In spite of the tough operating environment, Pan-African lender, Ecobank rode on the back on significant loan recoveries made to grow its bottom-line in the first three months of 2019.
The bank increased loan recoveries by a whopping 235 per cent to N24.73 billion in the first quarter of the year, compared to N7.39 billion in the corresponding period in 2018.
These recoveries lifted the profit after tax of the lender, which rose 10 per cent to N30.6 billion, while pre-tax profit was up 9 per cent during this period.
Gross earnings increased marginally by 0.4 per cent to N199.4 billion, helped by fee and commission revenue, which was up 13 per cent, but slowed down by interest income, which dropped -8 per cent in Q1 2019.
Ecobank explained that the stunted growth in gross earnings is traceable to “suspension of interest income accruals on mainly subsidy-related Oil and Gas exposures in Nigeria, subdued client activity in Nigeria around the presidential elections in February, compression in net interest spreads due to lower average gross yields on earning assets, and a decline in average balances of treasury bills and customer loans. The net interest margin declined to 4.8 per cent compared with 6.1 per cent in the prior year.”
Operating income also dipped marginally -1 per cent to N140.45 billion impacted by significantly lower net interest income, while operating expense -2 per cent N92.99 billion and consequently, operating profit before impairment losses declined -13 per cent to N47.5 billion due to lower other operating and staff costs, during the period under review.
The implementation of IFRS 16 retrospectively from 1 January 2019 by the Pan-African commercial lender, caused its balance sheet to grow due to the recognition on balance sheet of the previously unrecognised lease liability as well as the ROU.
“There has also been a change to both the expense character (rent expenses replaced with depreciation and interest expense) and recognition pattern (acceleration of lease expense relative to the recognition pattern for operating leases today). Both the changes to the balance sheet as well as the ones to the income statement are not material to the group,” the bank stated in a release on its Q1 2019 financial performance.
Ecobank lowered its risk appetite in the first three months of 2019 as loans and advances to customers slipped -7 per cent to N3.09 trillion, while it raked in lower deposits from customers, which dipped 6 per cent to N5.48 trillion with loan-to-deposit was 60.5 per cent this period.
The bank’s lower risk appetite could be attributed to its non-performing loans (NPLs) ratio, which stood at 9.8 per cent, only 0.2 per cent the 10 per cent benchmark set by the Nigerian Central Bank.
The toxic assets to total risk assets of Nigerian operations of the Ecobank was 13.8 per cent as at March.
And despite its lower risk appetite, the bank had to make a higher provision for impairment losses on loans and advances, which increased 11 per cent to N29.16 billion.
And expectedly, total assets decreased 5 per cent to N7.84 trillion and total equity also dipped marginally by -1 per cent to N660.07 billion.
And earnings per share stool at N3.79 as at the end of March 2019, compared to N0.45 in the same period in last year.
“We are pleased with our performance in the first quarter, especially amid a challenging macroeconomic environment. Our diversified business model continues to be of immense benefit allowing the firm to deliver the promise of the Ecobank brand to our customers across Africa.
“Our objective to drive stable non-funded revenues gained momentum, with our non-interest revenues increasing by 25 per cent on a constant currency basis, driven by cash management, trade finance, and digital product offerings. We maintained cost discipline across our businesses and drove efficiency in our processes. We recovered a record amount of impaired loans, thanks to an effective non-performing loans recovery strategy, which helped in significantly improving our cost-of-risk.
“Overall, we are confident that Ecobank will deliver on its strategy, continue to serve our customers well, and generate attractive returns for our shareholders in the long-term,” noted Ade Ayeyemi, Group CEO asserted.