Sunday, September 22, 2019 / 12.00PM / Proshare Research / Header Image Credit: africabriefing.org
After a few years of trouble (still smoldering) with its Nigerian subsidiary (Ecobank Nigeria), ETI is slowly edging out of the woods, albeit still fragile. The banking groups H1 2019 performance was a statement of intent. ETI gross earnings grew by +5.36% from N384.59bn in H1'18 to N405.20bn in H1'19(see chart 1 below).
Chart 1 ETI Gross Earnings (N'm) H1 2019
Source: ETI's financial statement for 2014 -H1 2019
Interest income grew by +1.80% to N246.57bn in H1'19 from N242.22bn in H1'18. Net interest income dipped by -10.70% to N130.89bn in H1'19 from N146.57bn in H1'18. Non-interest income increased by +13.01% to N 149.22bn in H1'19 from 132.04bn in H1'18. Non-interest income constitutes 53.27% of operating income in H1'19 as against 52.61% recorded in H1'18. Operating income increased marginally by +0.54% from N278.61bn in H1'18 to N280.11bn in H1'19.
A Better Loan Book
Impairment charges fell by -49.72% to N20.68bn in H1'19 from N41.13bn in H1'18(see chart 14 below). The Impairment to loan ratio fell to -0.66% in H1'19 as against -2.46% recorded in Dec'18. The ratio of total liabilities to total assets stood at 91.95% in H1'19 as against 91.97% in Dec'18. Return on total asset stood at 0.91% in H1'19 while return on equity stood at 11.27% in H1 2019.
Chart 2 ETI Impairments to Loans in H1 2019
Source: ETI financial statement 2014-H1 2019
Finding A New Paradigm
ETI and its local Nigerian subsidiary (Ecobank Nigeria) will be pushing for new growth paradigms in the coming months if both institutions are to make a success of their operations in years ahead. Top line earnings need to grow faster and cost to income ratios need to fall. To the groups credit. its non-Nigerian operations in French speaking West Africa (UMEOA) and Ghana are doing appreciably better than the Nigerian operations, but even the Nigeria business is gradually turning a corner as the bank pursues a number of strategic initiatives such as right sizing and digitalizing local operations.
However, digitalization and rationalization are not strategies but measures that are part of an overarching intent to improve the bank's business process, this is a start to achieving larger domestic market share. The groups 11% return on equity (ROE) is modest measured against the domestic Nigerian inflation rate of 11.02% (August 2019), indeed the group needs to address the issue of its high leverage (see ROE illustration below).
In reviewing ETI's H1 2019 performance it is important to separate the report of the group ETI (an entity listed on the Nigerian Stock Exchange (NSE)) from Ecobank Nigeria which is a private limited liability subsidiary of ETI.
1. Banks' H1 2019 Numbers: Top Line Growth, Bottom Line Uncertainty - Proshare Confidential, Sept 22, 2019
2. UBA Pushes for Faster Growth; Top line Up 13.87% - Sept 22, 2019
3. GT Bank Targets Scale Not Size; H1 2019 Gross Earnings Down -2.1% - Sept 22, 2019
4. FBNH Searches For Growth; H1 Operating Income Drops -0.3% - Sept 22, 2019
1. ETI Announces The Completion of Disposal of IFC Shareholdings To Arise B.V - August 29, 2019
2. Negative Sentiment Sustained On ETI As Share Price Hits 52-Week Low of N6.00K - August 18, 2019
3. ETI Announces The Appointment of Ayo Adepoju As Group Chief Financial Officer - August 06, 2019
4. ETI Announces The Appointment Of Nana Araba Abban As New Group Consumer Banking - August 05, 2019
6. ETI Records 21.4 Growth in PAT in Q2 17 Results SP N17.99k - August 24, 2017
7. ETI to Publish Q2 2017 Financial Results on August 24 2017 - July 04, 2017
8. ETI Declares N18.68bn PAT in Q1 17 Results SP N7.8k - April 27, 2017
9. ETI Declares N52.6bn Loss After Tax in 2016 Audited Results SP N8.20k - April 18, 2017
11. ETI Awaits Requisite Approval on the Conversion of
Its Preference Shares to Ordi -
November 28, 2016