Ecobank Double Down on Earnings Growth in H1-2021
Ecobank group has recorded a strong earnings boost in the first half of 2021 with total profit rising 23% to $210 million as gross revenue printed at $825 million.
Key performance metrics show the financial service supermarket double down on earnings growth in the first half, outperforming its guidance for the period.
In its financial statement obtained by MarketForces Africa, the pan African lender’s revenues settled at $825 million, surged by $54 million or 7% which benefited from growth across all business lines especially in Commercial which surged $23 million and Consumer segment that recorded $11 million upticks.
Also, payments revenue expanded 20% to $90 million, representing 11% of Group revenues in the period.
The group’s profit before tax of $210 million came on the back of higher net interest margin (NIMs) positive operating leverage and efficiency gains, partially offset by higher impairment charges and a net monetary hyperinflationary loss.
The company’s financial statement shows that the profit available to Ecobank Transnational Incorporation (ETI) shareholders increased 19% to $106 million in the first half of 2021.
It recorded a cost-to-income ratio (CIR) of 58.7%, reflecting sustained progress at cost discipline and achieving mid-50s CIR in the medium-term.
The outturn resulted in 180 basis points improvement to the group cost-of-risk, includes macro-overlay of $15 million, as a proactive buffer against the uncertain economic outlook
“We continued to generate record deposit growth. Year on year, customer deposits increased $2.4 billion to $19.1 billion, driven by a strong omnichannel strategy across digital and physical channels.
“Deposits grew by $1.0 billion in the three months ended 30 June (2Q21)”, the bank said in a statement on Monday.
The Pan-African lender sees a 3% increase in customer loans to $8.6 billion, the group said this is ahead of its guidance for the period.
Asset quality position always witnessed an improvement due to management deliberate efforts to reduce non-performing loans.
Ecobank group delivered a 220 basis points decline in NPL ratio to 7.4% from 7.6% in the fourth quarter of 2020 and 9.8% in the second quarter of the same year.
NPL coverage ratio of 86.7% improved from 74.5% in 4Q20 and 65.3% in 2Q20 demonstrating efforts to build reserves of NPLs to near 100% in the near term.
Ade Ayeyemi, Ecobank Group CEO, said: “We saw continued and sustained resilience in our performance, which is indicative of the success of our ‘execution momentum’ drive.
“As a result, we generated a return on tangible equity of 16.1% versus 15.2% a year ago and increased diluted EPS and tangible book value per share by 19% and 6%, respectively. In addition, profit before tax increased 23% to $210 million.”
“Group revenues rose 7% to $825 million, despite the challenging operating environment with the third wave of coronavirus infections threatening economic recovery. Our diversified pan-African business model continued to rise to the challenge.
“Revenues grew 13% and 6% in our Commercial and Consumer businesses, while our focus on growing the trade business led to increased trade assets. The slowly increasing business and spend activity drove a 20% rise in our Payments business’s revenue to $90 million.
“Deposits growth was strong, with total deposits now over $19 billion, an increase of $1.0 billion in the second quarter and $2.4 billion in a year, driven by our omnichannel strategy. Though loan growth remained flat, we are focused on providing support to MSMEs for growth,” Ayeyemi added.
“I am proud of the team’s hard work in driving efficiency, which continues to reflect in our cost-to-income ratio of 58.7% ahead of guidance and progressing well toward our medium-term goal of approximately 55%.
“In addition, credit quality continued to be exceptionally strong. As a result, our NPL ratio of 7.4% is a substantial improvement from the prior year’s 9.8%, as we also build reserves to insulate the balance sheet with an NPL coverage ratio of 86.7% and pushing towards our near-term target of 90%,” Ayeyemi continued.
“We successfully raised $350 million Tier 2 Sustainability Notes in June, the first-ever by a financial institution in sub-Saharan Africa and first to have a Basel III-compliant 10-year non-call 5 structure outside South Africa in 144A/RegS format.
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“The Bond was 3.6 times oversubscribed, demonstrating strong confidence in the Ecobank Group and our commitment to the sustainability of our communities and their social needs. I am deeply grateful to all stakeholders and must thank our clients for continuing to put their trust in Ecobank for their diverse banking needs.” Ayeyemi concluded.
