Ecobank blames lower rate environment, others for poor performance

Ecobank Nigerian entity has blamed lower rate environment and competition, and the impact of the suspension of interest income on subsidy related oil/gas loans in Nigeria as the reason why its half-year result was so poor.

In the recently released result, the bank posted pre-tax profit of N206 million, down by a whopping 99 per cent from the N26.5 billion reported the same period last year.

A closer observation of the result also show that the weak profits were driven by a massive drop in Net Interest Income falling to N25.6 billion compared to N64.7 billion for the same period last year.

Unfortunately, this will not go down well with investors who quibble over what to do with the resultant 0.1% return on average equity for the first 9 months of the year.

The company also reported an increase in non-performing loans for the period under review. Fortunately, its other African operations are faring better, reporting a pre-tax profit of N109 billion. So, if anything needs to change, it has to be from its Nigerian operations.

At N7.1, Ecobank share is down 55% in the last one year. The latest result paints an ugly situation for investors looking for an upside.

The string of acquisitions, especially in Nigeria has left the bank looking for character and a cultural fit.

Recall that Ecobank acquired the assets and liabilities of All States Trust Bank and Hallmark Bank in 2006. In October 2011, ETI acquired Oceanic Bank Plc. The entire share capital of Oceanic was canceled, while its shareholders received one ordinary share of $0.025 and $0.428 preference shares of $0.1032 in ETI, for every 20 held in Oceanic Bank.

In 2017, ETI (the parent bank) set up a Special Purpose Vehicle (SPV) to acquire impaired assets from Ecobank Nigeria. These include legacy loans from Oceanic bank.

Last August, the bank announced that its long-time shareholder, International Finance Corporation (IFC), was transferring its investment in the bank managed by the IFC Asset Management Company (AMC) to Arise B.V., which has become a major shareholder of ETI resulting in a 14.1% stake in the company.

Last year, the company CEO, Charles Kie, resigned and left the country following several clashes with law enforcement agencies. His replacement, Patrick Akinwuntan, will have his work cut out as he tries to return the bank to its rightful place.