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Ecobank PAT surges 36% for year ended December 2018

...reports profit of N32.4b

Ecobank
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Ecobank Nigeria reported a profit increase of 36 percent for the year ended December 2018 compared to the year before.

The Nigeria arm of the pan-African bank said profit increased from N23.7 billion in 2017 to N32.4 billion in 2018.

According to figures from the bank’s financial report released Thursday at the lender’s headquarter in Lome, Togo’s capital, the commercial bank’s return on equity increased to 11 percent for 2018 compared to 7.8percent for 2017.

Emmanuel Ikazoboh, the Group Chaiman of Ecobank Group, said despite the improvement recorded in the year under review and the importance of paying dividends to shareholders, the “board has taken a decision not to pay dividends to shareholders.”

He attributed the decision to factors such as the impending regulatory capital requirements of the group and the need to build the holding company’s liquidity buffers.

“We assure you that while this was a hard decision, it was taken in the best interest of the company. We want to make sure we attend to the capital needs of all our subsidiaries before can start paying dividends,” Ikazoboh said.

Checks by BusinessDay revealed that in November 2018, ETI’s board adopted the NAFEX rate of approximately N364 to the US dollar in translating the financials of Ecobank Nigeria, away from using the CBN official rate of N306/$. This had an adverse impact on the Nigeria’s capital adequacy ratio.

BusinessDay analysis of the bank’s financials revealed that its operating income decreased by 20 percent, while excluding the impact of FX transactions, the operating income declined N39.4 billion, led by declines in both net interest income and non-interest revenue.

In the review year, the lender’s net interest income decreased by 22 percent driven by lower average yields on interest earning asset and decline in earning asset balances.

Non-interest revenue was also down 18percent, owing to the growth in fees and commissions income which was largely offset by the impact of the lower yields on fixed income trading and significant lower spreads in FX sales, following normalisation in the currency market.

According to the bank’s financials, operating expenses of N99.13 billion fell by N3.9 billion or 4percent. Excluding the FX transactions, expenses fell by N1.44 billion, benefiting from on-going cost containment initiatives.

The lenders’ cost-to-income ratio was 61.9 percent for the review year compared to its reported 51.2 percent value the previous year, owing to lower revenues.

The bank’s non-performing loan (NPL) ratio stood at 13.7 percent in 2018, a marginal drop by 0.8 percentage points from the 14.5 percent it reported in 2017. The bank’s target is to reduce its NPL ratio to a single digit by year 2020.

Commenting on Ecobank Nigeria’s performance, Ade Ayeyemi, Group CEO of Ecobank Group, said the group recognises the fact that Nigeria’s underperformance may still be a concern.

“We have instituted a clear plan to drive growth in our Nigerian operations, including possible additional capital injection with a higher focus on growing non-funded income, pursing further operational efficiencies and continuing to address credit quality challenges,”Ayeyemi told BusinessDay on the sidelines of the AGM in Lome.

Earlier this month Ecobank group sold $450 million of Eurobonds at yields that rank among the highest from emerging markets this year.

According to Renaissance Capital, one of the arrangers, Econbank’s five-year senior unsecured notes was priced at 9.75 percent.

Also, the bank raised $200 million in loans last year, which are due for repayment in November 2019.

 

Endurance Okafor

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