Ecobank Transnational Incorporated emerged in the West African banking landscape to fill a gap that long existed but not explored. Accordingly in 1985, a group of businessmen came together with the political support of the Economic Commission of West Africa States, ECOWAS, and various governments in West Africa to form Ecobank with the aim of playing a financial and economic role towards promoting international trade amongst the countries of the region and with other countries outside the region.
As at 2014 the bank operated in 36 countries in Africa with offices in Europe, South East Asia and Middle East. It boasts of over 10 million customers, about the largest in the region, through the network of about 1,265 branches and offices as well as 2,690 ATMs and over 14,233 points of sale, PoS. The Nigerian operation accounts for 45% of the total in all measures of size. The group’s business is organized in three key divisions namely: Corporate and Investment Bank, Domestic Bank and Treasury.
With some 641,403 shareholders of 22.56 billion shares of USD0.025 per share the group is listed in the Nigerian Stock Exchange amongst other exchanges. About 10 shareholders including the International Finance Corporation, IFC, held 73.4% of the shares. The peculiar nature of its international, cross-border operations, all figures are reported in US Dollars.
Earnings and Profitability
In the year 2014, the group reported gross earnings of ESD2.9 billion against USD2.6 billion in 2013. Out of this, interest income accounted for USD1.7 billion or 69% of total. This reflected increased reliance on interest income as it was 62% in 2013.
Absolute interest margin was just a little change at 66% and 64% in 2013 and 2014 respectively. Though operating expenses rose from USD1.43 billion to USD1.53 billion, profit after tax rose significantly from USDO.15 billion to USD0.39 billion leading to increase in return on average equity from 7% to 16%. Earnings per share doubled to USD0.02 from USD0.01. The bank did not declare any dividend against 2014 result.
Shareholders’ Funds as at 2014 year end was about USD2.7 billion up from USD2.1 billion in 2013This is significantly higher than the competitors in Nigeria and this underlies the fact that in order to operate across the international markets high capital base is required.
In relating capital to estimated risk size in the asset portfolio, we arrived at estimated risk asset coverage of 18% against 14% in 2013. We consider this level of coverage to be close to 16% Basle 2 minimum requirement and suggest that the bank may need to slow down on risk asset expansion or seek to increase capital. The later option appear more plausible given the bank’s easier access to the financial markets.
Asset Quality and Risk Assets Creation
In 2014 Ecobank Group had global risk asset exposure of USD13 billion, slightly up from USD126 billion in the preceding year. The group obviously slowed down on the expansion rate and appeared to have become more selective in creating risk assets so as not to compromise quality.
On closer look at the non-performing loans ratio, we observed that this measure was flat and remained unchanged at 4% achieved in 2013. This reflects high quality. Credit Risk Standards consider non-performing loan ratio of 5% and below to be good quality all things being equal. As a big bank with huge portfolio of risk assets spread across 36 countries, 4% level of sticky facilities is considered high quality.
Liability Generation and Liquidity Risk
By the end of 2014, Ecobank had in its balance sheet some USD19.4 billion of liabilities considered vulnerable to sudden demand, and current account holdings accounted for USD9.6 billion out of this total.
In order to stand ready to satisfy customers and meet regulatory requirements of minimum liquidity, the bank held USD7.5 billion in assets considered to be liquid. This translated to liquid assets to total assets ratio of 31% just as adjusted liquidity ratio was 28%. Those ratios were better than the preceding year’s at 28% and 26% respectively.
These figures are very close to minimum regulatory requirements of 30% for specified liquidity ratio and suggest that within the context of Nigerian jurisdiction the bank was very close to border line. We are however aware that the prescription differs among the different countries in which the group operates.