January 18, 2008 812 VIEWS


Key Statistics

Current Market Price (N)                     203

Assets (bn)                                       455.49

Deposits (bn)                                   325.02

Shareholders Funds (bn)              62.70

Market Cap. (bn)                              272.87

Trailing EPS (N)                                    10.05

Trailing PE Valuation (x)                     20.23

Trailing Earnings Yield (%)                4.9

Trailing Price to Book (%)                  4.2

YE Forecast EPS (N)                            15.05

YE Forecast P/E Valuation (x)            13.49

YE Forecast Earnings Yield (%)         7.4

NPL/TL ratio (%)                                 8.0






Competitive Advantages

Management Team. ETI has a dedicated and experienced management team, both at the parent and operating company level. Senior management, supported by strong local teams, has been responsible for aggressive expansion of the business, delivering on results and the integration of new operations across sub-Saharan Africa.


Brand Recognition. The Ecobank brand is recognized as one of the leading names in the domestic market in which they operate. Its home grown regional character as an African

 bank distinguishes it from other multinational banks operating in the region and anchors the strong growth that has been experienced.


Local Knowledge. ETI has operated successfully in

Africa for the past 19 years and gained substantial local knowledge and expertise on banking solutions unique to African challenges. All ETI subsidiaries are led by local CEO's who are senior and respected bankers in the domestic market. As a result, the group is well positioned to design banking solutions unique to each country in which it operates while leveraging the group wide knowledge base.


Operational Efficiency and Growth. The ETI group has grown larger and more geographically diversified and has therefore exploited the opportunities that can be derived from economies of scale production. The group's objective is to become an efficient operator in what are inefficient markets by utilizing modern technology and business practices to drive down costs and grow revenues. ETI therefore intends to adopt and adapt business processes and practices that have been successful in other markets in which the group operates.



Risk Factors

Sovereign Risk. This includes political, convertibility and cross-boarder risks. Such risks could be due to actions of a sovereign state or to unforeseen circumstances such as wars and uprising. Since ETI is a regional player with locations in several African countries, the group is susceptible to sovereign and political risks associated with instability of governments. They also suffer the risks associated with inability of borrowers who reside in a particular country to meet their obligations to a lender who is domiciled in another country.


Compliance Risk. This is a risk to the ETI franchise arising from violations of, or non-conformance with laws, accounting rules, regulations, prescribed practices or ethical standards. Compliance risk exposes the group to sanctions, penalties, damages and voiding of contracts. ETI operates in countries with varying local laws, standards and policies and therefore faces the challenge of harmonizing those laws without contravening the requirements in countries to which they operate.



Market Risk. The group could suffer financial losses due to adverse changes in market conditions during the period required to close out an open operation. Such risks include liquidity risk, exchange rate risk, market indices and prices of various financial instruments.



Other Risks. Other probable risks which the ETI group could be exposed to are stated below:

* Credit Risk

* Operational Risk

* Technological Risk

* Environmental Risk

* Financial Reporting Risk


Financial Analysis

Ecobank Transnational Incorporated (ETI) has grown its assets from N148.58 billion in 2002 to N455.49 billion as at FYE 2006, representing a CAGR of 32%. This impressive growth can be attributed to the group's increase in its subsidiary base (from 8 to 13) over the review period. During the same period, the number of branches and offices increased from 78 to 305 (up 291%).


ETI currently has banking operations in 17 geographical countries in West and Central Africa and has plans to continuously increase its presence to cover other countries in

Africa. ETI's largest subsidiary Ecobank Nigeria, recently announced its intention to consummate a merger with Sterling Bank (Nigeria) Plc which if implemented, would grossly increase its total asset outlay.


In absolute terms, ETI's loan book has increased significantly. This is due to the bank's organic expansion as well as its aggressive entry into consumer/retail banking. In relative terms, the group's loan to asset ratio has increased from 45.91% to 54.78% while its loan to deposit ratio has improved considerably from 60% to 76%. ETI has also been able to grow its risk management processes to help protect itself against its exposure to loan losses.



In terms of its earnings, ETI has performed considerably well. In FYE 2007, the group's after tax earnings stood at N11.23 billion ($86.3 million) as against its 2002 figure of N2.15 billion ($16.5 million). The largest growth was however recorded in the 2006 financial year with the group recording a 51% leap in earnings, thereby improving its fundamental viability.



ETI's asset quality reveals a sporadic movement during our 5 year review period. The group recorded an all time high Non-performing loans/Total loans ratio of 14% in 2005 but further declined by 6% to 8%. This impressive decline can be attributed to the bank's impressive risk management processes. ETI was able to achieve this result in spite of the rather harsh and unfriendly operating conditions in countries such as

Ivory Coast and Togo.


The group's loan loss expense declined from 1.5% to 0.8% between 2005 and 2006. With the group's continued emphasis on improvement in its risk management, we expect this improved trend to continue in the years to come.



Return on Equity was also sporadic over the years. The company initially recorded improvements during the first three years of operations but began to decline afterwards. It however made a marginal improvement during the financial year ended 2006 from 16.76% to 17.91%. ETI intends to position itself for profitable growth by expanding to new markets with strong earnings potential as well as increasing market share in existing its markets.



Investment Strategy

ETI is currently quoted at N203 ($1.56) which is an attractive 32% discount to its 52 week high of N300.98. Based on its current price, the group’s YE forecast PE is trading at a multiple of 13.49x which compares favourably with the 1st and 2nd tier average PE multiples of 22x and 20x respectively. Its Price to Book value of 4.2x also compares favourably with peers.


While the Proshare website is renowned for its  accuracy and painstaking attention and commitment to factual data, we are not liable for any incorrect information included. We recommend that you make enquiries based on your own circumstances and, if necessary, take professional advice before entering into transactions. This report is based upon information from various sources that we believe are reliable. However, we do not make any representation as to the accuracy or completeness of the report. This report is not an offer to buy or sell, nor a solicitation to buy or sell the securities mentioned therein. This report is provided solely for the information of clients of LeadCapital Limited (LeadCapital) who are expected to make their own investment decisions without sole reliance on this report. LeadCapital and PROSHARE (publishers of the report under approval) accepts no liability for any direct or consequential loss arising from any use of this report or its contents. Investments can fluctuate in price and value and the investor may get back less than was originally invested. Past performance is not necessarily a guide to future performance. This information has been issued by LeadCapital, which is licensed by the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE). Enquiries relating to any matters in this report should be directed to Bamidele Adewole (01 4611269 ext 130)





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