Ecobank surmount headwinds with 15 percent profit rise

Pan-African lender Ecobank Transnational Inc. 15 percent profit growth in the third quarter of the year has surmounted macro headwinds fretting most firms in Africa largest economy.

Eco bank is the only lender operating in Nigeria that has been consistently recording earnings growth based on data compiled by BusinessDay’s

The impressive result means the Togolese bank’s deposit and loan growth has culminated in improved top and bottom line earnings while its management continues to pursue the strategic objective of adding value to shareholders’ value.

For the first nine months through September 2015, Ecobank’s net income increased to N60.41 billion as against N52.49 billion the preceding year.Gross earnings improved by 18 percent to N411.83 billion as the lender continues to diversify its revenue base despite weak earnings seasons by most firms in the third quarter.

The slow economic growth as a result of the drop in oil price, macroeconomic challenges and the political and policy uncertainties that shaped direction of the economy so far in 2015 culminated in weak performance by quoted companies.

The inhibiting operating environment took a toll on banks profitability when compared with last year’s performance. Also, the rising loan loss and Non Performing Loans (NPL) stoked by high exposure to the public sector and oil and gas.

To further exacerbate the anemic position of Nigeria lender is the rising loan loss expense stoked by huge write offs, which is further drain on efficiency and profitability positions.

Again within the banking space, the central bank has imposed foreign exchange restrictions, a policy analysts say is hurting profits of banks and also causing liquidity squeeze. The Abuja based bank through its MPC has clutch to the 13 percent interest rate.

Economic growth (real GDP growth) slowed to a 10 year low of 2.4 percent in Q2, 2015 while inflation has risen to 9.4 percent on foreign exchange constrain and weak fiscal spending.

Despite the aforementioned doldrums, Ecobank recorded a 24 percent increase in interest income to N256.72 billion while net interest income moved by 25 percent to N165.60 billion in the period under review.

The growth in interest income is attributable to increase in interest income on loans and advances.

Ecobank sustained balance sheet strengthening and growth with strong liquidity as total assets spiked by 21 percent to N4.65 trillion in 2015 from N3.83 trillion last year. Loans and advances jumped by 16 percent to N2.29 trillion. Deposits to customers jumped by 16 percent to N3.21 trillion.

“We had decent loan growth in our Corporate Bank business. And despite a decrease in Domestic Bank deposits, we increased the share of stable deposits within the deposit mix. With revenue growth challenged in the current environment, we would focus more on cost efficiency and invest in key initiatives in our Transaction banking, Cards, and eBanking businesses,” said Ade Ayeyemi, Group CEO of the bank.

“Also, we are simplifying our operating model to better serve our customers and position the company for long term success,” said Ayeyemi

The bank’s share price closed at N17.60 on the floor of the exchange while market capitalization was N424.161 billion.

OUR REPORTER