The board of Ecobank Transnational Incorporated (ETI), on Thursday presented its un-audited figures for the first quarter ended March 31, 2017, pointing to the urgent need for the group to do something about its non-performing loan book. The financials presented to the Nigerian Stock Exchange (NSE) showed that loan loss provision rose by 86% from N12.294bn in 2016 first quarter to N22.864bn, which would have significantly boosted profit numbers above the 15% growth in the period under review.
The urgency following from data mined by INVESTDATA RESEARCH showing that the Ecobank Group has grown provision for non-performing loans steadily by 268.95% in four year between 2013 and 2016 from N60.09bn to N221.7bn, amounting to N431.43bn which is almost half a trillion for the period, before this latest first quarter figure.
Realising the trouble ahead, should toxic loan accumulation continue, Ade Ayeyemi, ETI’s chief executive announced the birth of the first private sector funded resolution vehicle akin to the industry-wide Asset Management Corporation of Nigeria (AMCON) in Nigeria to ring-fence the legacy loans from its Nigerian which consistently accounts for 40% of annual revenue.
This, according to him, would among others “allow management to focus on delivering results. Our business philosophy was founded on international best practice in terms of accounting and asset quality, so whilst the impairment charge has impacted our earnings, our accounting treatment has been for the right reasons and we are in better shape for the future as a result.”
According to the 2017 Q1 result, gross earnings rose by 36% to N178.387bn from N131.394bn, with interest income accounting for N115.664bn 35% from the previous N85.925bn; while interest expense rose by a faster 51% to N44.057bn from N29.218bn, leading to net interest income of N71.607bn, compared with N56.706bn in 2016 first quarter.
Fee and commission income increased by 32% from N25.496bn from N33.595bn; fee and commission expense rose by 83% to N3.999bn from N2.184bn. Net trading income stood at N27.665bn from N18.914bn, an increase of about 46%, which was the major driver of non-interest revenue, which increased to N58.723bn from N43.284bn.
The combination of net interest income and non-interest revenue result yielded operating income of about N130.33bn from N99.991bn.
Staff expenses rose to N38.949bn from N30.711bn; depreciation and amortization stood at N6.969bn from N5.114bn; other operating expenses climbed to N38.256bn from N30.273bn; following which operating profit before impairment and tax stood at N46.236bn, 36% up from N33.852bn in the first three months of 2016.
The bank also suffered impairment losses on financial assets worth N23.364bn, 76% above the previous N13.277bn, the bulk of which was the losses on loans and advances; following which profit after impairment losses stood at N22.873bn from N20.614bn.
Profit before tax for the period was N22.854bn, up by 11% from N20.629bn; while after tax profit was better by 14% at N18.67bn from N16.367bn, representing earnings per share of 4 kobo, double the previous first quarter’s figure.
Total assets for the period rose 36% to N6.262tr from N4.61tr; with customer loans rising to 2.825tr from N2.2tr; while customer deposits grew to N3.146tr from N3.152tr, an increase of about 32%