% (H1’2015).

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Mitigating external headwinds with internal optimisation

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PROFITABILITY

COMMENTS

In H1’2016, the Bank recorded the following;

Profit before Tax (PBT) increased by 10.26% to N1.29 billion (H1’2016) from N1.17 billion (H1’2015). The increase

resulted in growth from gross earnings, conscious cost management and improvement in fee based income.

Profit after Tax (PAT) increased by 10.62% to N1.10 billion. Effective tax rate for the periods H1’ 2016 & 2015 was at

15%.

We expect subdued growth in earnings, given the present high interest regime.

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DEPOSITS

COMMENTS

As at H1’2016, the Bank recorded the following;

Deposits grew by 17.0% to N277.87 billion

(H1’2016) from N237.43 billion (H1’2015).

Growing retail franchise led to an increase in

retail deposits from 19% (H1’2015) to 33%

(H1’2016) and making up for lost public

sector deposits (TSA).

Going forward, the Bank will continue to grow its

retail deposits resulting in lower funding cost.

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LOAN GROWTH AND ANALYSIS

Loan analysis H1’2016BREAKDOWN OF LOANS AND ADVANCES

COMMENT

* Capital market activities has been included in “others” (H1’2016), as it accounted for less than 3% of the loan book.

* Others comprises of Education, Agriculture, Finance & Insurance, Transportation, Arts & Entertainment, ICT, Water

Supply and Sewage Management and Administration.

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SECTOR H1'2016

(N'bn)

2015FY

(N'bn)

Oil & Gas 32.15 32.24

General 5.67 3.96

Hotel & Leisure 7.23 5.34

Personal and Professional 15.18 14.96

General Commerce 22.4 17.91

Construction 18.52 10.6

Real Estate Activities 17.16 34.93

Manufacturing 12.06 8.89

Government 10.6 10.07

Power and Energy 8.79 3.34

Professional, Scientific and Technical 8.28 11.5

*Others 14.2 19.74

Capital Market - 7.67

Total 172.24 181.15

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NPL by Sectors

Total NPL was N4.87 billion (H2’2016

from N3.98 billion (H1’2015).

A significant share of this relates to

legacy loans

COMMENTS

NPL (N’mn)

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Hotel, Leisure and Hospitality 1,060.10 21.79%

Retail and Consumer Finance 1,729.63 35.54%

Manufacturing 753.76 15.49%

General Commerce 635.99 13.07%

Power and Energy 192.62 3.96%

Oil and Gas 133.14 2.74%

Others 360.83 7.42%

Total 4,866.07 100.00%

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Asset Quality

Efficient Risk Management culture evidenced by low NPL ratio

COMMENTS

Despite the challenging economic environment, the Bank recorded the

following;

NPL ratio at 2.83% remains below the regulatory limit (5%) and

industry average (10%; Q1’2016).

Liquidity ratio is above the regulatory limit of 30% (31.37%;

H1`2016)

Coverage ratio stood at 139%, ensuring adequate provisioning for

known impairments and losses.

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CAPITAL AND LIQUIDITY

COMMENTS

As at H1’2016, the Bank recorded the

following;

CAR was above the regulatory limit of

10% despite the introduction of

regulatory changes.

Liquidity ratio was above the regulatory

limit of 30%.

We note that the Bank’s CAR which was

reported as 15.10% (2015FY) declined

due to regulatory changes by the CBN

and came into effect in 2016. However,

we remain confident that despite the

current macro economic environment, the

Bank remains well positioned weather

negative shocks.

H1 2016 H1’2015 2015FY

Capital Adequacy

Ratio (CAR)

13.36% 18.94% 15.10%

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Risk Management remains at the core of our business model

Impact of decline in Government

Revenue on Credit Risk

Continuing Challenges in the Oil

and Gas Sector

Technology related risks and

operational threats

Exchange Risk and Trade Finance

opportunities

• Expected decline in industry loan quality amidst global low commodity

prices and with government as the major business driver. However,

the Bank is poised to maintain high asset quality through improved

efficiency in loan collections and monitoring, as well as lending to

highly structured and stable companies with good track record.

