Ecobank Nigeria: The Case For Restructuring, Repositioning and Retooling


Wednesday, July 31, 2019   /  09:50AM  /  By  Proshare Research   / Header Image Credit: Premium Times Nigeria



  • Financial contribution of Ecobank Nigeria Limited to the Group has been weak and needs to significantly improve relative to the performance of peer local deposit money banks (DMBs)
  • Digital  process upgrade and new competitive edge are synonymous and as such the bank needs to build on its advantages as it transits from analogue bureaucracy to tech-enabled performance-driven competitiveness, with a customer-centric focus
  • Ecobank Nigeria Limited needs to right fit people to jobs and follow through on performance assessments
  • The urgency of now means a focused execution of change-plans as currently being undertaken by the bank, the ongoing institutional re-engineering is the right approach to its operational goals.


Fitch Rating and The Revenue Race

Global Credit Rating Agency, Fitch, in a recent report on Ecobank Transnational Incorporated (ETI) rated the banking Group a B, which suggests that the bank has not progressed from its earlier rating. The B rating, however, still builds into a corporate narrative of stability even if growth remains muted. A major drawback to the group’s advancement has been the relatively poor performance of its Nigerian operations with its Nigerian bank trapped in a slow revenue growth pattern with flattened operating margins. The Group’s Gross revenue rose marginally by +5.4% from N384.59bn in Q2 2018 to N405.20bn in Q2 2019. The deposit money institution’s (DMB’s) profit margin before tax grew from 16.93% in Q2 2018 to 18.12% in Q2 2019. The slow growth in revenue but stronger improvement in margin reflects a tug at a corporate turnaround.    


Ecobank Nigeria: The Need For Change

Ecobank Nigeria has turned into the sick baby of the ETI Group for about two years with the local bank having to dig into a variety of measures to reverse a declining financial outlook. As part of strategies to improve Group performance, the management of the Nigerian subsidiary in 2018 began an academy to retool and upgrade skills of employees. The effort is expected to yield results for the bank in terms of improved service quality, customer user experience and competitive digital presence by the beginning of 2020 when most of the 300 recent trainees settle down to becoming captains and advocates of the new bank culture, hence instilling a new work ethic. Between 2014 and 2018 the ETI Group saw gross revenue drop by N454.71m or -20% which reflects the difficulties the Group has had in Nigeria.


The sustained fall in the Group’s revenue over the last five years has been a clear warning of the need to increase gross market share and place a cap over growth in its operating expenses.


Ecobank Nigeria recorded a -98.86% decline in profit before tax from N18.36bn in Q2 2018 to N0.21bn in Q2 2019. The bank’s profit before tax from its Nigerian operation constitutes a small proportion (0.28%) of the total ETI profit before tax as against 28.21% contribution recorded in Q2 2018. Net interest income dipped to N16.71bn in Q2 2019 from N46.43bn in Q2 2018; a decline of -64.01% while non-interest income fell by -16.45% from N28.85bn in Q2 2018 to N24.10bn in Q2 2019. Total operating income for Q2 2019 amounted to N40.81bn as against N75.32bn recorded in Q2 2018; representing a drop of -45.82%. The bank’s operating expenses dipped by -5.20% from N44.94bn in Q2 2018 to N42.61bn in Q2 2019. In the background of these numbers is a strong loan-to-deposit ratio (LDR) of 65% for Ecobank Nigeria or 5% above the CBN minimum statutory ratio of 60%

Total assets grew by +7.97% from N1.98trn as at Dec 2018 to N2.14trn in Q2 2018 while total liabilities also grew by +12.65% from N1.72trn in Dec 2018 to N1.93trn in Q2 2018. Ecobank Nigeria’s total asset constitutes 26.41% of ETI total assets while its total liabilities constitute 25.99% of ETI total liabilities as at Q2 2019.



