Scorecard: Between Unity & Wema Bank, where would you place your bet?


The audited 2015 Q3 results of both Wema Bank Plc and Unity Bank Plc, two of Nigeria’s smallest banks by market size and capitalisation show moderate improvement from the preceding first two quarter figures in 2015.

However, placing both financial institutions side by side showed that they are in a very keen competition. New Mail took a cursory look at the business activities of both banks in the first nine month of 2015 using key performance ratios and narrated its findings below.

Both Unity and Wema Bank Plc are operating alongside Zenith Bank, GT Bank, FBN Holding, StanbicIBTC etc in the financial services sector of the Nigerian stock Exchange. Going by market and balance sheet size, Unity and Wema Bank can stand side by side.

Unity Bank Plc
Unity Bank Plc

Assets Turnover
Wema Bank closed the Q3 of 2015 with gross earnings of N32.6 billion, which is an increase of three percent. The Bank recorded a 0.4 percent decrease in asset. Similarly, Unity Bank grew its earnings by 2.2 percent to N49.2 billion during the year which is below the 6.5 percent increase in total assets.

Unity Bank is therefore ahead on asset turnover at 11 kobo compared to Wema Bank’s nine kobo in the review period. This means assets yielded more revenue at 11 kobo for Unity Bank than Wema bank ’s nine kobo.

This also implies that if the management of Unity Bank worked with the quantity of assets at the disposal of Wema bank’s management, it would have generated gross income in the region of N38.6 billion as against the N32.6 billion posted by Wema Bank.

UnityWema Gross Earnings Performance chat
UnityWema Gross Earnings Performance chat

Earnings Growth
Over the two comparable Q3 reports, Wema Bank has grown gross earnings by 2.9 percent beating Unity bank’s quarter on quarter revenue growth of 2.2 percent. Interest income amounted to N35.2 billion for Unity Bank third quarter 2015 and accounted for 71.5 percent of gross earnings.

For Wema Bank, interest income grew by 1.7 percent to N26.6 billion in the review period and represents 81.6 percent of gross income. Unity Bank generated an average of 15 kobo of interest income per naira of its portfolio of loans and investments compared to Wema Bank’s 18 kobo.

This means that if Wema Bank had the volume of loan and advances of Unity Bank, it would have generated interest income in the region of N43.3 billion against N35.2 billion achieved by Unity Bank.

In terms of ability to convert revenue into profit, Unity bank is well ahead of Wema Bank. Unity Bank interest expenses rose far ahead of interest income by as much as 9.4 percent to N14.3 billion in the Q3 and claimed 41 percent of interest income and 29.1 percent of gross earnings.

UnityWema Net Profit Performance Chart
UnityWema Net Profit Performance Chart

For Wema Bank , interest expenses also grew above interest income at 9.6 percent to N13.3 billion, claiming 50 percent of interest income and 41 percent of gross earnings. Unity Bank therefore paid a lower average interest expense on customers’ deposits in the year at 5.75 percent compared with Wema Bank’s average interest expense of six percent.

Assets Quality
Unity Bank drop more deposit base ahead of Wema bank at -8.8 percent to N248.8 billion compared to Wema bank’s -5.5 percent decline to N221.7 billion in the first nine months of the year 2015.

Unity Bank increased loans and advances by 14.1 percent to N146.6 billion, beating Wema Bank’s growth rate of 9.6 percent to N240.33 billion. Wema Bank however carries cash and balance that almost double the size of Unity Bank’s at about N29.3 billion compared to N18.9 billion posted by Unity Bank.

Unity Bank deployed 96.7 percent of deposits to loans and advances, which is a comparatively more aggressive move than Wema Bank’s 66.1 percent. Total operating expenses dropped marginally at 0.2 percent for Unity Bank, amounting to N10.5 billion.

In the case of Wema Bank, total operating expenses declined by 0.3 percent to N7.5billion. Unity Bank increased its cost margin to 80 percent compared to Wema Bank’s cost margin of 96 percent. This means Unity Bank used 80 kobo to generate a naira of its gross income in Q3 2015 while Wema Bank spent 96 kobo for a naira.

UnityWema: Cash and Balance Sheet comparism chat
UnityWema: Cash and Balance Sheet comparism chat

Profit Margin
The increase in cost margins impacted on profit margin and rates of return between both banks. Net profit margin amounted to 20 percent for Unity Bank in third quarter 2015, a figure ahead of Wema Bank’s net profit margin of four percent.
It means Unity Bank converted 20 kobo into net profit for its shareholders while Wema Bank converted just four kobo to profit in the same period. This could imply that if Unity bank had Wema Bank’s earnings volume, it would have generated a net profit of about N6.5 billion as against N1.2 billion of Wema Bank’s profit for the period.

Unity Bank is also ahead on return on assets at 2.24 percent as against Wema Bank’s 0.37 percent. Unity Bank also ranks higher on earnings per share at 19.92 kobo compare with Wema Bank at four kobo. On the other hand, Unity Bank beats Wema Bank on return on equity at 11.45 percent as against 2.88 posted by Wema Bank.

Unity Bank Wema Chart
Unity Bank Wema Chart

Future Outlook
New Mail analysts observes that both banks have strong capital base to lift their performance to a better level in years ahead.

For instance, Wema Bank Plc recently changed its status from a regional bank to a national authorized commercial bank. The approval to change from a Commercial Bank with a regional scope to a national scope was granted by the Central Bank of Nigeria (CBN) according to a statement from the Bank.

The change in status will broaden the business scope of the bank as it will now be able to operate in every part of the country. It is expected that the new status will boost its bottom-line in the years ahead.

Also, Wema Bank recently raised N8.15 billion through the FMDQ Securities Exchange through the issuance of Commercial Papers, this is also a sure indice to suggest that things are indeed looking up for the bank.

Analysts at New Mail promise to monitor both banks’ performance as the year runs and bring you comprehensive report on their audited results for year ending December 2015.

In the interim, it is our opinion that there is possibility that Unity Bank Plc will maintains its slight edge over Wema Bank Plc in the financial financial results.

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