Record impairments drags Ecobank into NGN52 billion loss in 2016

Ecobank

Ecobank Transnational Corporation said that the group recorded a net loss of NGN52.6 billion for the full year 2016.

This approximately USD204 million loss based on the company’s Forex conversion.

The company’s bottomline suffered huge impairment on a year on year basis.

On the topline, year on year interest income rose by 24% to NGN429 billion versus NGN345 billion disclosed in the year 2015.

The inflationary regime showed in the bank’s major spending as interest expenses rose by 22% to NGN145 billion compared to 119 billion in the previous year.

Fees and commissions only rose by 8% year on year to NGN124 billion compared to NGN115 billion.

The climax of the result is the rise in impairment losses on financial assets which rose by 111% to NGN221 billion compared to NGN105 billion. The deterioration in its loan books shows that the bank is suffering from the same problem confronting many other banks in Nigeria.

The lingering impairment pile up has increased Ecobank’s total liabilities to NGN5,7 trillion compared to NGN4,1 trillion disclosed in 2015. Total asset at the end of the year also rose by 33% to NGN6,2 trillion compared to NGN4,6 trillion disclosed last year.

In a message to the group’s shareholders, Ade Adeyemi, Chief Executive of Ecobank Transnational Incorporated, said:

“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 $131m and revenue of $2bn for the year ended 31 December 2016. Our Group revenues remained resilient despite a tough year of macroeconomic 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% of the Group’s revenues have historically been generated. Separately, our end of year bottom line performance has been impacted by our 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. 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”.

“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% above LIBOR”.

“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.

“I remain confident in the result of the cost efforts and in our ability to deliver a leading service for our customers which will be reflected in improved key performance indicators in 2017 and beyond. Ecobank’s twin goals are generating sustainable returns above the cost of equity whilst maintaining the highest international standards and we treat both goals equally. Reputations are hard won and easily lost and we will never compromise that. We have a bright future ahead and I look forward to the future with confidence.” “The Francophone West Africa and Anglophone West Africa regions continue to perform positively generating over 40% of the Group’s revenues at a return on equity above 24% and 32% respectively. We remain the leading bank in these regions”.