…Suffers Major Setback In Core Banking Operations At The End
Of 3rd Quarter In 2019 As Earnings Per Share Dropped
Ecobank Transnational Incorporated (ETI) presently is facing
a major setback experts revealed to this publication
He said, it is necessary to enlighten the publics,
shareholders, investors and customers of the bank for them to know the status
of the financial institution.
Reason for this is that Ecobank in its core banking
operations recorded low which whittled down its finances in the third quarter
ended September 30, 2019.
Which means shareholders of the bank are the biggest losers
as earnings per share (EPS) dropped and share price staggers.
However, the bank defies Central Bank of Nigeria directives
on granting 65 percent of depositors money as loans to real sector.
The financial analyst said, this was as a result of the
bank’s inability to attract new deposits.
ETI recorded a 3 percent drop on deposits in the third
quarter of this year as against its performance for same period 2018.
As of September 30, 2019 deposits from customers dropped to
N5.63trillion from N5.80trillion in the preceding third quarter.
In the same vein, loans and advances portfolio declined 6
percent as the bank decided to cut down on advancing credit to its customers
contrary to the directive of the central bank that deposit money banks should
increase lending to small and medium enterprises and individuals to accelerate economic
growth.
The bank’s loans and advances to customers compared to its
deposits base stood at about 56 per cent as at September 30, 2019. It dropped
from N3.34trillion in September 2018 to N3.15trillion as of nine months ended
September 30, 2019. The figure fell below the CBN’s mandatory cap of 65
percent.
Although Ecobank Transnational Incorporated (ETI) grew its
third quarter earnings by 7 percent with net profit up 4 percent, the marginal
growth did not come as a result of its core banking services as net interest
income dipped 9 percent while non-interest income only grew 12 percent which
means the bank fell short of key performing parameters for deposit money banks
in the review period with deposits from customers dropping by 3 percent while
loans and advances to customers declined by 6 percent.
Also total assets dropped by 0.6 percent while total equity
remained unchanged in the review period. Also, earnings per share (EPS) dropped
by 8 percent.
According to the financial expert, he highlighted that
Ecobank Gross earnings recorded a marginal growth of 7 per cent from about
N573billion in third quarter ended September 30, 2018 to about N611billion in
the same period in 2019.
The ability of the bank to generate revenue improved by 1
per cent as revenue increased from N419billion in Q3, 2018 to N423billion as of
September 30, 2019. Operating profit before impairment losses recorded a drop
to the tune of 13 percent from N163billion in Q3, 2018 to N142billion in the
same period in 2019.
Before tax deduction, profit increased by 14 percent from
N96billion as of September, 2018 to N109billion as at September 30, 2019 while
profit for the period (net profit) increased by 4 per cent at N78.8billion
compared with N75.8billion recorded in the same period in 2018.
However, the bank’s balance sheet recorded a dismal
performance as assets portfolio sheds weight by 0.6 percent from N8.22trillion
in September 2018 to N8.17trillion as of September 30, 2019. Total equity
remained almost fixed at N660.22billion from N660.07billion in September, 2018.
The bank could not grow its deposits portfolio in the review
as year-on-year performance recorded a 3% drop.
As of September 30, 2019 deposits from customers dropped to
N5.63trillion from N5.80trillion in the preceding third quarter.
In the same vein, loans and advances portfolio declined 6
percent as the bank decided to cut down on advancing credit to its customers
contrary to the directive of the central bank that deposit money banks should
increase lending to small and medium enterprises and individuals to accelerate
economic growth.
The bank’s loans and advances to customers compared to its
deposits base stood at about 56 per cent as at September 30, 2019. It dropped
from N3.34trillion in September 2018 to N3.15trillion as of nine months ended
September 30, 2019. The figure fell below the CBN’s mandatory cap of 65
percent.
Meanwhile, expert revealed that Governor of the Central Bank
of Nigeria (CBN), Mr. Godwin Emefiele, said he wanted to ramp up the growth of
the Nigerian economy and his strategy is to bring about that desired growth for
the economy through deliberate investment in the real sector which is the
growth engine of the economy.
In a letter tagged: “Regulatory Measures to Improve Lending
to the Real Sector of the Nigerian Economy,” he mandated all commercial banks
operating in the country to make cash available for businesses to increase
their capacities and to be able to create more jobs.
