Ecobank Valuation Rises after Move to Recover Legacy Loan

Ecobank Transnational Incorporation’s (Ticker: ETI) market valuation inched higher by more than 4% following the group’s move to recover a legacy loan offered to a Nigerian businessman.

Analysts noted that pressure from high non-performing loans remains one of the key issues facing its Nigerian subsidiary performance. Balance sheet repair top the group agenda in the past three years or more and there have been positive results as the group’s NPL ratio declined to 5.2% in 2022.

In the stock market, the Pan Africa lender is valued at N206.432 billion over 18.349 billion shares outstanding priced at N11.25. In its latest result, the financial services behemoth delivered impressive earnings growth by the industry’s standard despite pressures across Africa markets – spooked by rising inflation rate.

The impacts of rising inflation rate across Africa has a mixed impact. However, this has turned positive for net margin following monetary policy tightening by central bankers in the region.

Detail from its audited report published last week showed that Ecobank earnings per share inched to $0.12, a marginal increase when compared with $0.11 reported in the comparable period in 2021.

In the equities segment of the Nigerian Exchange, the market re-priced Ecobank group share price 4.2% higher than its opening value – as a reward for improved earnings reported in 2022.

Market analysts reviewed showed that over the last 3 years on average, earnings per share has increased by 41% per year whereas the company’s share price has increased by 42% per year.

Details from its audited financial scorecards indicate that the Pan African lender’s revenue grow by 8.2% year on year to $1.66 billion in 2022. Even with the surge, profit margin was flattish at 17% – though still strong. Year to date, Ecobank share price has gained 6.13%.

The group’s newly appointed chief executive officer, Jeremy Awori focus is to increase the bank’s profitability, reducing costs and pursuing the bank’s stabilisation in Nigeria, its largest single market.

With the balance sheet rebuild, it aims to reduce the cost-to-income ratio to a target of around 50% or below, he added.

Although Nigeria is its largest single market which contributed 23% of the group’s net revenue in 2021, the business has been hobbled over the years by low profitability, high costs and a burden of non-performing loans.

Nigeria alone accounted for around 67% of the bank’s non-performing loans as of the end of the financial year 2021. At 5.2% in 2022, the group’s NPL ratio has been declining consistently since 2019 when it printed at 9.7%.

To effects its debt recovery strategy, Ecobank Nigeria Limited filed a bankruptcy suit against the Chairman of Honeywell Group, Dr Oba Otudeko to recover an alleged debt of N4.1 billion.

The bank said Otudeko personally guaranteed the loan obtained by its firms.

The Supreme Court on January 27 affirmed that Otudeko’s firms were indebted to Ecobank and that they were duty-bound to repay all the facilities availed by the bank, in line with the contract of the parties.

Ecobank, in the bankruptcy suit, is seeking “a receiving order against estate, funds, investment, shares or other interest of the debtor principally in Siloam Global Services Limited.

The group also included Honeywell Group Limited; Honeywell Flour Mills Plc; Anchorage Leisures Limited; Honeywell Oil and Gas Limited; Uraja Real Estate Limited in the suit.

Other assets it seeks to realize include Broadview Engineering Limited; Uraja Power Solutions Limited; Honeywell Energy Resources Limited; Hudson Power Limited; Pivot Engineering Limited and Pavilion Technology Limited, which interest is held either directly or through the said Siloam Global Services Limited and/or in any other company within and outside Nigeria.

The Federal High Court in Lagos has adjourned further proceedings until July 4 in the bankruptcy suit filed by Ecobank Nigeria Limited to recover an alleged debt. #Ecobank Valuation Rises after Move to Recover Legacy Loan