Ecobank warns of lower profit as Naira depreciates

The management of Ecobank Transnational Incorporated (ETI) Plc has said there were looming headwinds ahead and the profit of the financial services holding group might come in lower than expected.

Against the background of mixed performance in the third quarter where the group recorded decline in dollar terms but considerable growth in Naira terms, group chief executive officer, Ecobank Transnational Incorporated (ETI) Plc, Mr. Ade Ayeyemi, said the group see further headwinds looming across and profits could come in lower than expected or in the most optimistic scenario flat.

“We see looming headwinds ahead and as a result expect reported 2015 profits to come in lower than expected, but relatively flat in constant dollars,” Ayeyemi said.

The Group CEO spoke on the background of the third quarter earnings of the financial services group, which showed declines across the key performance indicators in dollar terms but these were masked by depreciation in Naira, which lifted the figures filed in Nigerian currency with substantial growths.

The nine-month report for the period ended September 30, 2015 showed that gross earnings, in dollar terms, depreciated by three per cent from $1.65 billion to $1.6 billion. Profit before tax slipped by two per cent from $408.05 million in third quarter 2014 to $398 million in third quarter 2015. Profit after tax dropped by five per cent to $305.67 million as against $322.1 million. Total assets dropped marginally from $23.42 billion to $23.37 billion while deposits dropped by four per cent from $16.84 billion to $16.09 billion. Total equity however rose by 10 per cent from $2.41 billion in third quarter 2014 to $2.65 billion in third quarter 2015.

When presented in Naira, all the key items showed double-digit growths. Gross earnings grew by 17 per cent from N268.95 billion to N315.83 billion. Profit before tax rose by 18 per cent to N78.67 billion in 2015 as against N66.5 billion recorded in comparable period of 2014. After taxes, net profit for the period grew by 15 per cent from N52.49 billion to N60.42 billion. Total assets rose by 21 per cent to N4.65 trillion in third quarter 2015 compared with N3.84 trillion in third quarter 2014. Deposits also increased from N2.76 trillion to N3.20 trillion, representing an increase of 16 per cent. Total equity funds grew by 34 per cent from N394.28 billion to N528.18 billion.
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Ayeyemi said operating environment in Middle Africa was challenging during the period noting that the decline in pre-tax profit was largely due to adverse currency movements and operational and impairment losses in the third quarter.

He added that while the financial results were impacted by various factors, the strength of the group’s diversified pan-African business model ensured a balanced outcome.

“We had decent loan growth in our corporate bank business. And despite a decrease in domestic bank deposits, we increased the share of stable deposits within the deposit mix. With revenue growth challenged in the current environment, we would focus more on cost efficiency and invest in key initiatives in our transaction banking, cards, and ebanking businesses. Also, we are simplifying our operating model to better serve our customers and position the company for long term success,” Ayeyemi said.

He pointed out that the group closed the third quarter with healthy capital levels with a Tier 1 capital ratio of 20.6% and Total Capital Adequacy ratio of 22.8% under Basel I.

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