Background
ETI, a public limited liability company, was established as a bank holding company in 1985, under a private sector initiative spearheaded by the Federation of West African Chambers of Commerce and Industry with the support of ECOWAS.
In the early 1980s, the banking industry in West Africa was dominated by foreign and state-owned banks. There were hardly any commercial banks in West Africa owned and managed by the African private sector. ETI was founded with the objective of filling this vacuum.
The bank has 17.20 billion shares outstanding with shareholders fund of N341.01 billion as of December 31 2013.
Financial results for 2013
Despite the regulatory headwinds, the bank grew its revenues, however, was unable to translate the impressive result at the top-line level to bottom-line due to impediments such as huge impairment provisions, increased loss loan expense and surging operating expenses.
For the year ended December 31, 2013, Ecobank’s gross revenues spiked by 15 percent year-on-year (y/y) to N411.18 billion from N357.91 billion in the same period of the prior year (FY12).
Profit before tax (PBT) in the review period shrank by 34 percent to N35.37 billion compared with N53.62 billion as of FY12.
Profit after tax followed the same downward trend in bottom-line performance as it dipped by 48 percent to N23.57 billion in FY13, as against N45.48 billion in 2012.
Operating expenses were up 14 percent to N224.10 billion in FY13, from N196.07 billion as of 2012. The operating expense figure alone is 54.50 percent of the total N411.18 billion gross earnings estimates. In addition, loan loss expense grew by 143 percent to N60.9 billion in FY13, compared with N24.64 billion as of 2012FY.
The slow growth in banks earnings as evident in their overall performance so far is a by product of the CBN’s tightening measures The CBN has increased CRR – the minimum cash, as a percentage of customer deposits that each bank must set aside as a reserve, from 4 percent in 2011 to 15 percent for private deposits, and 75 percent for public sector deposits.
Ecobanks Net Margin, a measure of profitability and efficiency, also slid to 5.73 percent in FY13, from 12.70 percent as of 2012FY. Earnings per share declined to 95.39k in FY13, compared with 265.71 percent as of 2012FY.
Ecobank’s total assets were up 16 percent y/y to N3.59 trillion in FY13, as against N3.11 trillion as of 2012FY. Deposits from customers in the review period climbed by 15 percent to N2.63 billion compared with N2.28 trillion as of 2012FY. Loans to customers also increased by 21 percent y/y to N1.82 trillion in FY13 from N1.47 trillion as of 2012FY.
Loans-to-deposit ratio, which measures a bank aggressiveness to lending, moved to 69.20 percent in FY13, as against 64.42 billion as of FY2012. The Return on average equity and return on average were 6.90 percent and 6.90 percent, respectively, in the review period.
Interest income in the review period increased by 19 percent to N255.17 billion as against N213.85 percent as of 2012FY, while net interest income jumped by 24 percent to N167.60 billion in the review period.
The bank’s market capitalisation was N232.20 billion, and price-to-book ratio and price-to-price to sales ratio were 0.68x and 0.56x, respectively.
BALA AUGIE
