ETI: Cut in Impairment Charges, OPEX Boost Profit
Kayode Tokede Ecobank Transnational Incorporated Plc (ETI) for the nine months ended September 30, 2021 audited result and accounts reported stronger growth in profit, attributable to reduction in impairment charges on loans & advances to customers and effective management Operating Expenses (OPEX). The results underlined solid and resilient results amid numerous domestic and foreign challenges that faced the sector and economy at large in the period under review. The group continued to maintain a wellstructured, efficient and diversified balance sheet with strong earnings capacity.
ETI joined most outstanding banks on the Nigerian Exchange Limited (NGX) to report consistent growth in profitability. The balance sheet structure enabled the group to withstand the negative impact of COVID-19, which virtually affected all the sectors of the nation’s economy. The pan-African bank in the nine months under review crossed N100billion mark in Profit Before Tax (PBT). PBT rebounded in the period, against prior nine months of 2020 figures when the Ecobank paid goodwill impairment of N60.6million, leading PBT to decline by -68.49 per cent in the period. In the period under review, the Group reported its highest PBT as it was up by 316.47 per cent to N143.67billlon from N34.5 billion reported in nine months of 2020. Also, profit after tax grew by 916 per cent to N104.51billion in nine months of 2021 from N10.28billion reported in nine months of 2020.
The growth in profits was on the back of a 11.93 per cent in operating income to N516.17billion in nine months of 2021 from N461.74 billion reported in nine months of 2021, while impairment charges on financial assets dropped slightly by 3.12 per cent to N59.57billion from N61.5billion reported in nine months of 2020 (fell -10.4 per cent to $145.01million) According to the bank: “Impairment charges on loans (net) were $103 million compared with $128 million in the prior year. Gross impairment charges were $231 million, $31 million more than a year ago, driven by higher impairment and better economic conditions continued to sustain loan recoveries, which were $128 million for the period, increasing $55 million from the prior year.
The cost-of-risk was 1.43% compared to 1.79per cent in the prior year.” With the growth in profits, Basic earnings per share (EPS) rose to N301.06 from a negative of N50.17 in nine months of 2020. Return on equity Also, Return on equity rose to 16.39 per cent in nine months of 2021 from 4.87 per cent in nine months of 2020. The group also reported three per cent decline in total operating expenses to N300.72billion in nine months of 2021 from N292.39billion reported in nine months of 2020. The breakdown of ETI’s OPEX showed two per cent increase in staff expenses to N132.4billion from N129.7billion reported in prior nine months while, Depreciation and amortization inched up by two per cent to N33.25billion from N29.41billion reported in nine months of 2020. In addition, other operating expenses grew slightly by one per cent to N135.06billion from N133.25billion.
The management of cost positioned the group Cost-to-income ratio to 58.30 per cent in nine months 2021 from 63.40 per cent in nine months of 2020. However, the top line performance, Gross earnings grew by 11.77 per cent to N686.77billion from N614.56billion in nine months of 2020. In dollar terms, gross earnings was up by 3.39per cent to $1.68billion in nine months of 2021 from $1.61billion reported in prior nine months of 2020. With interest income adding 12 per cent to N445.12billion in nine months of 2021 and interest expenses increasing by 13 per cent to N160.7billion, the group reported net interest income that was up by 12.02 per cent to N445.12billion from N397.37billion in nine months 2021. Non interest income also increased by 12.42 per cent to N231.74billion from N206.13billion in 2020. Loans to custo mers ETI’s total assets grew by 15.7 per cent to N10.91 trillion as at September 30, 2021 from N9.43 trillion reported in 2020, drive by increase in loans to customers and deposit. The bank’s loans and advances to customers was down by one per cent to N3.67 trillion from N3.7 trillion in 20202 as Deposit from customers grew six per cent to N7.79trillion from N7.3trillion in full year ended December 31, 2020.
In addition, to balance sheet, total equity rose by eight per cent to N876.33billion from N811.75billion reported in 2020. The CESA business unit of the Group recorded the highest growth in customer deposit by +17 per cent while the Nigerian segment had a decline in deposit from customers by –three per cent. The UEMOA region accounts for the largest portion of the Group’s total deposit from customers, contributing 35.44per cent while Nigeria accounts for 20.27per cent of total deposits. Assets quality The management promised to sustained improvement in Asset quality following the merger inflated Non-Performing Loan (NPL) ratio NPL ratio was steady between nine months 2018 to nine months 2020 at an average of 9.8per cent, in nine months 2021, it improved to 6.90 per cent meeting the Group’s 2021 target of 5 – 7 per cent. Although, the Pan African bank’s NPL is above CBN’s regulatory threshold of five per cent. The AWA region of the group had the lowest NPL ratio of three per cent while the Nigerian business segment recorded the highest NPL ratio of 16.5per cent.
Also, ETI’s Capital Adequacy Ratio (CAR) reflecting Day IFRS 9 transitional adjustment stood at 20.6 per cent(Dec’19: 20.0 per cent), and the full impact CAR of 19.6 per cent remained well above regulatory minimum of 15 per cent. CEO Speaks Ecobank Group CEO, Ade Ayeyemi in a statement said: “We reported strong results, reflecting the continued diligence of Ecobankers in putting our customers first and ensuring that we meet their respective needs. For the nine months period up to September 2021, we earned $352 million in pre-tax profit, a 41 per cent increase compared to the prior year and revenues of $1.3 billion, a four per cent growth. “Hence return on tangible equity increased to 17.9per cent, and we grew the per-share value of our shareholders’ equity by 11 per cent to 5.52 dollar cents.
These results also demonstrate the hard work invested in driving efficiency in all our businesses in line with our deliberate focus on driving down our cost-to serve, sustain improvement in the quality of our credit portfolio, and strengthen liquidity and capital buffers. As a result, our cost-toincome ratio has been declining consistently quarter on quarter, currently 58.3per cent.” “In addition, the stock of nonperforming loans as a percentage of loans outstanding is now at 6.9% compared to 9.9per cent a year ago. At the same time, we are proactively building loan reserves, currently at 91.2% of nonperforming loans, close to our near-term target of 100%. We have boosted the firm’s liquidity profile, thanks to growing customer deposits fueled by an acceleration in digital channel adoption, partnerships with Fintechs, Telcos, and businesses in the Payments Ecosystem,” Ayeyemi added. “During the quarter, Arise B.V., a major institutional shareholder of ETI made a $75 million Additional Tier 1 (AT1) investment in the firm.
Adding onto the $350 million Tier 2 Sustainability Note ETI successfully issued to investors in June. The AT1 further improves our Tier 1 capital and double leverage ratio and demonstrates stakeholder confidence in our strategy and business prospects,”Ayeyemi continued. “Finally, we continue to invest in new digital and mobile capabilities to enhance customer experience, alongside the investments we are making in our people, processes, and controls, to ensure the continued resilience of our business and service delivery to our clients. I am deeply grateful to all our customers, “he added. ETI appears to be on the mend as its nine months results reflects an improvement in top and bottom-line earnings compared to nine months of 2020. The group posted a goodwill imp