Ecobank Transnational Inc. said its first quarter profits for 2014 surged 18 percent on effective cost cuts according to a statement posted on the website of the Nigeria Stock Exchange.
For the first three months of the year, pretax profits spiked by18 percent to N19.26 billion from N15.70 billion in 2013, while revenue rose 20 percent to N86.29 in the review period.
“The combination of good organic revenue growth and cost control has driven an improvement in the cost-to-income ratio in every cluster,” said Albert Essien the bank’s Group Chief Executive Officer in the statement.
“With sustained focus on cost management coupled with solid revenue growth across our network we expect continued improvement in our efficiency,” he said.
Based on BusinessDay investigation, Net margin, a measure of profitability and efficiency remained flat at 17 percent.
Operating expenses margin in the review period reduced to 69 percent compared with 72 percent as at Q1’2013, while loan loss expenses jumped by 76.38 percent to N7.32 billion in the review period.
It is unclear if the banks stellar performance in the first quarter of 2014 can be maintained for the rest of the year given the tightening stance of the Central Bank of Nigeria (CBN) which has crimped the growth prospects of most financial institution in the country.
In addition, some analysts are saying that the incoming Governor of the bank of last resort may not relax the tightening policy.
“Given relative stability of the financial system, we expect the MPC to maintain its policy rate at 12 percent with the symmetric corridor of ± 200bps for standing deposit and lending facility rates,” said Abiola Rasaq of the Research and Strategy Unit of Associated Discount House Limited in an emailed statement to BusinessDay.
“The cash reserve requirement (CRR) on private and public sector deposits should be retained at 15 percent and 75 percent respectively,” he said.
In spite of the aforementioned regulatory headwinds and rising operating costs befalling most players in the sector, Ecobank’s cost to income reduced to 69.14 percent in Q1’14 from 72.28 percent in 2013.
Loan to deposit ratio which shows the aggressiveness of a bank to lending increased to 70 percent in the review period from 62 percent as Q1’2013.
Ecobank trades on three African exchanges and operates in 33 nations on the continent.
“Combined with a solid business performance, this will strengthen the institution and lay the foundations for a better year in 2014,” said Essien.
The bank’s share price closed at N14.08 on the floor of the exchange on the May, 15 2014, while the market value was N229.20 billion on the same day.
BALA AUGIE
