Modupe GbadeyankaBy Modupe Gbadeyanka
The year 2016 was really a challenging one for Ecobank Transnational Incorporate (ETI) going by its audited financial results released to the Nigerian Stock Exchange (NSE) today.
In the financial statements analysed by Business Post, it was observed that the N221.7 billion impairment charges dragged Ecobank to a loss after tax of N52 billion, as against a profit after tax of N21.25 billion in 2015.
Also, the firm’s loss before tax stood at N33.7 billion in 2016 compared with a profit before tax of N40.5 billion it achieved 12 months earlier.
However, Ecobank took a decision to completely clean its books of non-performing risk assets in its legacy loan portfolio, making a provision of N221.7 billion in its 2016 audited accounts.
The impairment charges, showed a jump of 110.7 percent compared with N105.2 billion recorded in 2015.
Ecobank said in the results that it recorded a growth of 22.3 percent in gross earnings to N665 billion in 2016, from N542.7 billion in 2015.
Net interest income similarly rose by 25.3 percent to N284 billion, from N226.6 billion in 2015. Profit before impairment charges stood at N188 billion, up from N146 billion.
The company said deposits from customers dragged down by 18 percent to $13.5 billion in the year under review, while its total assets depreciated by 13 percent to $20.5 billion.
Commenting on the results, the Group Chief Executive Officer of ETI, Mr Ade Ayeyemi said the firm’s 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 further that, “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.”
While assuring that stakeholders that the group has strengthened its entire risk management architecture, he said the bank would also focus on bringing down impairment cost, improve the collection so that the bottom line would be robust going forward.
Mr Ayeyemi disclosed that the funds proposed $400 million convertible bond issue will be used sensibly and profitably, of which $200 million would be used to repay the short-term financing used in setting up the resolution vehicle.
“The remaining $200 million 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 $300 million. 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 per cent 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,” he said.
