Ecobank Group H1 2021 Results: Performance Surges as Doubts Hang Over Nigeria

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Thursday, July 29, 2021, / 07:30 AM / by Adaeze Nwachukwu, Proshare Research / Header Image Credit: Ecobank Transnational Inc 


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Ecobank Transnational Inc (ETI) H1 2021 result has created mixed feelings amongst analysts and investors as the bank reported an H1 2021 profit before tax (PBT) of N85.32bn which was 33.4% higher than the N64.13bn PBT recorded in H1 2020. The rise in profit sent a message of a possible reversal in fortunes which, hitherto, resulted in the banking giant's inability to pay dividends over the last five years. 

 

Of particular concern to investors has been the sustained drag of its Nigerian operations on the group's overall performance. While market groupings in Anglophone West Africa (AWA), Francophone West Africa (UEMOA), and Central and Southern Africa (CESA) witnessed strong top and bottom-line growth in H1, the Nigerian business saw activities shuffle along a slow upward corridor.

 

Key Takeaways/Highlights

  • Net interest income up Y-o-Y by +14.48% from N161.41bn in H1 2020 to N184.78bn in H1 2021.
  • Non-interest income grew Y-o-Y by +16.45% to N150.10bn from N128.89bn in H1 2020.
  • PBT was up +33.04% to N85.32bn in H1 2021 from N64.13bn in H1 2020
  • Impairment charges on financial assets rose +19.42% to N43.57bn in H1 2021 from N36.48bn in H1 2020.
  • Total assets up Y-o-Y by +17.35% to N11.02trn from N9.39trn in H1 2020.
  • Loans and advances to customers were up by +9.01% to N3.63trn from N3.33trn in H1 2020.
  • Deposit from customers grew by +21.66% to N7.86trn from N6.46trn in H1 2020.
  • Total equity rose Y-o-Y +8.14% to N803.18bn from N742.74bn in H1 2020.
  • Basic earnings per share (EPS) rose to N174.21 in H1 2021 from N136.44 in H1 2020
  • NPL ratio improved from 9.80% in Q2 2020 to 7.40% in Q2 2021
  • Cost-to-income ratio dipped by -8.42% to 58.70% in Q2 2021 from 64.10% in Q2 2020
  • Return on equity rose to 14.50% in H1 2021 from 12.00% in H1 2020.

 



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Net Interest Income

The pan African bank's net interest for the second quarter of the year dipped quarter-on-quarter (Q-o-Q) by -6.20% to N89.43bn from N95.35bn in Q1 2021. This was largely due to a +23.86% Q-o-Q rise in interest expense despite a marginal +3.25% growth in interest income.

 

On a Y-o-Y basis, net interest income rose by +5.45% from N84.811bn in Q2 2020.

 

Q2 2021 records the highest percentage decline in net interest income between Q1 2020 and Q2 2021, while in Q2 2020 it had its highest percentage growth which was during the peak of the COVID-19 pandemic globally.

 

In US dollar terms, net interest income had a slightly higher percentage decline, it declined Q-o-Q by -8.12% to US$217.85m in Q2 2021 from US$237.09m in Q1 2021 (see chart 1 below).

 

Chart 1: ETI's Net Interest Income Q1 2020 - Q1 2021 (N'bn)

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Source: ETI's Financial Statement, Proshare Research


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Non-Interest Income

ETI's non-interest income climbed Q-o-Q by +16.63% to N80.81bn in Q2 2021 from N69.29bn in Q2 2021. This was propelled by a significant +197.28% rise in other operating income and a -24.21% fall in fees and commission expense.

 

On a Y-o-Y basis, non-interest income rose by +30.72% from N61.82bn in Q2 2020. Q1 2021 had the highest percentage decline of -11.85% while Q3 2020 had the highest percentage growth of +24.92% in non-interest income during the period under review.

 

Translating to US dollar terms, non-interest income grew Q-o-Q by +14.50% to US$197.27m from US$172.29m in Q1 2021 (see chart 2 below).

 

Chart 2: ETI's Non-Interest Income Q1 2020 - Q1 2021 (N'bn)

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Source: ETI's Financial Statement, Proshare Research



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Profit Before Tax

The group's PBT rose for the third consecutive time this quarter after declining significantly in Q3 2020, the decline in PBT in Q3 2020 was attributed to N60.58bn payment in goodwill impairment.