Chart 1 Ecobank Nigeria Income Statement Highlights

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Source: Ecobank Nigeria, Proshare research

The bank, according to observers, needs to trim its financial and non-financial costs as it tackles the persistent issue of declining shareholder funds and sizeable debt charge offs. The Nigerian bank needs to approach the market with a sleeker structure and a flexible response to emerging consumer demands, which include ease of digital interface. 


Repositioning the bank's finances would, therefore, require a few big hairy and audacious goals/actions (BHAG) which may include but would not be limited to the following:


  • Increasing the bank’s gross revenues by growing both interest and non-interest incomes (digital and trade finance). Net interest margin needs to rise.

  • Staff cost needs to fall to increase the gross corporate revenue-to- cost ratio and its Cost-to-Income Ratio (CIR). The bank may need to right-size employee numbers by as much as 300 existing workers. The reduction in staff will result in a large one-time charge against 2019 profits, but it would equally result in a leaner and more efficient financial institution in 2020.

  • Ecobank Nigeria’s (and ETI’s) digital user penetration rate needs to increase with a higher digital conversion ratio. The bank needs to fight for a greater proportion of the growing digital market. The rise in digital transactions will reduce ‘menu costs’ related to paper use and back-office dark holes involving the unmeasured cost of bureaucracy.

  • Ecobank Nigeria would need to seek strategic Fintech alliances to enable it to compete credibly with other industry players that have established tech foundries or have acquired Fintech companies that support their digital financial journey.  Banks like Access Bank, Zenith Bank and GT Bank have pulled ahead in these areas of building strong tech support structures.

  • The bank will need to resolve issues of recapitalization and non-performing loans (NPL’s). The IFRS9 day one provision made in 2018 is no longer available in 2019, and this could adversely affect the bank’s bottom line as prospective credit loss will now have to be taken in for the full year. Also, the IAS21 foreign exchange requirements which the bank partially complied with in the last month of 2018 will need to reflect full-year compliance, and so the bank would need to translate its foreign dollar result at the NAFEM rate of N360/$ rather than the official rate of N306/$ for the full year 2019. The bank will also have to work out how it will turn 2018’s negative other comprehensive income (OCI) into a positive number. The lower net asset in Q2 2019 as against Q2 2018 (see table 1 below) reflects the continued erosion of shareholder funds.


Business Condition

Data drawn from ETI’s Q2 results show that the Group has had a decent operational run as profit before tax rose from N384.59bn in Q2 2018 to N405.20bn in Q2 2019, representing a growth of +5.4% (this is a reversal of a five-year negative growth trend in the bank’s gross earnings Y-o-Y). The Group’s net interest income, a measure of profitability in its core business, fell from N146.57bn in Q2 2018 to N130.89bn in Q2 2019, representing a drop of -11% To counter the adverse effect of a slide in net interest income, the bank increased its income from trade finance and other businesses, resulting in other operating income rising by 34% Y-o-Y.



Table 1 ETI Q2 2019 Financial Result




2019 N'm

2018 N'm

% Change





Gross Earnings




Profit before tax








Profit for the period




Basic EPS (kobo)




Balance Sheet Information

Net Assets   




Source: ETI, Proshare Research




Goading The Bull

To sustain its recent quarterly bullish performance ETI (and its Nigerian subsidiary) will have to recapitalize the Nigerian bank and grow loans and advances strategically while increasing the bank’s share of total local retail deposits. The added pressure on the bank comes from the Central Bank’s recent Loan-to-Deposit Ratio (LDR) requirement of 60%.  Nevertheless, the new loan rule by the regulator will not be much of a challenge for ETI as it has a ratio for Q1 2019 of 56% (54.02%, Q2 2019) (see Tables 2&3 below) which was better than the ratios of a few other banks in Q1, 2019 (see chart 2 below).



