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Ecobank Group, the leading pan-African bank, today announces its Full Year Audited Results for the year end 31 December 2016.
Ade Ayeyemi, Group CEO said:
“The financial results show the benefits of progress of our strategy but also reflect the frustrating reality of poor financial performance in announcing a loss before tax of $131m and revenue of $2bn for the year ended 31 December 2016.
Our Group revenues remained resilient despite a tough year of macro-economic headwinds including a weaker economic environment, particularly in Nigeria, and the strengthening of our reporting currency - the US dollar – against all African currencies particularly the Nigerian Naira where 40% of the Group’s revenues have historically been generated.
Separately, our end of year bottom line performance has been impacted by our voluntary adoption of a full impairment charge regarding our legacy loan portfolio, for which a resolution vehicle was set up, the first private sector funded resolution vehicle of its kind in Nigeria, with the sole objective of ring-fencing the legacy loans from Nigeria’s core bank.
This, among others, would allow management to focus on delivering results. Our business philosophy was founded on international best practice in terms of accounting and asset quality, so whilst the impairment charge has impacted our earnings, our accounting treatment has been for the right reasons and we are in better shape for the future as a result.
“The funds from our proposed $400m convertible bond issue will be used sensibly and profitably, of which $200m would be used to repay the short-term financing used in setting up the resolution vehicle. The remaining $200m is for a conscious debt restructure of the maturity profile of the ETI Holdco balance sheet. We are delighted to have very high subscription levels to the issue from existing shareholders, in the region of $300m. The conversion price of the offer is 6 USD cents compared to a current price of 3 USD cents with an interest rate of 6.46% above LIBOR.
“Good businesses should always match operational expansion with cost control, and this is a fundamental belief of ours which we practise. We maintain our cautious stance on lending in this challenging period, but will continue to implement a number of exciting new customer initiatives such as our pan-African banking app and leveraging our blue-chip partnerships to benefit our customers across 40 countries. As the gateway to global trade finance in Africa, the role we are playing at the centre of the intra-Africa trade and cash management for governments, corporate clients, suppliers and distributors will benefit the economies in which we operate and consequently the income of Ecobank.
“The Francophone West Africa and Anglophone West Africa regions continue to perform positively generating over 40% of the Group’s revenues at a return on equity above 24% and 32% respectively. We remain the leading bank in these regions.
“I remain confident in the result of the cost efforts and in our ability to deliver a leading service for our customers which will be reflected in improved key performance indicators in 2017 and beyond. Ecobank’s twin goals are generating sustainable returns above the cost of equity whilst maintaining the highest international standards and we treat both goals equally. Reputations are hard won and easily lost and we will never compromise that. We have a bright future ahead and I look forward to the future with confidence.”
Greg Davis, Group CFO, added:
“Throughout 2016, we faced and addressed a number of challenges, not least the more difficult operating environment in Nigeria, plus adverse currency movements. Despite this, we delivered top line revenue of $2bn an 8% increase in constant currency.
The calibre of our earnings has also improved as part of our focus on improving asset quality, and growing in non-credit related activities. As part of our commitment to improving overall asset quality, impairment losses for the year increased, driven by charges on specific client names and a legacy loan portfolio.
We are continuing to address credit processes with tighter controls on origination and collections. Pre-impairment income grew in constant currency by 17%, rising to $735m, despite the higher US dollar. We have also reduced our cost-to-income ratio from 65% to 63% and will continue to identify areas where we can improve further efficiencies, driving value for our shareholders