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2023 9M: Ecobank sets to surpass 2022 performance, while Nigerian business continues to trail.

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Among other high-level appointments, Osei-Poku was named Regional Executive for Anglophone West/Africa by Ecobank Group.

2023 9M: Ecobank sets to surpass 2022 performance, while Nigerian business continues to trail.

Ecobank Transnational Incorporated has recorded a commendable 9-month performance and is likely to beat its 2022 5-year record performance.

In addition to its commendable overall performance, the bank’s share price presents a compelling investment opportunity. It is attractively priced, boasting a lower price-to-earnings ratio compared to other sectors.

Despite these positive indicators, its Nigerian business is still trailing behind other geographic regions in performance, although the 9M 2023 results indicate it will likely outperform its 2022 results.

Ecobank Transnational Incorporated (ETI) has disclosed a significant 55% year-on-year increase in profit before tax, amounting to N262.171 billion, as indicated in the audited financial statements seen by Nairametrics.

This figure not only reflects a remarkable increase but is also noteworthy as it stands 14% higher than the full-year figure of N230.55 billion recorded in 2022, which itself represented a 5-year high.

The banking group ascribed this growth to a combination of increased revenue and enhanced cost efficiency. CEO Jeremy Awori provided insights into the results, stating,

“Ecobank generated profit before tax of $450 million for the nine months to September, an increase of 55% in constant currency from the prior year.

Moreover, we delivered profits attributable to ETI shareholders of $224 million, which translated to a return on tangible shareholders’ equity of 25.6% on the back of strong revenue growth of 34% in constant currency and an improved cost-to-income ratio of 53.7%.”

A cursory review of the financial statements shows that in the first nine months of 2023, operating income surged by 12%, or 55%, in constant currency to $1.518 billion, or N884.618 billion.

This figure not only signifies noteworthy year-on-year growth but also surpassed the full-year 5-year record of N794.860 billion set in 2022.

On the other hand, while the improved cost-to-income ratio of 53.7% is said to have played a significant role in bolstering the impressive bottom, a comparative analysis with other banks such as UBA, FBNH, Stanbic IBTC, Zenith, etc. reveals that it is relatively high.

Despite the fact that revenue grew faster than operating expenses, the notable increase in the latter might have played a role in the bank’s relatively high cost-to-income ratio.

The bank’s operating expenses, driven by the growth in staff expenses and other operating costs, surged by 48% year-on-year to N475.353 billion. This figure exceeded even the 2022 full-year N448.441 billion.

We expect the bank to continue enhancing its cost-containment strategies to further reduce its cost-to-income ratio.

In addition to the significant rise in net revenue and enhanced cost efficiency contributing to the impressive bottom line, another critical success factor noted is the group’s widespread geographic diversification in alleviating challenges specific to regions.

This advantage has proven instrumental in mitigating challenges unique to specific regions, as highlighted in the banking group’s 9-month result statement:

“Group profit before tax increased by 12% or 55% at constant currency to $450 million, driven by positive operating leverage (revenue growth higher than expense growth) and despite the exposure to Government of Ghana (GoG) Eurobonds substantially increasing impairment charges on other financial assets and continued hyperinflation in Zimbabwe and South Sudan creating net monetary losses.

The geographical diversification advantage is evident in Nigeria, as its business in the country lags behind the financial performance of the banking group’s other geographic regions.

In the 2022 FY, the Nigerian business accounted for only 12.85% ($239 million) of the group’s net revenue. This trend continued in the 9M period of 2023, with the Nigerian business contributing 12.52% ($190 million) to the group’s net revenue.

Also, a breakdown of the PBT shows that Nigeria’s business contributed only 5.56% ($25 million), which is 80.18% of its 2022 full-year contribution, while Francophone West Africa (UEMOA), Anglophone West Africa (AWA), and Central Eastern and Southern Africa (CESA) contributed 52%, 36%, and 49%, respectively.

