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Ecobank TransnationalIncorporated (ETI) appears to beon the mend as its 9M audited results reflects an improvement in top andbottom-line earnings compared to 9M 2020. The group posted a goodwillimpairment of N60.58bn in the previous year which hurt its earnings, however despite the one-offgoodwill adjustment the group in 2021 saw an earnings rebound and an upward stretch inliquidity for the first nine months of the year. 

By June 2021, the group successfully raised US350m in Tier2 Sustainability Notes, making it the first financial institution to raise aTier 2 instrument in Sub-Saharan Africa (SSA). The 10-year debt instrument hasa call option in June 2026 and was issued with a coupon rate of 8.75%. The couponrate is notably higher than Access Bank's first Eurobond issued this year at acoupon rate of 6.125% but slightly lower than Access Banka's second issue witha coupon of 9.125%.

The group shored up its capital by securing anAdditional Tier 1 (AT1) capital investment of US$75m from Arise B. V, expectedto improve the group's capital adequacy ratio (CAR). 

Key Takeaways/Highlights

• Gross earnings grew by +11.77% to N686.77bn from N614.56bn in 9months 2020 (up by +3.39% to US$1.67bn in US dollar terms).
• Net interest income up Y-o-Y by +12.02% to N445.12bn from N397.37bn in 9months 2021 (up by +3.62% to US$1.08bn in USD terms).
• Non-interest income increased by+12.42% to N231.74bn from N206.13bn in 9months 2020 (increased by +3.99% toUS$564.11m in USD terms).
• PBT was up +316.47% to N143.67bn from N34.49bn in 9months 2021 (grew by +285.24% to US$349.74m)
• Impairment charges on financialassets fell -3.12% to N59.57b from N61.49bn in 9months 2020 (fell -10.39% to US$145.01m).
• Total assets up Y-o-Y by +15.71% to N10.91trn from N9.43trn in 9months 2020 (increased by+7.03% to US$26.56bn).
• Loans and advances to customers wereup by +11.25% to N3.67trn from N3.29trn in 9months 2020 (grew by+2.90% to US$8.9bn).
• Deposit from customers grew +16.48% to N7.79trn from N6.69trn in 9months 2020 (increased by +7.74% to US$18.96bn).
• Total equity rose Y-o-Y +23.67% to N876.33bn fromN708.62bn in 9months 2020 (up by+14.40%to US$2.13).
• Basic earnings per share (EPS) roseto N301.06 from a negative of N50.17 in 9months 2020.
• The non-performing loan (NPL) ratioimproved to 6.90% from 9.90% in 9months 2020.
• Cost-to-income ratio dipped by -8.04% to 58.30% in 9months 2021 from 63.40% in 9months 2020
• Return on equity rose to 16.39% in 9months2021 from 4.87% in 9months 2020.

Gross Earnings

ETI's gross earnings have been on a steady upwardtrajectory, it edged up by +11.77% toN686.77bn in 9months 2021 from N614.56bn in the same period in the previousyear. Net interest income and non-interest income both recorded the same levelof growth in the period. Net interest income grew Y-on-Y by +12.02% to N445.12bn while non-interest income wasup by +12.42% to N231.74bn in 9months 2020 (see chart 1below). 

In US dollar terms the Bank posted a slower growthrate in gross earnings mainly on the back of the devaluation of the domesticcurrency. Gross earnings grew Y-on-Y by +3.39%to US$1.67bn from N1.62bn in 9months 2020. The I & E FX window rate wasused for the conversion.

Chart 1: ETI's Gross Earnings 9M 2017 - 9M 2021 (N'bn)

Source: ETI's Financial Statement,Proshare Research

Profit Before Tax

Earnings before tax rebounded in the period, against9m 2020 figures the Bank paid goodwill impairment of N60.58m which caused PBTto decline by -68.49% in the period.

For 9months 2021 ETI recorded its highest PBT duringthe period under review, PBT was up by +316.47%to N143.67bn. This was on the back of a +11.93%in operating income to N516.17bn, while impairment charges on financial assetsfell slightly by -3.12% to N59.57bn (see chart 2below). 

Dollarizing the Bank's PBT, it also advanced in theperiod by +285.24% to US$349.74m fromUS$90.79m in 9months 2020, slower than growth in Naira terms.

 Chart 2: ETI'sProfit Before Tax 9M 2017 - 9M 2021 (N'bn)

Source: ETI's Financial Statement,Proshare Research

Financial Intermediation

Net Deposits 

Deposits from customers edged up by +16.44% to N7.79trn from N6.69trn for 9months 2020,the growth in customer deposits drove higher balances in treasuries andinvestment securities (see chart 3 below). 

The CESA business unit of the Group recorded thehighest growth in customer deposit by +17%while the Nigerian segment had a decline in deposit from customers by -3%. The UEMOA region accounts for the largest portionof the Group's total deposit from customers, contributing 35.44% while Nigeriaaccounts for 20.27% of total deposits. 

Chart 3: ETI's Deposits From Customers 9M 2017 - 9M 2021 (N'trn)

Source: ETI's Financial Statement,Proshare Research 

Loans & Advances to Customers

The growth rate in loans and advances to customers wasslower than customer deposits, it grew by +11.55%to N3.67trn from N3.29trn in 9months 2020 (see chart 4 below). 

Despite growth in loans and advances to customers anddeposits from customers, the net loan-to-deposit ratio (LDR) dipped to 47.11%in the period from 49.18%. 

Chart 4: ETI's Net Loans & Advances to Customers 9M 2017 - 9M 2021 (N'trn)

Source: ETI's Financial Statement,Proshare Research

Non-Performing Loan 

NPL ratio was steady between 9months 2018 to 9months2020 at an average of 9.8%, in 9months 2021, it improved to 6.90% meeting theGroup's 2021 target of 5% - 7%. Although, the Pan African Bank's NPL is aboveCBN's regulatory threshold of 5%.

The AWA region of the group had the lowest NPL ratioof 3.0% while the Nigerian business segment recorded the highest NPL ratio of16.5% (see chart 5 below).

Chart 5: ETI's Non-Performing Loans Ratio 9M 2017 - 9M 2021 

Source: ETI's Financial Statement,Proshare Research

The Nigerian business unit recorded declines both innet revenue (operating income) which fell by -23%and PBT which dipped by -51%. The 9M result ofthe group highlighted the Anglophone West Africa region as the most profitable,with the highest group return on equity (ROE), and the largest PBT despite arelatively lower group-wide net revenue (see table 1 below).

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