Fitch Ratings has upgraded Wema Bank PLC’s Long-Term Issuer Default Rating (IDR) to ‘B’ from ‘B-‘ and its Viability Rating (VR) to ‘b’ from ‘b-‘.
Alongside these stable outlooks, Fitch also upgraded Wema’s National Long-Term Rating to ‘A(nga)’ from ‘A-(nga)’.
The rating agency stated that the upgrade reflects the bank’s stronger capitalization following a successful capital raise in 2025, alongside improved profitability, which should help absorb the impact of robust asset growth on its capitalization.
Wema’s issuer default ratings are driven by its standalone creditworthiness, as reflected in its ‘b’ VR.
This rating takes into account the concentration of its operations in Nigeria, its small but growing franchise and balance sheet, and its high credit concentrations.
According to Fitch, these challenges are balanced by reasonable asset quality and capitalization, sound profitability, and an improved deposit structure.
The rating note acknowledged that the Nigerian naira has stabilized, the banking sector’s underlying profitability and foreign-currency (FC) liquidity have improved, and various capital-raising exercises have boosted the overall capitalization of Nigerian banks.
However, inflation remains high, regulatory intervention continues to be burdensome, and the expiry of forbearance has increased impaired loan ratios (Stage 3 loans under IFRS 9) as well as prudential provisions.
Fitch observed that Wema Bank holds a relatively small market share, representing 3 percent of domestic banking system assets at the end of 2025, which constrains its revenue generation.
However, its leading position in digital banking has effectively reduced its reliance on expensive term deposits.
The bank’s single-obligor concentration remains high relative to Fitch Core Capital (FCC), despite a notable reduction since 2024. At the end of 2025, the bank’s top 20 funded exposures accounted for 31 percent of its gross loans.
On a positive note, Wema’s oil and gas exposure, which settled at 18.8 percent of total loans, remains low by domestic industry standards. However, the bank’s risk profile remains highly correlated with the sovereign rating.
The bank’s exposure to the Nigerian sovereign through securities and Central Bank of Nigeria (CBN) cash reserves was very high at the end of the first quarter of 2026.
Despite this, Wema’s impaired loans ratio was reduced to 4.2 percent at the end of Q1 2026, down from 4.9 percent at year-end 2025. This improvement was driven by a 7 billion naira decline in Stage 3 loans and a 7 percent growth in its overall loan portfolio.
The Stage 2 loans ratio increased to 1.5 percent in Q1 2026 but remains well below the sector average. The specific coverage of Stage 3 loans is relatively low, reflecting a reliance on collateral and strong recovery prospects.
The bank’s operating profit to risk-weighted assets (RWAs) increased to a solid 11.2 percent in 2025, up from 8.3 percent in 2024, propelled by stronger net interest income, which has more than doubled since 2024. Its net interest margin reached 12.3 percent in 2025, up from 8.8 percent in 2024, comparing favorably with several larger peers. Additionally, operating profit to average total assets jumped to 5.3 percent in 2025 from 3.5 percent in 2024.
The bank’s FCC ratio stood at a high 30 percent at the end of Q1 2026, up from 28 percent in 2025 and 18.7 percent in 2024. Fitch attributed the sharp increase from 2024 to a 200 billion naira rights issue, which included a 150 billion naira capital raise completed in September 2025.
“We expect the bank’s FCC ratio to decline to between 25 percent and 28 percent by the end of 2026 due to strong loan growth, but this still remains commensurate with the bank’s risk profile,” the rating agency noted.
Wema’s regulatory capital adequacy ratio (CAR) was 24.7 percent at the end of the first quarter of 2026, which is well above the regulatory minimum requirement of 10 percent.
The bank’s reliance on expensive term deposits declined sharply to just 12 percent of total deposits at the end of Q1 2026, down from 46 percent at the end of 2022.
Deposit concentration has also seen a decline, with the 20 largest deposits representing 19 percent of total customer deposits at the end of 2025, compared to 52 percent at the end of 2022.
Foreign currency liquidity coverage remains healthy, with foreign currency liquid assets covering 86 percent of foreign currency customer deposits at the end of 2025.