EcoBank Transnational Corporation (ETI), the pan African lender with branch offices across the continent, has just released its Half-Year financial results that shows significant improvement in all key metrics.
Drilling down the numbers indicates that Nigeria is not the major driver of growth as subsidiaries in Other African countries have been the movers behind Group’s stellar performance.
It should be noted that Ecobank Transnational Corporation is divided into four geographical regions. These reportable regions are Francophone West Africa (UEMOA), Nigeria, Anglophone West Africa (AWA), and Central, Eastern and Southern Africa (CESA).
Of course, the coronavirus pandemic paralyzed economies across the continent and a sit at home order by the government hindered valued customers from honoring their obligations.
Despite the pandemic crisis and slow economic recovery, Francophone West Africa (UEMOA)’s pre-tax profit was up 16 percent to $87 million as at June 2021; Anglophone West Africa (AWA)’s bottom line increased by 25 percent to $121 million, and Central, East and West Africa, jumped 14 percent to $78 million.
However, Nigeria saw pre-tax profit dip by 58 percent to $10 million as at June 2021 as operators in the industry are reeling from a punitive regulatory environment. The central bank’s decision to bar individuals and non-corporate from its Open Market Operations pressured interest income as net treasury yields crashed.
There are indications that lenders or subsidiaries in other African countries are reducing cost while at the same time magnifying profit and the management is efficiently creating value for shareholders.
For instance, UEMOA’s return on equity (ROAE) moved to 20.50 percent in June 2021 from 18.60 percent the previous year. AWA’s ROE increased to 27.0 percent from 26.90 percent while CESA’s ROAE rose to 19.40 percent in June 2021 from 16.10 percent the previous year.
Nigeria operations fell off the cliff as ROE reduced to 2.50 percent in the period under review from 4.20 percent the previous year.
The need to moderate inflation in the face of a pandemic forced the Central Bank of Nigeria (CBN) to elevate the cash reserve ratio (CRR) to 27.50 percent, and that resulted in the loss of significant revenue for banks.
Nigerian banks are more aggressive about lending as loans to deposit ratio stood at 67.0 percent, that compares with UEMOA, (49 percent); CESA, (34.70 percent), and AWA, (34.20 percent).
The improvement in lending is due to a hike in the minimum loans to deposit ratio to 65 percent by the regulator as it seeks to force banks into spurring credit facilities to the real sector of the economy.