Total assets and stock performanceDespite the fluctuating performance in certain regions, the Pan African lender remains a formidable presence as one of the largest banking groups on the continent, outside South Africa, with total assets up $26.644 billion, or N20.697 trillion, as of September 30, 2023, and subsidiaries spanning 33 sub-Saharan African countries (SSA).

Following its impressive performance in 2022, Ecobank paid a final dividend of $0.11 cents per share, representing a 5.6% payout.

Over the last five years, the bank has distributed dividends in two of those years. Given the bank’s potential to exceed its 2022 profit after tax, it is expected that the banking group should increase its dividend per share in contrast to 2022.

This potential increase in dividends would contribute to enhancing the current dividend yield, which stands at 3.29%, and help strengthen investor confidence.

Last year, the stock rallied to a 21.84% YTD gain, outperforming the NG Banks industry and NGXASI. This year, the year-to-date gain has surged to an impressive 61.32% as of the close of trading on Monday, December 4, 2023.

This substantial gain underscores the positive investor sentiment and market confidence in Ecobank’s ongoing financial success and growth prospects.

Focus on the Nigerian region: The Nigerian market is the largest in Sub-Saharan Africa and should hold future potential for the group. The need to focus on growing revenue, cost efficiency, and digital payment systems should be highly prioritized.

The region’s comparatively poor performance is, in part, influenced by several factors, including low net revenue, elevated expenses, and an increase in net impairment charges on loans.Net revenues increased 3%, or 37%, in constant currency to $190 million, benefiting primarily from the net impact of higher market rates and loan growth.

The persistent rise in the overall prices of goods and services contributed to a 28% increase in operating expenses, reaching N134.376 billion, marking the highest among the regions. This had an impact on the cost-to-income ratio. Although there was a slight improvement, reducing from 77.9% in the prior year to 73.6%, it remains higher than the group’s cost-to-income ratio and a drag on the group’s earnings.

The region’s net impairment charges on loans have continued to grow from $17 million compared to $11 million in 2021 to $25 million in 9M 2023 compared with $13 million in 9M 2023, reflecting additional impairment charges.

Ecobank Valuation: Over the past 5 years, the bank has consistently grown its earnings, accumulating $1.336 billion or N513.548 billion in profits with a compound annual growth of 8.03% or 15.11% in constant currency.

However, in 2022, the growth in earnings, measured in constant currency, fell below the 5-year compounded annual growth rate, but there has been a significant rebound with a 55% increase in the first nine months of 2023.

This has driven the trialling 12-month EPS to N10.17 and consequently a trailing price-to-earnings ratio (1.68x). When compared to the banking sector average ratio of 4x, it indicates that at the current price, the stock is cheaper relative to its earnings potential and the sector.

In essence, the P/E ratio is signaling that Ecobank’s share is undervalued.In summary, the bank outperformed its key 2022 guidance ratios and exceeded its 2022 earnings during the first nine months of 2023.

As we anticipate the release of its Q4 2023 results, a pivotal consideration is whether the bank will fall short of or exceed its projected guidance.

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Ecobank Reiterates Commitment To Help Adire Industry Leverage AfCFTA…

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Ecobank Reiterates Commitment To Help Adire Industry Leverage AfCFTA…

Ecobank Reiterates Commitment To Help Adire Industry Leverage AfCFTA…

 

… Gets Commendation from Ogun State Government

Ecobank Nigeria has restated its commitment to ensure that Nigeria’s Adire industry leverages the potential of the African Continental Free Trade Agreement (AfCFTA).

Speaking at the third edition of the annual Ecobank ‘Adire Lagos Experience’ in Lagos, the Executive Director, Commercial Banking, Ecobank Nigeria, Kola Adeleke, said the bank is committed to helping businesses exhibiting at the fair explore opportunities available through the Africa trade pact.