 

In Q2 2021, PBT rose Q-o-Q by +11.50% to N44.98bn in Q2 2021 from N40.34bn in Q1 2021. On a Y-o-Y basis, PBT rose significantly by +44.60% from N31.11bn in Q2 2020.

 

Translating to US dollar terms, PBT had a slightly lower percentage growth. It grew Q-o-Q by +9.41% to US$109.76m while it grew Y-o-Y by +37.12% from US$80.04m in Q2 2020 (see chart 3 below).

 

 

Chart 3: ETI's Profit Before Tax Q1 2020 - Q1 2021 (N'bn)

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Source: ETI's Financial Statement, Proshare Research


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Impairment Charge

Impairment charges on financial assets fell for the second consecutive time in 2021. Between Q1 2020 and Q4 2020, ETI's impairment charge increased at a decreasing rate and declined in 2021.

 

In Q2 2021, impairment charges on financial assets dipped by -8.91% from N22.79bn in Q1 2021 to N20.77. On a Y-o-Y basis, a fell slightly by -1.24% from N21.03bn in Q2 2020 (see chart 4 below).

 

Chart 4: ETI's Impairment Charges Q1 2020 - Q1 2021 (N'bn)

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Source: ETI's Financial Statement, Proshare Research



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Cost-to-Income Ratio

From Proshare's analysis, the credit lender's cost-to-income (CIR) declined marginally to 58.15% from 59.30% in Q1 2021. On a Y-o-Y basis, CIR declined from 62.18% in Q2 2020 to 58.15% in Q2 2021.

 

The decline in CIR was driven by a +3.41% in the group's operating income which is higher than the +1.40% rise in operating expenses (see chart 5 below).

 

Chart 5: ETI's cost-to-income Ratio Q1 2020 - Q1 2021 (N'bn)

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Source: ETI's Financial Statement, Proshare Research

 

According to the latest results of the group, the Nigerian business segment had the highest cost-to-income ratio and non-performing loan ratio when compared to UEMOA (Francophone West Africa), AWA (Anglophone West Africa), and CESA (Central, Eastern & Southern Africa) regions. The AWA regions seem to be more cost-efficient, lower NPL ratio, and have higher returns (see table 1 below).

 

Table 1: ETI H1 2021 - A Performance Snapshot

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Total Assets

ETI's total assets grew Y-o-Y by +17.35% to N11.02trn in H1 2021 from N9.39trn in H1 2020. The growth in assets was propelled by a +35.49% rise in cash and balances with central banks, and a +33.72% Y-o-Y rise in investment securities (see chart 6 below).

 

Total loans and advances of the bank grew Y-o-Y by +13.16% from N4.14trn in H1 2020 to N468trn in H1 2021. This was driven by a +30.45% growth in loans and advances to banks while loans and advances to customers grew Y-o-Y by +9.01% to N3.63trn.

 

The loan-to-deposit ratio declined to 54.54% in H1 2021 from 56.56% in H1 2020 which is below CBN's regulatory minimum of 65%.

 

Chart 6: ETI's Total Assets Q1 2020 - Q1 2021 (N'trn)

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Source: ETI's Financial Statement, Proshare Research


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Total Equity

The transnational bank's total equity grew Y-o-Y by +8.14% from N742.74bn in H1 2020 to N803.18bn in H1 2021. This was attributed to a +5.35% Y-o-Y growth in retained earnings and reserves. During the period under review, the bank had its highest percentage growth in total equity in H1 2020 while H1 2018 records the highest percentage decline of -2.46% (see chart 7 below).

 

Chart 7: ETI's Total Equity Q1 2020 - Q1 2021 (N'bn)

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Source: ETI's Financial Statement, Proshare Research

 

Regional Performance

The Nigeria business segment continued to pull down the performance of the group in terms of net interest income, impairment charges, and PBT. In H1 2021, UEMOA, AWA, and CESA regions recorded growth in operating income and PBT, however, the Nigerian segment had significant declines in both parameters. The regions also had a Y-o-Y rise in impairment charges except for the AWA business which recorded a decline of -15.38% in the period (see table 2 below).

 

Table 2: ETI's Performance by Region

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