Stories Tony Chukwunyem
Ecobank Transnational Incorporated (ETI) recovered $2 million of its non-performing loans (NPLs) in the first quarter of 2017 through a resolution vehicle it set up for that purpose, the Group’s Chief Executive Officer, Ade Ayeyemi, has disclosed.
He said this at the bank’s Annual General Meeting (AGM) in Lome, Togo.
He said that despite the continued macro-economic challenges in some parts of the continent, all of the Group’s businesses are making meaningful progress: “With an ongoing focus on cost discipline, stringent credit control and the increasing digitisation of our services to enhance the customer experience”.
He said: “We are proactively resolving our legacy loan issues, achieving $2 million of recoveries from the Resolution Vehicle in the first quarter of 2017. I am confident that these positive developments will be reflected in an improving performance from Ecobank going forward.”
In its financial statement for 2016, the management of ETI explained that as part of a clear and well-defined non-performing loan strategy, loans with a book value of N52 billion or $263 million were transferred to a separate entity referred to as Resolution Vehicle during the fourth quarter of 2016.
The lender said it swung to a loss before tax of $131.3 million in 2016, from a profit of $205.2 million a year earlier, adding that its performance was also hit by charges as a result of a rise in NPLs, which climbed to 9.6 per cent of total loans in 2016 from 8.9 per cent a year ago.
According to the Group, its performance was also impacted by the higher loan impairment charges taken in the fourth quarter of 2016 on specific client names related to a legacy portfolio experiencing deterioration in quality on account of macroeconomic conditions, particularly in Nigeria.
It said its impairment losses on financial assets were $864million, an increase of 62 percent over the prior year. Also impairment losses on loans and advances comprise 89 percent or $770 million of the total impairment losses on financial assets.
Net Interest Income stood at $1.1billion a decline of $39 million or 3 per cent over the over the prior year, mainly stemming from adverse currency movements and a deliberate curtailment in lending activity.
“Despite these challenges, group revenues remained resilient in a tough year of macroeconomic headwinds including a weaker economic environment, particularly in Nigeria and the strengthening of our reporting currency – the US dollar – against all African currencies particularly the Nigerian Naira where 40 percent of the Group’s revenues have historically been generated,” the Group CEO stated.
He explained : “Separately, our end of year bottom line performance has been impacted by our voluntary adoption of a full impairment charge regarding our legacy loan portfolio, for which a resolution vehicle was set up, the first private sector funded resolution vehicle of its kind in Nigeria, with the sole objective of ring-fencing the legacy loans from Nigeria’s core bank.”
This, among others, would allow management to focus on delivering results he said, adding measures being instituted would yield the desired results very soon.
He also disclosed that the bank plans to leverage on the distribution network and strategic partnerships to increase customer base to 100 million by 2020.
He added that the lender is also working to achieve improved profitability and additional volume growth in non-credit related income-generating business, in the long term.
“Ecobank remains well positioned to benefit from its leading geographic footprint, digital innovation, leading customer service and products to generate profitable, sustainable performance, in line with international best practice standards, introducing audited reporting for the half year 2017,” the Group CEO said.
Meanwhile the bank has secured shareholders’ approval to raise $400 million in its convertible bonds to restructure its operations and strengthen the group’s capital position.
The convertible bond issue will have a maturity of five years and a coupon of 6.46 percent above 3-month LIBOR, with an option to convert at an exercise price of $0.6 during the conversion period. The bonds will be on offer to all Ecobank shareholders on identical terms shortly.
The proceeds have been earmarked to repay the bridging finance required to create a Resolution Vehicle to manage Ecobank’s legacy loan portfolio and to optimise the maturities of the Group’s debt portfolio.
Board Chair of Ecobank Group Emmanuel Ikazaboh, said : “We are delighted with the strength of the support shown for the issue by our existing shareholders, as it vindicates the vigorous action taken to address our challenged legacy assets, as well as indicating their confidence in Ecobank’s future.
“Nevertheless, it is a matter of great regret that the Board was unable to recommend the payment of a dividend in respect of 2016.
“Ecobank’s senior management are united in its firm resolve to work urgently, yet diligently, to reinstate cash dividends as soon as ETI’s financial position permits.”
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