The event which is holding at the ultra-modern Ecobank Pan African Centre (EPAC), has seen over 100 exhibitors showcase locally processed adire attires made by indigenous designers.

“After the program, these 100 merchants, we are going to continue partnering with them. We are going to support them to build capacity. We are going to even use the opportunity for them to improve the quality of whatever they are producing for export purposes. Because ultimately, our goal is to ensure that Adire becomes like an African brand with global acclaim.
“This is very unique for us as an organization because it will help to grow our nation’s economy as we see the export potential there. We are going to profile all these merchants on the Ecobank single market trade hub and then position them so that they will be able to export their products to other countries in Africa and beyond, “he said.

Mr. Kola noted that Adire Lagos’ exhibition is part of the efforts of the bank to support and project the creative industry in the country, adding that as part of a Pan African bank which operates in 33 countries of Africa, Ecobank Nigeria will always look out to support various productive initiatives and the Adire exhibition fits into this goal.

Ecobank Reiterates Commitment To Help Adire Industry Leverage AfCFTA…

(L-R) Kola Adeleke, Executive Director, Commercial Banking, Ecobank Nigeria; Bimbola Wright, Director, Ecobank Nigeria; Emmanuel Ikazoboh, Former Chairman, Ecobank Transnational Inc.; Carol Oyedeji, Deputy Managing Director; Dr. Adesegun Akin-Olugbade, OON, Chairman, Luwaji Advisory & Former General Counsel, AFC & ADB.; Titi Olujobi, Director, Ecobank Nigeria; and Kenneth Okere, Company Secretary, Ecobank Nigeria at the Ecobank Adire Exhibition in Lagos.
Meanwhile, the Commissioner for Culture and Tourism, Ogun State, Dr. Fagbayi Oluwasesan, has commended Ecobank for promoting Adire culture to help improve the sector.

 

Speaking during his visit to the fair, Fagbayi, said: “The fabric is synonymous to Ogun state. We are the custodians of Adire. It is an indigenous textile from Ogun State and we have to protect it. That’s why we are happy with Ecobank for what they’re doing today, assisting us to showcase what God has given to us, protecting it, and also telling the world that this is what is good for us to be using as fabric.”

He also said that the Ogun State government has commenced measures to address the challenge of imported adulterated Adire fabric, which poses a major threat to the local Adire industry.

“The State House of Assembly have commenced steps, through our ministry, to curb the excesses or inflow of Chinese adulterated fabric.

“First and foremost, we don’t need to address it as ‘Adire Chinese’. It is never Adire because it is a print on its own that doesn’t pass through the process of how the fabric is made. The original fabric is made manually, and it passes through nine stages before it is made.
“We are working on that and a committee has been set up with the approval of the Governor that they should go to the market, you know, look at what we can do and come up with a law, probably, though we may not have the capacity to ban it outrightly.
“We’re also taking it up with the National Assembly; the Representative Abeokuta South Federal Constituency has also raised a Bill at the National Assembly that has passed its second reading now. By the time that is done probably we will have the backing of the federal government in banning this adulterated fabric out rightly.”

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Fidelity Bank started recapitalisation before CBN made it compulsory –Amuchie

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Fidelity Bank started recapitalisation before CBN made it compulsory –Amuchie

Fidelity Bank started recapitalisation before CBN made it compulsory –Amuchie

Recently, the Central Bank of Nigeria (CBN) raised the capital base of commercial banks and set the tone for recapitalisation. But one bank that was already working on recapitalisation prior to that is Fidelity Bank Plc.

Revealing this in an interview, Fidelity Bank’s Executive Director, Chief Operations and Information Officer, Mr. Stanley Amuchie, said the bank had in August last year got its shareholders’ nod to recapitalise, only for the CBN to unveil the programme in March 2024.

He said Fidelity Bank was ahead of its competitors in knowing the right thing to do at every point in time.

He spoke on this and other things.

With CBN recapitalisation programme, which affects all banks, where you are on this?

