N221bn Provision: ETI Floats AMCON Look-Alike Vehicle For Nigerian Legacy Loans

Chief Executive Officer of Ecobank Transnational Incorporated Plc (ETI), Ade Ayeyemi, on Tuesday, blamed the N52.6bn loss after tax in the 2016 financial year, representing a 348% drop from previous year’s N21.252bn profit, on the decision by the board to voluntarily provide N221.7bn to completely rid its book of legacy non-performing loans.
The impairment charges represented a 110.7% increase, brings to N326.9bn, the group’s total provision in two financial years, considering the N105.2bn recorded in 2015.
Already, Ayeyemi said, the group has set up 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.
Group revenues, he stressed, remained resilient despite a tough year of macro- economic headwinds including a weaker economic environment, particularly in Nigeria, and the strengthening of our reporting currency – the United States dollar – against all African currencies particularly the Nigerian Naira.
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.”
It would be recalled that following the 2009 stress-testing of Nigerian banks by the Central Bank of Nigeria (CBN) under Lamido Sanusi, which showed eight banks had become under-capitalised, ETI acquired Oceanic Bank International Plc, whose toxic assets were acquired by AMCON.
According to the figures released through the Nigerian Stock Exchange (NSE), Ecobank Group grew gross earnings by 22.3% to N665bn in 2016, from N542.7bn in 2015; Profit before impairment charges stood at N188bn, up from N146bn; resulting in loss before tax of N33.7bn, as against the previous year’s profit of N40.5bn, while loss after tax stood at N52bn, as against a profit after tax of N21.25bn in 2015.
While assuring that stakeholders that the group has strengthened its entire risk management architecture, the CEO said the group would also focus on bringing down impairment cost, improve the collection and what have been provided for so that the bottom-line would be robust, going forward.
Meanwhile, Ayeyemi spoke of a proposed $400m convertible bond issue of which $200m is for repaying short-term financing facilities used in setting up the resolution vehicle, while the remaining would be utilized for “a conscious debt restructure of the maturity profile of the ETI Holdco balance sheet.
“We are delighted to have very high subscription levels to the issue from existing shareholders, in the region of $300 million. The conversion price of the offer is 6 USD cents compared to a current price of 3 USD cents with an interest rate of 6.46% above LIBOR.
“Good businesses should always match operational expansion with cost control, and this is a fundamental belief of ours which we practise. We maintain our cautious stance on lending in this challenging period, but will continue to implement a number of exciting new customer initiatives such as our pan-African banking app and leveraging our blue-chip partnerships to benefit our customers across 40 countries.
“As the gateway to global trade finance in Africa, the role we are playing at the centre of the intra-Africa trade and cash management for governments, corporate clients, suppliers and distributors will benefit the economies in which we operate and consequently the income of Ecobank,” he said.
Ayeyemi expressed confidence in the planned cost-cutting efforts and in “our ability to deliver a leading service for our customers which will be reflected in improved key performance indicators in 2017 and beyond. Ecobank’s twin goals are generating sustainable returns above the cost of equity whilst maintaining the highest international standards and we treat both goals equally. Reputations are hard won and easily lost and we will never compromise that. We have a bright future ahead and I look forward to the future with confidence.”

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