Emefiele through the Director of Banking Supervision, Mr.
Ahmad Abdullahi, instructed banks to make available as loan to the real sector,
at least 60 per cent of the cash, which they collect from depositors effective
from September 30, 2019. The requirement has since been reviewed to 65 per cent
with a December 31 deadline.
“All DMBs are hereby required to maintain a minimum Loan to
Deposit Ratio (LDR) of 60 per cent by September 30, 2019. This ratio shall be
subject to quarterly review,” the letter stated.
For the purpose of implementation and to be able to track
compliance, the CBN said it shall provide a framework for classification of
enterprises/businesses that fall under these categories.
The apex had warned that failure to meet the prescribed
minimum LDR by the specified date shall result in a levy of additional cash
reserve requirement equals to 50 per cent of the lending shortfall of the
target LDR.
The CBN said it shall continue to review development in the
market with a view to facilitating greater investment in the real sector of the
Nigerian economy.
Earnings per share from continuing operations attributable
to owners of the parent during the period (expressed in kobo per share) stood
at about 227.4kobo, dropping 8 percent from 246kobo in the same period the
preceding year.
A breakdown of the bank’s earnings portfolio showed that
income from core banking operations in the review nine months period dropped by
9 per cent as net interest income stood at N196billion compared to N215billion
recorded in the preceding nine months period.
Interest expense, which increased by 27 per cent YoY made a
mockery of the 5 per cent increase in interest income as at end of September
2019. Interest expense rose to N177billion in 2019 from N139billion in 2018
while interest income moved up from N354billion in 2018 to N373billion in 2019.
Non-interest revenue on the other hand gained 12 per cent
with fee and commission income and net trading income being biggest
contributors. Meanwhile, fee and commission expenses which declined by 34
percent, from (N14.86billion) in September 2018 to (N9.8billion) as at
September 30, 2019, boosted non-interest revenue which stood at N227billion in
2019 compared to N203billion amassed in September 2018.
It’s obvious that the management of ETI must device means to
reduce cost, if the bank must move up on the ladder of profitability and be
able to compete effectively in its industry. Whilst operating income grew only
by 1 per cent as of September 30, 2019, operating expenses moved up 10 per
cent.
The condensed unaudited consolidated statement of
comprehensive income of the bank presented to the Nigerian Stock Exchange for
the financial period ended September 30, 2019 showed that operating expenses
grew by 1 percent to N423billion from N419billion in the same period in 2018
while operating expenses jumped 10 per cent from N256billion in September 2018
to about N281billion in the same period in 2019.
Apparently, a growth strategy to grow its deposits portfolio
must be adopted. In vein of this, Ecobank has made some moves in recent times.
The Pan- African Bank with a presence in 33 African countries including
Nigeria, entered into a partnership with Airtel Money, which will allow
millions of Airtel Money and Ecobank customers across Africa gain access to
mobile financial services using the Ecobank digital financial services
ecosystem.
Customers will be able to make mobile deposits and
withdrawals, effect real time domestic and international money transfers, make
in-store merchant payments, and access loans and savings products among others.
The bank also said it had removed all charges from USSD
transactions for its customers.
The Ecobank group in August 2019 appointed a new consumer
banking head as well as chief financial controller to drive deposit and manage
its finance.
Group Chief Executive Officer of the bank, Ade Ayeyemi,
revealed that “The bank will continue to focus on its strategic priorities.
Whilst noting the revenue headwinds, most of our regions delivered solid profit
growth, with total Group profit before tax of $303 million, demonstrating the
resilience of our pan-African business strategy.
We continued with the modernisation of our core banking
application having now covered about 80 per cent of total Group transactions
and 22 out of our 34 countries within a period of less than a year, with full
completion by mid-November 2019.”
“Our unwavering commitment to ensuring best-in-class digital
product offerings remains key. Our Ecobank Pay Zones are increasing across our
network, providing SMEs and households with easy and secure digital payment
solutions.
Additionally, we are growing our agency banking network
making banking services available to more previously un-banked Africans.
“We recognise the imperative of ensuring excellent customer
experience across all our customer touch points and we are assiduously
committed to achieving this.
“We are confident that all the actions we are taking will
deliver longer-term value to all of our stakeholders,” he added. He said.
(The City Pulse News)
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