Wema Bank Vs Zenith Bank: Zenith Bank in clear lead

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By Folakemi Emem-Akpan

In terms of size, Zenith Bank is easily the bigger of the two banks. It has a more substantial balance sheet than Wema Bank does, with a heftier assets base, liabilities and deposits. It is also the bigger of the two when it comes to revenue generation and profit retention. For example, for the 2016 financial year, Zenith Bank grossed N507.9 billion, had a pre-tax profit of N156.7 billion, and deployed assets worth N4.74 trillion. On the other hand, Wema Bank grossed N53.8 billion, had a pre-tax profit of N3.3 billion, and deployed assets worth N424 billion.

While a bigger turnover size does not necessarily translate to better productivity, Zenith Bank outperformed its peer in terms of profitability for the 2016 financial year. It took the lead in all eight of the profitability ratios examined, while Wema Bank did not lead in any.

Growth rates

For the 2016 financial year, Wema Bank grew revenue at an infinitesimally slower rate than Zenith Bank did. Turnover growth rate was 17.2  per cent and shows that the bank made more revenue in 2016 than it did in 2015. The result was however slightly lower than that which Zenith Bank recorded.  Zenith Bank’s turnover growth rate for the period under review was 17.4 per cent, also better than the 7.2 per cent growth rate  of the preceding year.

ROA and ROE

For the 2016 year, Zenith Bank was the winner in terms of return on assets (ROA) and return on equity (ROE). ROA for the year was 3.3 per cent, up from 3.1 per cent in the prior year. This means that of every N100 worth of assets deployed by Zenith Bank, N3.30 accrued to it as pre-tax profit while Wema Bank was able to record a lower 80 kobo pre-tax profit from every N100 worth of assets employed.

As regards ROE, Zenith Bank’s ROE was 18.4 per cent, not just higher than the 17.8 per cent recorded in the erstwhile year but also much better than the 5.2 per cent Wema Bank recorded for the same period under review.

Pre-tax profit margin

For the 2016 financial year, pre-tax profit margin (which measures a company’s ability to squeeze as much profit as is possible from turnover) for Zenith Bank was 30.9 per cent, higher than Wema Bank’s own which stood at 10 per cent. This means that for every N100 income earned by Zenith Bank in 2016, an extremely high N30.90 accrued to it as profit while a lower N10.00  pre-tax profit accrued to Wema Bank for every N100 income earned.

Net interest margin

Net interest margin is one of the true measures of a bank’s effectiveness, as it measures effectiveness in its core banking operations. For the year, Zenith Bank led the two banks, recording a net interest margin of 62.5 per cent, as compared to Wema Bank’s 41.7 per cent result.

Classified loans

Proportion of classified loans was another ratio in which Zenith Bank led the two banks in 2016. For the year, the portion of its entire loan stock that became classified as non-performing stood at 3.0 per cent. This result was better and lower than Wema Bank’s result for 2016. For Wema Bank, proportion of classified loans for 2016 was 5.07  per cent, up from and worse than 2.67 per cent in 2015.

Capital adequacy

Zenith Bank recorded a capital adequacy of 23.0 per cent, better than Wema Bank’s 15.0 percent result. What this means is that Zenith Bank is better equipped than Wema Bank in the banks’ primary business of giving out loans. It is also worthy of note that while Zenith Bank’s result was higher than the 16 per cent rate mandated for Systemically Important Banks, Wema Bank’s was lower.

Two-year averages

In terms of averages, Zenith Bank also generally performed better than Wema Bank did, coming out on top in seven of the ratios.

 

 

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