Table 2 ETI LDR Q1 2019

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Source: ETI Unaudited Q1 Result 2019



Table 3 ETI LDR Q2 2019

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Source: ETI Unaudited Q2 Result 2019



Chart 2 Q1 LDR for Nigerian Deposit Money Banks Listed on The NSE 2019

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Source: Listed Banks on the NSE  Unaudited Results for Q1 2019


Chart 3 Loan to Customers Vs. Investment in Public Debt

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Source: Listed Banks on the NSE  Unaudited Results for Q1 2019


ETI has extended fair amounts of loans in 2019 as it has also invested heavily in public sector debt instruments both its loans and T-bill investments has exceeded those of local rivals (see chart 3 above). The bank’s primary concern going forward would seem to be reducing the size of NPLs while marginally growing the bank’s loan book. Furthermore, the bank may need to strengthen retail banking activities to generate a larger number of low-cost deposits thereby improving its net interest income and net interest margin, an index of strength in the core activities of the institution.


The improvement in the bank’s loan quality should see it grow shareholder value and return on equity (ROE) in months ahead. The Group’s share price on the NSE as of Tuesday, July 30, 2019, was N8 per share. The recent price reflects a Y-o-Y market return of -60.89% as against the NSE All Shares Index (ASI) return of -24.49%.



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Going Forward

As ETI ropes together internal policies to improve corporate performance, it must come to terms with the nexus of a new market and its digital interfaces, rather than an old market and its analogue antecedents. Generic strategies will be handy (see illustration 1), but the bank will need to deal with the implications of emerging developments such as the African Continental Free Trade Agreement (AfCFTA) and more pressingly the onslaught of digital migration and the competition for customer interface conversion.


Being mean and lean is no longer a fad but a requirement for corporate sustainability and profitability in the Nigerian banking sector; hard times do not kill, but the poor reaction to them certainly will.



Illustration 1  Ecobank Nigeria’s Three (3) Generic Strategies

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Table 4  Ecobank’s Five (5) Years Revenue and Profit Numbers 2014-2018  

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Source: Ecobank Audited Annual Accounts 2014-2018



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For further enquiries concerning this report you may contact either of the following individuals:


Saheed Kariebe                                                                              Teslim Shitta-Bey                                               



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9.      Ecobank Transnational Incorporated $50m Eurobond Tap Issuance OversubscribedJun 06, 2019

10.  Ecobank Bags Most Admired Financial Services Brand in AfricaJun 03, 2019

11.   ETI Issues a 5-Year $50m Senior Unsecured Bond OfferingMay 30, 2019

12.  ETI Stocks Soar As Foreign Portfolio Investors Return To MarketMay 28, 2019

13.  ETI Declares N29.66bn PAT in Q1 2019 Results,(SP:N10.45k)Apr 30, 2019

14.  ETI Announces Board Changes:Appoints Dr. Aasim Qureshi; Mr. Al Khalifa and Dr. Daniel Matjila DepartApr 29, 2019

15.   Greg Davis Resigns as Ecobank CFO; Appoints Ayo Adepoju in Acting CapacityApr 28, 2019

16.  ETI Successfully Raised $450m Via Its Debut EurobondApr 18, 2019

17.   Ecobank Launches New 5-Year Eurobond at 9.75% Re-OfferApr 12, 2019

18.  ECOBANK Notifies of the Company’s 31st Annual General MeetingApr 09, 2019

19.  ETI Declares N102.17 bln PAT in Q4'18 Results,(SP:N13.20k)Mar 28, 2019

20. Nedbank’s 2018 Results Preview Ecobank Expectations; Cue Waiting GameMar 12, 2019

21.  Ecobank Transnational Incorporated Announces The Appointment of Arunma Oteh To Its Board of DirectorJan 18, 2019

22.   Ecobank Responds to Wrongful AllegationsDec 19, 2018

23. Nedbank Associate Under Scrutiny - Sunday Times SADec 16, 2018

24.   Compliance With IFRS IAS21 – ETI and The Effects of Changes in Foreign Exchange RatesDec 15, 2018

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