MON 25 APRIL, 2022-theGBJournal | Ecobank Group published its unaudited 1Q 2022 financials today, reporting impairment charges on loans (provision for credit losses), net of loan recoveries and impairment releases down to $42 million compared with $48 million a year ago.
The Bank also reports gross impairment charges were $64 million, down 4% from a year ago, reflecting an overall reduction in the credit risks within our loan portfolios as borrowers’ credit conditions improved on relatively improved economic conditions.
Partially offsetting gross impairment charges were $22 million, up 17% from the year-ago period, in loan recoveries, collections on past-due loans and releases of previous impairment charges.
The Bank said the current period’s loan recoveries include $2.2 million from the Resolution Vehicle (RV).
‘’However, with the fragility of the economic recovery due to the ongoing geopolitical tensions, we increased further the central macro-overly provision buffer of $164 million held as of year-end 2021 by $20 million in the first quarter of 2022 to a total of $184 million,’’ the Bank said.
Overall, the Bank’s credit quality remains solid, reflected in the cost-of-risk, which improved further to 1.66% in the first quarter of 2022 compared with 1.69% at year-end 2021 and 1.97% in the year-ago period.
Meanwhile, the Bank delivered strong profit before tax increase of 25% to $125 million, diluted earnings per share growth of 29% to 0.27 US cents and net revenue growth of 7% to $436 million. Returns on tangible shareholders’ equity of 18.9% was a record compared to 15.7% a year ago.
If adjusted for the impact of foreign currency translation (or on a constant currency basis), PBT increased by 29%. Additionally, positive operating leverage and efficiency gains achieved in each of the business lines benefited PBT growth, with Corporate and Investment Banking (CIB), Consumer Banking (CSB) and Commercial Banking (CMB), growing PBT by 13%, 26%, and 59%, respectively in the first quarter of 2022.
Net revenue (operating income) was $436 million, increasing by 7% or $27 million or 16% on a constant currency basis. The increase in revenue was primarily driven by a 15% growth in non-interest revenue (NIR) and a 1% growth in net interest income (NII).
Also, revenue expansion, a critical strategic imperative of its ‘Execution Momentum’ strategy, was substantial in each of the business lines. For example, CIB revenues were higher by 8%, CSB by 9%, and CMB by 11%, on a year-on-year basis, driven by deepening client relationships and increased household and business activity.
Net interest income was $239 million, increasing by 1% or $1 million, or 9% on a constant currency basis while Non-interest revenue was $198 million for the first quarter of 2022, increasing by 15% or $25 million, or by 25% on a constant currency basis, boosted by the continued robustness in client and customer activity following the lifting of most of the Covid-19 pandemic-induced restrictions.
On other hand, operating expenses rose 4% to $253 million (11% on a constant currency basis). Employee related expenditures increased by 4% to $113 million, while other operating expenses rose 6% to $115 million, predominantly driven by higher inflation.
The depreciation and amortisation charge fell by 2% to $26 million. Despite higher inflation, the cost-to-income ratio improved to a record 58.0% compared to 59.3% in the year-ago period, driven by higher revenue growth and continued expense discipline in an inflationary environment. Also, the cost-to-assets ratio, which measures costs to average assets, improved to 3.7% compared with 3.8%.
Ade Ayeyemi CEO, Ecobank Group said, “We achieved these results in a difficult operating environment characterised by the strengthening of the US dollar against our operating currencies, high inflation, high interest rates and tight labour markets across Africa as the Russia-Ukraine conflict continued to take its toll.’’
“We have continued to run the company with expense discipline, while growing earnings and investing in improvements to the customer experience. So, despite increased expenses – largely due to inflation – our cost-to-income ratio improved to 58.0%, compared to 59.3% a year ago. Our credit portfolio is in good shape, and we continue to drive down the non-performing loans ratio towards our near-term goal of under 6% while we maintain adequate impairment reserves as a buffer for possible downside risks.”
“We have ample liquidity on our balance sheet and continue to generate healthy levels of customer deposits while maintaining satisfactory levels of capital above internal and regulatory minimums. As a result, we are confident in the company’s positioning for growth, and will continue to invest in our digital offerings and payment capabilities while enhancing our core technology. In summary, we are pleased with our progress, and I would like to thank our customers for their trust, and all Ecobankers for their hard work towards realising our vision and remaining the bank that Africa and friends of Africa trust.” Ayeyemi concluded
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