June 10, 2007

As Ecobank seeks to expand market frontier

MADUKA NWEKE - http://www.businessdayonline.com

Ecobank’s acquisition of Unity Bank, widely known for its national spread will no doubt expand the physical presence and financial growth of the sub-regional bank.

With 2006 profit after tax of N3.558 billion, up 113 per cent from N1.668 billion 2005, by end of its second quarter, the PAT has risen to N5.01 billion or 121 percent. There is great expectation that combining the capital base of Unity Bank with that of Ecobank will build great synergy.

Most financial analysts say with such huge profits and a declaration of 9 kobo, the Ecobank has gained the confidence of shareholders who appreciate the growth and profit of the bank, and have unanimously approved the acquisition of Unity bank as a means of further strenghteninging its presence nationwide apart from the West African region.

During the bank’s 19th annual general meeting held at the Civic Centre, Lagos , shareholders urged the bank to bring the share price of Ecobank Transnational Incorporated (ETI) down for Nigerian investors to subscribe to.

The duo of Akintunde Asalu and Sunny Nwosu who lent their voices in the appeal stressed that it would be nice if ETI should divest and by that increase the shares of Ecobank Nigeria which is best among Ecobank groups in terms of performance.

Nwosu urged the bank to make it the toast of Nigerian investors and affirmed the acquisition of Unity Bank as a rational action. He urged the management and directors to work for the increase of dividends by the next year.

Nwosu said the reconstruction of shares that have human face would appeal to shareholders arguing that most shareholders kick against share reconstruction because of its negative effects on investors.

He made a case for the opening of Ecobank shops in the hinterland to bring the bank close to the people.

According to him, branch empowerment in other parts of the country will increase the profit range of the bank and bring its goodwill to other investors outside Lagos .

According to the bank’s audited report and accounts for the year ended December 31, 2006, Ecobank Nigeria recorded strong growth in key performance indicators as improved business efficiency doubled profit, enabling the bank to meet the earnings requirement to cover the bonus issue of one for made during the year.

The accounts showed that gross earnings grew by 86 percent to N17.36 billion from N9.3 billion in the preceding year. Profit before taxation hit N5.01 billion, up 121 percent over the previous year’s figures, while the operating ratios also generally recorded positive improvements.

At N132 billion, the bank’s balance sheet closed 95percent above the previous year’s figure. This outstanding performance is attributed to more efficient operations and processes resulting in increased customer base, a more robust loan portfolio and commitment by all the stakeholders.

This level of performance was made possible by increased funding base, which translated to growth in volumes, and improved asset and liability management.

Non-interest revenues amounted to N6.2 billion, 50 percent higher than 2005 figure of N4.1 billion thus reflecting the bank’s initiative to drive fee-based income. Foreign exchange accounted for N756 million of this income, an increase of 88 percent over 2005 figures.

Operating expenses rose to N9.2 billion compared with N4.5 billion in the preceding year. This is driven mainly by the cost relating to retail outlet expansion, additional staff employed during the year, amortisation of additional assets acquired during the year and other operating expenses incurred towards an effective and efficient service delivery.

Net loan loss expenses during the year improved with provision dropping by 66 percent from N590 million to N198 million. The reduction in provision was as a result of intensified recovery effort, which yielded a good return as substantial part of the outstanding amounts was recovered during the year.

Gross loans and advances at end of the year rose 144 percent to N54.7 billion from N22.4 billion in the previous year. The bank’s net loan loss expense amounted to 0.35 percent of the total loans in contrast to 2.6 percent in 2005, indicating an improvement in recovery effort over the previous year. Also, the ratio of non-performing loans to gross loans reduced from 13 percent in 2005 to 3 percent in 2006 as a result of improved credit risk management. The ratio is one of the lowest in the industry.

The total deposit portfolio grew by 159 percent from N32.5 billion in the previous year to N84 billion as at 31st December 2006 . The deposit portfolio is expected to grow substantially in 2007 with the massive expansion of retail outlets and the acquisition of a new software platform to enhance the customer base of the bank.

The shareholders fund of the bank shored up in 2005 to meet the N25 billion capital base requirements. It grew by 10 percent from its closing figure of N26.7 billion in 2005 to N29.3 billion in 2006. In 2007, management will consider opportunities to push the capital base in order to fund investment in IT infrastructure, branch expansion and strategic development.

Ecobank recently proposed a merger with Unity Bank which is expected to lead to a balance sheet in excess of N400 billion, a branch network of over 346 (Ecobank 131 branches, Unity bank 215) while staff strength would be about 5,670 (Ecobank 2,070, Unity Bank 3,600). The number of branches of the two institutions upon merger will make Ecobank the 4th largest bank in branch network.

Ecobank’s group’s expansion on the other hand has been achieved by leveraging on its first move advantage as the leading regional bank in Africa . The group offers banking products and services to individuals, companies, governments, and non-governmental organisations, multinationals and financial institutions. Building on this momentum, it is currently exploring opportunities in eastern and Southern Africa as part of its Pan-African strategy which also include many central African countries.

Ecobank Nigeria plc was incorporated as a public limited liability company on October 7, 1986 and was granted banking license on April 24, 1989 . The bank has a technical management agreement with Ecobank Transnational Incorporated ("ETI"), Lome , Togo . ETI was formerly a 54 percent holder of the Nigerian bank’s share capital but following the Central Bank of Nigeria ’s (CBN) policy thrust on the recapitalisation of banks, ETI increased its stake to 71 percent in 2005. Under the agreement, ETI provides technical, management, staff trainsing, business development and advisory services to the bank.

The bank is a dominant franchise of Africa ’s leading regional banking group, Ecobank Group established in 1985, as a regional bank by the West African business community with the support of ECOWAS to promote regional financial co-operation in trade and investment. Ecobank Group is today considered by many investors as a gateway to the West and Central African financial markets offering world class products and services.

It is Africa ’s leading regional banking group with a network of branches and offices across West and Central Africa . The group is also expanding into Eastern and Southern Africa as "One Bank" with common policies, procedures and standards.

It aspires to be the main instrument of economic change in the sub-region and Africa including building on its track record of growth and profitability. Ecobank has grown over the last 17 years into a group with a balance sheet of $2.5 billion. It has also invested over $300 million in the banking sector in West and Central Africa , by far the largest investment by any banking group in the region.

Ecobanki Nigeria and Ghana have been listed on the Nigerian Stock Exchange and Ghana Stock Exchange respectively. ETI has also been listed at the Bourse Regionale des Valeurs Mobilieres in Abidjan , Accra and Lagos . This multi listing on three exchanges in West Africa is designed to improve the liquidity of its shares and the market value of the company to shareholders.