Ecobank Q1’20 Results – Lower loan recoveries mask gains in Nigeria

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CardinalStone Research
Ecobank Transnational Incorporated (ETI) recorded a 19.0% YoY decrease in earnings to $66.0 million in its unaudited Q1’20 result. The decline in earnings largely reflected a 67.0% fall in loan recoveries in the review period. Similarly, lower loan recoveries impacted net impairment losses on financial assets, which rose by 48.0% YoY.
  • Gross Earnings declined by -2.3% to N195bn from N199bn in the previous quarter.

  • Profit before tax declined by 11% to N33bn.

  • Profit after tax declined by 19.3% to N24.7bn.

  • Net Assets grew by 2.2% to N703bn from N688bn.

Pre-provision operating profit rose by 2.0% YoY (34.0% YoY in constant currency terms) in Q1’20, supported by a 21.0% YoY growth in net interest income. The increase in net interest income was supported by higher asset yield (+30 bps to 8.5%) and lower funding costs (-60 bps to 2.6%). Both operating revenue and operating expenses were relatively flat (+1.0% YoY, apiece). Cost to income ratio was flat at 66.0% (Q1’19: 66.2%), whereas the cost of risk rose 40 bps to 1.5%. All in, ROE came in lower at 13.5% from 16.9% in Q1’19.
Regional Highlights:
  • Francophone West Africa (UEMOA): Earnings for the region fell by 39.0% YoY in Q1’20, weighed by an 84.0% drop in loan recoveries. Elsewhere, pre-provision operating income came in flat (-1.0% YoY), as a 7.0% growth in net interest income was offset by a 9.0% decline in non-interest income. The cost to income was flat at 63.0% while the NPL ratio improved from 5.6% to 3.9%. Overall, ROE declined to 18.4% from 22.8% in December 2019
  • Nigeria: Earnings rose 2.6x during the quarter. The quarterly earnings were uplifted by a two-fold increase in net interest income, which offset the 70.0% decline in loan recoveries. Also, pre-provision earnings rose to $13.0 million from a loss of $10 million in Q1’19. Cost to income ratio improved to 81.9% from 119.3% in Q1’19, while NPL ratio moderated slightly to 23.3% (December 2019: 23.9%). Overall, ROE improved to 3.2% from 0.4% in December 2019
  • Anglophone West Africa (AWA): Earnings rose by 27.0% YoY in Q1’20, supported by a 16.0% growth in operating income. The higher operating income reflected 23.0% and 5.0% increases in net interest and non-interest incomes, respectively. Impairment charges came in flat year-on-year. Cost to income ratio eased to 47.8% (Q1’19: 49.0%), but NPL ratio rose to 8.4% from 7.7% in December 2019. Overall, ROE slowed to 27.9% from 30.1% in December 2019
  • Central, Eastern, and Southern Africa (CESA): Earnings weakened by 30.0% during the quarter, dragged by the 26.0% slump in non-interest income. Operating expenses rose 3.0% which, in addition to the 15.0% slowdown in operating income, resulted in a higher cost to income (60.1% vs 49.8% in Q1’19). NPL ratio rose slightly to 8.9% (December 2019: 8.4%), while ROE was relatively flat at 23.8% (December 2019: 23.6%).
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Ecobank Q1'20 Results - Lower loan recoveries mask gains in Nigeria - Brand Spur

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