The Central Bank of Nigeria, on March 28, 2024, announced recapitalisation for the banking industry. If you look at Fidelity Bank, we got the approval of our shareholders on August 11, 2023. That shows that, as a bank, we understand our business as well as the environment. We have done what we call Capital Needs Assessment. Based on that, therefore, we went out to seek approval of our shareholders to raise capital. And what we are trying to do is to issue 10 billion units of shares in public offering at N9.75k per share; and 3.2 billion units of shares by way of right issue to existing shareholders at N9.25k per share. That process has been in play. The signing ceremony is a step towards opening to the market. And that was why, a few days ago, on June 5, we had the signing ceremony. Of course, the processes involves getting all the parties together.

Who are these parties?

The parties will be the people at the issuing houses, the receiving banks, the reporting accountants and then the stockbrokers. Those are the people that will make up the parties to the offer. We have gone through the processes of getting all the people together, as well as prepared documents for the Securities and Exchange Commission (SEC) for approval. We have also secured approval of the Nigeria Stock Exchange Commission (NSEC) and that of the Nigeria Exchange Limited (NGX) and then held the signing ceremony. The next step is to secure the final approval of SEC to open the offer to the market. And we hope to open the offer on June 20 this year. It will be open for 28 working days. What it means is that, we will close on July 29, 2024.

It looks like you want to go into the market before others and ensure you get your shares before the competition gets stiff…

Like I said, we started this process earlier, because ours is based on strategy. This is because we are looking at our current business. We believe we had enough capital to do our business but we are looking at growth, which is why we are projecting growth. We believe that, if you want to grow, you must have what it takes. I want to liken capital to what oxygen is to human beings. If you don’t have enough oxygen, you will suffocate. Therefore, we looked at the growth process and what we needed to do, hence we started ours quite early. We didn’t wait. Remember, we were not reacting to CBN’s pronouncement. We have been very proactive about our capital base. That is what we are doing.

Ir seems there are some jitters, maybe not so much, but when the news about the revocation of Heritage Bank’s license came out, banking stocks dropped, people were asking questions, and now you are going to the market. How do you convince the people that Fidelity Bank is safe?

Let me say this again. Fidelity Bank Plc is very safe. This is a bank that has shown capacity and growth over the years. For instance, in the last five years, if you look at the stock, which is what we are talking about, you will appreciate the value our bank has created between May 2019 and May 2024. The value or the share price of Fidelity has grown by 507 percent or at N1.68k as at 31st of May, 2019, to N10.20k as at 31st of May, 2024. That is 507 per cent growth. What this means is that we have grown at an average of over 100 percent for every year.

 

You hit a new record high, over one hundred and four thousand, for the all-share index?

Yes. For all that has happened, you will see that our bank grew more than two times the all-share index. Even if you talk about the banking index, which is what tracks the value of shares of the banking industry, our bank did four times.

What are the chances of mergers, or are you looking at acquiring some banks?

Everything is on the table. For now, what we are trying to do is to get additional capital at the level where we are today. And by the time we get that, we will be in a very good position to look at what is ahead of us.

What of acquiring banks that need help, which will also increase your branches and assets?

Those are very possible. Like I said, everything is on the table for us. Our plan is to put ourselves in that position where you can think clearly and then be able to take any decision. And if we need to acquire, there has to be value. We will look at those who bring that synergy we will need. That is what we are looking at. But aside from that, we are well positioned. For the offer that is about to open, we are already getting feelers that people are seeing the investments in Fidelity and what it has done over the years. That is why they are very eager to be part of what is happening in Fidelity.

What is the major drive for capital that you are looking to get from the market?