• The bank has reined in lending to this challenged sector and existing

loans are given more attention and monitoring to arrest deterioration

• Appropriate controls and regular vulnerability/penetration tests being

conducted on our electronic and alternative payment platforms to

protect depositors and the bank against cyber-attacks and

consequent operational losses

• Illiquidity and volatility in the foreign exchange market continue to

pose significant threats to trade businesses and other income lines

• Continuous review of our credit risk appetite and tightening of risk

tolerance limits on sectors/borrowers with negative outlooks

• In response to rising inflationary trends, we will continue to insulate

our interest margins against any rate shocks via strategic gapping of

rate sensitive assets and liabilities

Managing Risk

Increasing Inflation Rate and

Interest Rate

Credit Exposures to Sticky

Economic Sectors

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KEY PERFORMANCE METRICS

H1'2016 2015FY 2014FY 2013FY 2012FY 2011FY

Net Interest Margin (%) 6.71 7.17 8.27 7.01 6.44 6.72

Cost of Funds (%) 6.56 5.65 5.21 5.87 5.42 3.07

Loan to Deposit Ratio (%) 63.02 65.59 57.65 47.02 42.31 40.81

Capital Adequacy Ratio (%) 13.36 15.09 18.22 27.00 -16.00 -13.50

Liquidity Ratio (%) 31.37 33.57 32.80 76.61 64.53 64.00

Cost to Income Ratio (%) 89.8 88.50 87.72 95.15 142.56 140.19

Provision for Loan Loss (N'billion) 3.12 3.79 3.98 9.10 10.00 32.00

Non-Performing Loan Ratio (%) 2.83 2.67 2.49 14.20 13.83 52.97

Return on Average Equity (%) 4.74 6.78 7.27 9.13 -133.58 -37.65

Cost of Risk (%) 1.80 1.70 2.01 5.98 8.08 35.24

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section page

1 Business and Operating Highlights 3

2 H1 Financial performance 8

3 Outlook & Strategy 19

20

H2’2016 OUTLOOK

GLOBAL

ECONOMY

DOMESTIC

ECONOMY

DOMESTIC

MARKETS

• Uncertainty to characterize the global economy.

• E.U and Britain try to find a common ground on the “Brexit”

referendum.

• China might post GDP numbers lower than 6.7%.

• Oil prices to remain volatile but low.

• Uncertainty regarding the extent of budget implementation.

• Economy to record increased activity as the government starts spending

• Diversification into the solid minerals space might pose a greater

challenge than expected given the fragile nature of the global economy.

• Inflation rate expected to moderate - long run adjustments to earlier policy shocks.

• The FX market might be fully liberalised, given the current

inadequacies..

• Equity markets to remain volatile, as investors remain cautious.

• Inflation–adjusted return on money market instruments should

become positive, as inflation rate moderates.

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KEY INITIATIVES

The Bank will continue to focus and grow the retail and commercial segment of its business.

E-BUSINESS

SOLUTION

digital strategies

will continue to be

leveraged upon.

BRANCH

EXPANSION

its optimization

will be pursued.

COST

OPTIMIZATION

alongside

continued process

review will be

ensured.

SERVICE

DELIVERY

remains at the fore

of the bank’s

ethos; creating

superior customer

experience.

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Headlines 2015FY 2016E Comments

Customer Deposit

Growth

10% 7-10% Deposit growth expected to remain

double digits; largely from a realignment

of volumes from institutional to retail and

commercial sources.

Retail penetration –

(Personal accounts -

share of deposit)

14% 15-20% Improved retail volumes from campus

storms, prepaid accounts, partnership

with telcos on agency and mobile

banking.

Loan Growth 25% 5% Slow and cautious loan growth; will pick

up in H2, 2016.

Growth in Non-Interest

Income

10% 15% Increased fee income driven by

transaction turnover and retail volumes.

Cost-to-Income Ratio 88.5% 88.5% Impact of further process improvements

and growth in top line revenue.

Net Interest Margin 7.17% 6.5-7.0% Impact of higher cost of funds.

GUIDANCE

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Thank You

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2424

25

• Two Independent Directors

• Varied experience from Banking, Industry, Law and other relevant sectors

• Implementing strong governance and risk controls

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BOARD OF DIRECTORS

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Aminu Kano, Abuja Lekki-Ajah, Lagos Trans-Amadi, Rivers

Awolowo, Lagos Ifo, Ogun Ado-Badore, Lagos Admiralty, Lekki, Lagos

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NEW BRANCH DEVELOPMENTS

27

Cautionary Note Regarding Forward Looking Statements

• This presentation contains or incorporates by reference “forward-looking statements” regarding the belief or current expectations of

Wema Bank Plc, the Directors and other members of its senior management about the Bank’s businesses and the transactions

described in this presentation. Generally, words such as ‘‘could’’, ‘‘will’’, ‘‘expect’’, ‘‘intend’’, ‘‘anticipate’’, ‘‘believe’’, ‘‘plan’’, ‘‘seek’’

or similar expressions identify forward-looking statements.

• These forward-looking statements are not guarantees of future performance. Rather, they are based on current views and

assumptions and involve known and unknown risks, uncertainties and other factors, many of which are outside the control of the

Bank and are difficult to predict, that may cause actual results to differ materially from any future results or developments

expressed or implied from the forward-looking statements. Such risks and uncertainties include, but are not limited to, regulatory

developments, competitive conditions, technological developments and general economic conditions. The Bank assumes no

responsibility to update any of the forward looking statements contained in this presentation.

• Any forward-looking statement contained in this presentation, based on past or current trends and/or activities of Wema Bank

should not be taken as a representation that such trends or activities will continue in the future. No statement in this presentation is

intended to be a profit forecast or to imply that the earnings of the Bank for the current year or future years will necessarily match

or exceed the historical or published earnings of the Bank. Each forward-looking statement speaks only as of the date of the

particular statement. Wema Bank expressly disclaims any obligation or undertaking to release publicly any updates or revisions to

any forward-looking statements contained herein to reflect any change in Wema Bank’s expectations with regard thereto or any

change in events, conditions or circumstances on which any such statement is based.