Ecobank looks to sustainable long-term performance, records $205m PBT

With a promise for a sustainable long-term performance, Ecobank Group yesterday announced its financial result for 2015, posting profit before tax (PBT) of $205 million on revenue of $2.1 billion for the year ended December 31, 2015, compared with $520 million and $2.3 billion for 2014, respectively.

The group’s profit after tax (pat) was $107 million, a decrease of $287 million, or 73 percent, from the prior year. Profit attributable to owners of Ecobank Transnational Incorporated (ETI) was $66 million, a decrease of $272 million, or 81 percent. In constant dollars, PAT was $136 million, down by 66 percent, primarily driven by higher impairments.

Net revenue of the group stood at $2.1 billion, a decrease of $174 million, or 8 percent, from the prior year. Revenues were impacted by the significant depreciation of the naira, CFA franc and cedi, which together accounts for more than 85 percent of Group-wide revenues, against the dollar. In constant dollars, revenue increased 9 percent to $2.5 billion.

Its Net interest income was $1.1 billion, increasing by $36 million, or 3 percent, reflecting growth in investment securities and lower average yield on interest-bearing liabilities. In constant dollars, net interest income increased 24 percent to $1.4 billion.

Impairment losses were $532 million, an increase of $265 million, or 99 percent, from the prior year. The increase in impairment losses was due to a comprehensive review of our portfolio and processes across the Group, during the fourth quarter of the year. Net impairment losses for loans and advances were $427 million, up by $198 million, or 86 percent. Impairment losses on other financial assets increased $67 million, or 179 percent, to $105 million. The annualized cost-of-risk was 3.48 percent compared with 1.86 percent in the prior year.

Commenting on the result, group chief executive officer said, “Our 2015 results were disappointing. We did a comprehensive review of our processes and portfolio leading to elevated impairment charges in the fourth quarter. Impairment losses were significantly increased by $265 million to $532 million. This was unacceptable to us, and we have taken drastic steps to address asset quality and strengthen our processes.

“Also, we were faced with a difficult operating environment due to the slowdown in economic growth across Africa, as a result of lower commodity prices. These developments affected both households and businesses. Our cost-income ratio was 64.9 percent, flat compared to prior year.”

“Our diversified business model is a source of competitive strength and stability. In the last few months, management and I, have worked to revise our strategy and operating model around our customers, our products, and our geographical footprint. We have made some management changes and developed a strategic plan aimed at ensuring we generate sustainable long-term performance”, Ayeyemi added.

Ecobank Nigeria profit after tax was $57 million, down by $161 million, or 74 percent, from the prior year. Its Net revenue was $876 million, down by $113 million, or 11 percent, primarily driven by adverse currency movements. In constant dollars, net revenue was up by $56 million, or 6%, to $1.0 billion.

Net interest income was $526 million, an increase of $30 million, or 6%, reflecting growth in investment securities – treasury bills and bonds, and a reduction in interbank borrowing. Non-interest revenue was $350 million, down by $143 million, or 29 percent. The decrease reflected foreign exchange scarcity challenges, lower fees from COT, reduced credit related fees due to lower loan balances, and caps on outbound remittances.