How acquisition helps Ecobank’s growth in 2012

Effect of the Central Bank of Nigeria’s (CBN) banking reforms that resulted in mergers and acquisition of some banks is now emerging as the affected banks are riding on the part of growth, as seen in the 2012 financial results.

For instance, Ecobank Transnational Incorporated, parent company of the pan-African banking group, has presented its audited financial result for the 12 months ended December 31, 2012, which shows a profit after tax of $287 million, up 39 percent from the previous year.

The bank’s balance sheet growth reveals that it records total assets of $20 billion, up $2.8 billion, or 16 percent from previous year.

Its successful integration of landmark acquisitions in Ghana and Nigeria, resulting in significantly increased market share in both countries in terms of total assets (#1 in Ghana, #6 in Nigeria), including investments of $74 million in one-off restructuring costs that will enable it benefit fully from the enlarged platform, the management states.

According to the bank’s strong performance in the fourth quarter, with customer loans growing by 10 percent, non-interest revenue up by 62 percent compared with third quarter 2012 run-rate, boosted by a $72.4 million refund from the Asset Management Corporation of Nigeria (AMCON) in respect of the Oceanic Bank acquisition.

Commenting on the result, Thierry Tanoh, group chief executive office, says: “These very pleasing results reflect the successful integration of our two major acquisitions in Ghana and Nigeria, strong demand for retail banking services across our 33 country platform, increasing trade and commercial flows between Middle Africa and the rest of the world, together with a strong performance of our dedicated staff.”

Ecobank Nigeria reported profit before tax for 2012 of $64.1 million, an increase of $25 million, or 65 percent, compared with 2011 primarily driven by revenue growth from domestic bank loans, trading activity and the sale of available-for-sale securities.

Further more, it revenue increased by $382 million, or 106 percent to $743million from the prior year period, primarily due to a128 percent growth in net interest income and 85 percent growth in non-interest revenue. The increase in net interest income was largely driven by the full year contribution of Oceanic Bank (compared to only two months in 2011) and modest volume growth. The increase in non-interest revenue was primarily attributable to an 87 percent growth in net fees and commissions and a 186 percent growth in net trading income. The growth in net fees and commissions was driven by higher cash management fees, credit related fees and a 374 percent growth in card management fees. Net trading income benefited from a growth of $61.1 million from interest rate instruments and FX transaction gains.

Operating expenses were $614 million, an increase of $321 million, or 110 percent from the prior year period, primarily driven by higher staff expenses and one-off costs related to its acquisition of Oceanic Bank.

These costs, largely related to restructuring costs and professional fees, are not expected to recur in 2013.

Similarly, Sterling Bank plc, audited report, prepared in line with the International Financial Reporting Standards (IFRS) and approved by all financial services regulatory agencies, has been presented to the investing public at the Nigerian Stock Exchange (NSE).

Key extracts of the report showed that the bank consolidated its growth and seamlessly harnessed the synergies from its recent acquisition with both outward and underlying performance indicators indicating marked improvements.

While gross earnings grew by 51 percent, profit from core operations (excluding the effect of one-off disposal of subsidiaries in 2011) increased by 108 percent; while the proportion of non-performing loans to total loans portfolio improved considerably to 3.8 percent as against 4.8 percent in the previous year. Net interest margin improved from 5 percent to 5.2 percent, underlying increasing profitability of the bank’s core banking operations in spite of the tough operating environment.

 

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HOPE MOSES-ASHIKE