… sets first private owned ‘Bad Bank’
Ecobank Transnational Incorporated (ETI) plc has released its audited full-year results for the financial year ended December 31, 2016, announcing a loss after taxation of N53 billion.
The bank also announced a loss before tax of N33.7 billion, representing 183 percent decline against Profit Before Tax (PBT) of N40.59 billion in 2015.
The bank said the year-end bottom-line performance was impacted by its voluntary adoption of a full impairment charge “regarding our legacy loan portfolio, for which a resolution vehicle was set up, the first private sector funded resolution vehicle of its kind in Nigeria, with the sole objective of ring-fencing the legacy loans from Nigeria’s core bank.”
“The financial results show the benefits of progress of our strategy but also reflect the frustrating reality of poor financial performance in announcing a loss before tax of $131 million and revenue of $2 billion,” Ade Ayeyemi, group CEO, Ecobank Transnational Incorporated said in a note.
He said, “This, among others, would allow management to focus on delivering results. Our business philosophy was founded on international best practice in terms of accounting and asset quality, so whilst the impairment charge has impacted our earnings, our accounting treatment has been for the right reasons and we are in better shape for the future as a result.”
“Our Group revenues remained resilient despite a tough year of macro-economic headwinds including a weaker economic environment, particularly in Nigeria, and the strengthening of our reporting currency – the US dollar – against all African currencies particularly the Nigerian Naira where 40 percent of the Group’s revenues have historically been generated”, he said.
In Naira terms, the Pan African lender reported gross earnings increase by 23 percent to N665 billion, from N542.706 billion in 2015, according to the results at the Nigerian Stock Exchange (NSE).
The Francophone West Africa and Anglophone West Africa regions continued to perform positively generating over 40 percent of the Group’s revenues.
The group operating profit before impairment losses increased by 29 percent to N188.6 billion, up from N146.04 billion in 2015.
Total assets grew by 33 percent to N6.255 trillion. Loans and advances to customers rose by 27 percent to N2.824 trillion from N2.232 trillion in 2015. Deposits from the bank’s customers increased by 26 percent to N4.1 trillion, from N3.2 trillion in 2015; while total equity increased by 7 percent to N538 billion from N502.8 billion in 2015.
The bank’s CEO also announced plans for a $400 million convertible bond issue.
“The funds from our proposed $400m convertible bond issue will be used sensibly and profitably, of which $200m would be used to repay the short-term financing used in setting up the resolution vehicle. The remaining $200m is for a conscious debt restructure of the maturity profile of the ETI Holdco balance sheet. We are delighted to have very high subscription levels to the issue from existing shareholders, in the region of $300m. The conversion price of the offer is 6 USD cents compared to a current price of 3 USD cents with an interest rate of 6.46 percent above LIBOR.”
Meanwhile, Nedbank which controls 20 percent equity of ETI Plc yesterday in a voluntary announcement relating to the release of 2016 Ecobank Transnational Incorporated financial results said it is currently not part of existing investors who have indicated appetite for ETI’s $300mn funding “as bond’s commercial terms do not meet required internal rate of return (IRR).”
“Good businesses should always match operational expansion with cost control, and this is a fundamental belief of ours which we practise. We maintain our cautious stance on lending in this challenging period, but will continue to implement a number of exciting new customer initiatives such as our pan-African banking app and leveraging our blue-chip partnerships to benefit our customers across 40 countries.
“As the gateway to global trade finance in Africa, the role we are playing at the centre of the intra-Africa trade and cash management for governments, corporate clients, suppliers and distributors will benefit the economies in which we operate and consequently the income of Ecobank”, the group CEO said.
“Pre-impairment income (PPI) for FY16 was broadly flat from prior year period, driven by currency translation effects, particularly as the US dollar appreciated about 50percent against the Nigerian Naira. In constant currency terms PPI increased 17% YoY, reflecting higher revenue growth compared with expenses growth. Pre-tax Loss $131 million, attributable to higher loan impairment charges in 4Q16 related to the legacy loan portfolio”, said Greg Davis, Group chief financial officer (CFO), ETI Plc.
He said ETI customer loans were flat year-on-year (YoY) in dollar terms reflecting the bank’s strategy to deliberately curb lending. “Customer deposits were marginally down on constant currency, driven by heightened competition in deposit markets”, Davis said.
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