Boasting 25.50% Return on Equity, Ecobank is a Quality Stock

With a return on equity (ROE) of 25.50 percent, Ecobank Transnational Incorporated Plc is a quality stock as the Pan Africa lender continues to generate profit and return to shareholders.

In short, the ROE increased to 25.50 percent in the first six months of 2023 from 18.80 percent as at June 2023.

Profit available to shareholders, Net income or profit after tax (PAT) spiked by 23 percent to $161 million in June 2023 from $130 million the previous year.

Improving underlying results reflects the resilience of Ecobank’s diversified business model, efficiency, and stability.

The impressive results are coming amid challenging macroeconomic conditions in African countries that are struggling with inflationary pressures, currency volatility, and deteriorating consumer purchasing power.

For instance, Nigeria’s inflation rate rose to 22.41 percent in May 2023, marking the fifth consecutive increase. Despite monetary policies to control inflation, it remains at an over 17-year high.

The tepid economic growth in Africa has stoked pessimistic prognosis, and Russia and Ukraine, combined with the hiking cycle by the United States Federal Reserve and European Union, signals more pains to come.

Some analysts expect Kenya’s shilling, Nigeria’s naira and Zambia’s kwacha, and Ghana’s cedi to weaken further.

Despite these challenges, Ecobank has an excellent asset quality, maintained consistent earnings growth, and a strong capital buffers that shields it from macroeconomic shocks.

The Bank is able to earn more profit on loans it gives out as net interest margin increased to 4.90 percent in June 2023 from 4.70 percent the previous year.

Cost to income ratio fell to 54.30 percent in June 2023 from 56 percent the previous year, which means the lender is profitable and being properly run.

“We achieved these results despite continued challenging macroeconomic conditions in the second quarter, with significant weaknesses in African currencies, high consumer prices and tepid economic growth,” said Jeremy Awori, CEO of Ecobank Group,

“We have made meaningful progress in formulating our strategic roadmap, which will provide the blueprint for our Growth, Transformation and Returns agenda. Over the last few months, as I engaged with our customers, colleague Ecobankers, and other stakeholders, my confidence in our growth opportunities has been reaffirmed. We see opportunities to build stronger and better customer relationships in our businesses, forge strategic partnerships and be the go-to Payments bank, leveraging our superior platforms,” said Awori.