When you are in business, at every point in your business, you need to sit back and look at where you are going to. We have seen a lot of growth in Fidelity in the last three to five years, in almost all the indices. If you look at indices like gross earnings, we’ve seen growth from N206 billion in 2020 to N556 billion in 2023 on gross earnings. That is a cumulative average growth rate of about 39 per cent. Similarly, our Profit Before Tax (PBT) grew from N28 billion to N124 billion by the end of 2023. That is a cumulative growth rate of 64 per cent. Moreso, savings accounts and deposits have also grown, significantly.

So, almost all the performance Indices have been on trajectory of growth. Therefore, you appreciate the kind of businesses you are seeing on the horizon at this moment. In this regard, what we have done, essentially, is to look at the Capital Needs Assessment, because we are getting more businesses, which is why we need to increase our capital, to be able to take on more businesses so that we do not get businesses we cannot handle. And like I said, capital in business is like what oxygen is to human beings.

Small business owners do say that commercial banks are not their friend at all. Do you think this new capital will get to small businesses?

Fidelity Bank has always been known for supporting small and medium enterprises (SMEs). Our bank has won several awards for SMEs support and there are probably only a few banks, if any, that have supported SMEs the way Fidelity has done. Our bank is more like an SMEs’ bank. We’ve grown new champions in the market and that is what we are known for. I can assure you that we will continue to do that, even better in the years ahead.

Recently, the Independent Project Monitoring Company recognised Fidelity Bank. What is the bank doing diffetently in Environmental, Social and Governance to warrant such recognition?

We are doing a lot. Today, we are one of the banks in Nigeria that have taken ESG to a greater level. We are doing a lot on the environment, staff (socials), and corporate governance. Therefore, if you talk about governance board, of course, ours is recognized as one of the strongest boards in the banking industry in Nigeria. We have people from different facets of the economy: oil and gas, investment banking and others. It goes to show that the quality of the board and its discussions are very strong. Then talk about the environment; we are doing paperless office, green financing and all. These are the things they have seen and that is why they recognised us.

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Guaranty Trust HoldCo Proposes N500bn Share Offering

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Guaranty Trust HoldCo Proposes N500bn Share Offering

Guaranty Trust HoldCo Proposes N500bn Share Offering

Guaranty Trust Holding Company (GTCO) Plc, said it has filed a preliminary ‘red herring’ prospectus with the Securities and Exchange Commission (SEC) to raise N500 billion.

The Company in a notice said the number of ordinary shares to be offered and the price range for the proposed offering have not yet been determined.
The notice said “this is issued in reliance on Rule 283 of the Rules & Regulations of SEC, Nigeria. The notice read in part, this does not constitute an offer to sell or the solicitation of an offer to buy any securities.

“Any offer, solicitation or offer to buy, or any sale of securities will be made only by a prospectus duly registered by the Securities and Exchange Commission, Nigeria (SEC) in accordance with the provisions of the Investments and Securities Act, No. 29, 2007 (the Act) and the rules and regulations of the SEC made pursuant to the Act (the SEC Rules).”

Stating the purpose of the proposed offering, the notice further said that, “the net proceeds of the proposed offering will be used for the growth and expansion of the GTCO Group’s businesses. Such planned growth and expansion will be effected through investments in technology infrastructure to fortify existing operations, the establishment of new subsidiaries and selective acquisitions of non-banking businesses; and the recapitalisation of Guaranty Trust Bank Limited.”

It added that “the proposed offering is structured as an institutional offering targeted at eligible investors and a retail offering within Nigeria and a private placing to persons reasonably believed to be qualified institutional buyers outside Nigeria (the international tranche).”

It noted that the proposed offering is anticipated to open by July, 2024, adding that the filing of the red herring prospectus was undertaken with a concurrent filing of a preliminary universal shelf registration statement.

“The universal shelf registration will permit GTCO to establish a multi-currency securities issuance programme (the Programme) to issue various types of securities, or any combination of such securities, in one or more offerings, from time to time, to raise proceeds in an aggregate amount of up to $750 million or equivalent amount in Nigerian naira) in the Nigerian/international capital markets during the validity period of the Programme.”

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