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Ecobank Group, the pan Africa financial group has released its audited results for the nine months ended September 30, 2021 with profit before tax and goodwill at $352 million, increasing by $102 million, or 41%, driven by positive operating leverage, efficiency gains, and improving credit quality.
Considering the goodwill impairment charge of the prior year of $159 million, profit before tax of $352 million, increased $261 million, or 288%.
Net revenue, (operating income) was $1,265 million, increasing by $52 million, or 4%, or in constant currency by 6%.
Revenue benefited from increases in net interest income and non-interest revenue, both increasing by $26m from the prior year, with solid revenue growth in Commercial and Consumer Bank.
Net interest income was $697 million, an increase of $26 million, or 4%. Interest income rose $46 million, or 4%, mainly driven by interest income on higher investment securities balances, modest loan growth within Consumer and Commercial Bank, and the net impact of higher yields with AWA and CESA.
Interest expense increased $19 million, or 5%, driven by the net impact of higher rates and modest increase in interest-bearing liabilities. As a result, the net interest margin (NIM) declined marginally to 5.1% from 5.2% in the prior year.
The average cost of interest-bearing liabilities was 2.35%, down ten basis points compared to the preceding year. Noninterest revenue was $568 million, increasing $26 million, or 5%. Net fees and commission income increased $37 million, or 13%, to $316 million, driven by higher cash management fees, an increase in gross dollar volume on mobile and online payment activity, brokerage and credit-related fees, and other associated fees.
These increases reflected robust customer activity supported by growing economic activity in most of our regions. Net trading income decreased $48 million, or 19%, to $210 million, predominantly driven by a significant reduction in fees associated with foreign currency trading. Other income of $28 million increased by $20 million, or 228%, driven by the sale of noncore assets and dividend income associated with investee associates of some of our affiliates.
Expenses were $737 million, decreasing by $32 million, or 4%, or in constant currency, by 4%. Hence, the cost-to-income ratio (efficiency ratio) improved to 58.3%, 514 basis points better than a year ago.
Also, the cost-to-assets ratio, which measures costs to average assets, was 3.8% compared with 4.3% in the prior-year period. Staff expenses decreased $17 million, or 5%, to $325 million, partly due to a decrease in headcount. The depreciation and amortisation charge increased $4 million, or 5%, to $84 million, driven by digital and mobile capability enhancements to improve the customer experience and drive revenue growth.
Other expenses fell $20 million, or 6%, partly due to the nonrecurring restructuring costs incurred in the prior year. Overall, cost reductions are benefiting from ‘manufacture centrally, distribute locally’ strategy, which saw us set up regional cost centers (RCC) and other efficiency initiatives.
Impairment charges on loans (net) were $103 million compared with $128 million in the prior year. Gross impairment charges were $231 million, $31 million more than a year ago, driven by higher impairment charges in our Francophone West Africa and Central, Eastern and Southern regions. Ongoing effectiveness of our NPL remedial and recovery strategy, asset quality improvements, and better economic conditions continued to sustain loan recoveries, which were $128 million for the period, increasing $55 million from the prior year. The cost-of-risk was 1.43% compared to 1.79% in the prior year.
Ade Ayeyemi, Ecobank Group CEO, said: “We reported strong results, reflecting the continued diligence of Ecobankers in putting our customers first and ensuring that we meet their respective needs. For the nine months period up to September 2021, we earned $352 million in pre-tax profit, a 41% increase compared to the prior year and revenues of $1.3 billion, a 4% growth. Hence return on tangible equity increased to 17.9%, and we grew the per-share value of our shareholders’ equity by 11% to 5.52 US dollar cents.
“These results also demonstrate the hard work invested in driving efficiency in all our businesses in line with our deliberate focus on driving down our cost-toserve, sustain improvement in the quality of our credit portfolio, and strengthen liquidity and capital buffers. As a result, our cost-to-income ratio has been declining consistently quarter on quarter, currently 58.3%. In addition, the stock of nonperforming loans as a percentage of loans outstanding is now at 6.9% compared to 9.9% a year ago. At the same time, we are proactively building loan reserves, currently at 91.2% of nonperforming loans, close to our near-term target of 100%. We have boosted the firm’s liquidity profile, thanks to growing customer deposits fueled by an acceleration in digital channel adoption, partnerships with Fintechs, Telcos, and businesses in the Payments Ecosystem,” Ayeyemi added.
“During the quarter, Arise B.V., a major institutional shareholder of ETI made a $75 million Additional Tier 1 (AT1) investment in the firm. Adding onto the $350 million Tier 2 Sustainability Note ETI successfully issued to investors in June. The AT1 further improves our Tier 1 capital and double leverage ratio and demonstrates stakeholder confidence in our strategy and business prospects.
“Finally, we continue to invest in new digital and mobile capabilities to enhance customer experience, alongside the investments we are making in our people, processes, and controls, to ensure the continued resilience of our business and service delivery to our clients. I am deeply grateful to all our customers and the Ecobank team for the remarkable job.”
