Ecobank Group has delivered a return on tangible equity of 16% on pre-tax profit of $75 million, from continued cost efficiency gains while revenue of $425 million went up 3% in constant dollars, despite macroeconomic headwinds.
Ade Ayeyemi, Group CEO, commenting on the financial results said: “Overall our performance in the first quarter was encouraging, despite continued macroeconomic headwinds. All of our businesses made meaningful progress with an ongoing focus on cost discipline, stringent credit risk practices, and increasing digitisation of processes to enhance the customer experience.”
“Our first quarter revenue of $425 million, increased 3% in constant dollars, whilst operating expenses remained flat. Pre-impairment income increased 10% in constant dollars, reflecting positive operating leverage. A cost-to-income ratio of 64.5% was an improvement on the 66.1% registered in first quarter of 2016, driven by efficiency gains. Pre-tax profits, however, decreased 17% in constant dollars, mainly because, impairments remain at an elevated level. We continue to address the latter through aggressive overhauling of our credit risk procedures. We delivered a return on tangible equity of 16% for the period.
“Our diversified business model and pan-African footprint continue to deliver significant competitive advantage. They allow us to provide unique, tailored financial products and services to meet the needs of our customers, including treasury solutions, credit, cash management, and trade finance, through the increasing utilisation of digital channels. All our staff, of more than 17,000 Ecobankers, remain dedicated to delivering superior customer value.”
Profit before tax of $75 million, decreased 28%, primarily driven by higher impairment losses in Corporate and Commercial Banking.
Net revenue of $425 million, decreased 15%. In constant dollars, net revenues increased 3%, driven by higher noninterest revenues.
Net interest income of $234 million, decreased 18%. In constant dollars, net interest income increased 3%, driven by the impact of growth in investment securities, partially offset by a decrease in net interest spreads.
Non-interest revenue of $192 million, decreased 12%. In constant dollars, non-interest revenue, increased 6%, driven by growth in fixed income securities trading, markets, and trade finance, partially offset by lower credit-related fees and commission income. Non-interest revenue ratio, which depicts the proportion of net revenue that is generated from non-capital intensive sources was 45% compared to 43%, in the prior year period. The 45% noninterest revenue ratio, shows that our sources of revenue are well-balanced between funded and non-funded revenue, and reflect the benefits of our pan-African diversified business model.
Operating expenses of $275 million, decreased 17%. In constant dollars, operating expenses were largely unchanged. The cost-to-income ratio for the quarter was 64.5% compared to 66.1% in the prior year period.
Impairment losses were $76 million (of which $75 million were on loans and advances), compared to $67 million (of which $62 million were on loans and advances) in the prior year period. The current quarter’s impairment losses were at elevated levels because of weak macroeconomic conditions, which continue to impact borrowers’ ability to make good on their financial obligations. The impairment losses were largely in Corporate and Commercial Banking. The annualised cost-of-risk was 3.0% compared to 2.1% in the prior year period.