A Second Look At Ecobank FYE 2018: Takeaways From The Most Recent Conference Call

Key Highlights The Banks dollar revenue dipped -0.3%

Profit before tax rose +51% on defined IFRS9 day one provision adjustments

Day one provisioning came to $299m

Non-interest income rose to 49% of total income in 2018 from 47% in 2017

Consolidated comprehensive income of ETI fell from $368.92m in 2017 to a loss of $43.24m in 2018 mainly as a result of foreign exchange translation issues arising from the application of the NAFEX exchange rate of N364/$ in 2018 as against N306/$ in 2017

NAFEX rate was only applied to the month of December 2018 while the CBN official rate was applied over the previous 11 months which in some estimates still creates a possibility of an overstatement of balance sheet size in dollars. The bank, nevertheless, insists that, the balance sheet was translated at a closing rate using NAFEX, hence the balance sheet has taken the full impact of the currency depreciation

Ecobank Nigeria’s operations represent only between 23% and 25% of the total continental business of ETI, extenuating the impact of the deteriorating performance of the Nigerian operations on the Group

Full application of IAS21-compliant NAFEX foreign exchange translation may weaken ETI’s 2019 financial performance but this is expected to be limited to mainly its Nigerian operations

The absence of day one IFRS9 provisioning in 2019 may also weigh down bottom line earnings of Ecobank Nigeria by FYE

Table 1: Ecobank’s Income Statement Highlights FY 2018 Proshare Nigeria Pvt. Ltd. Table 2: Ecobank’s Financial Position Statement Highlights FY 2018 Proshare Nigeria Pvt. Ltd. Introduction-Tackling The Tough Issue of IAS21

ETI (“Ecobank”) had a better than expected result in FY 2018, putting a bullish twist to an industry undergoing a bearish gross earnings outlook; the deposit money bank’s gross earnings dipped -0.3% from $2.49bn in FY2017 to $2.48bn in FY 2018, however, profit before tax bounced nicely, growing by +51.2% from $288.3m in FY 2017 to $435.9m in FY 2018, a sign that major loan restructuring and a cut back in operating expense seems to be working.In November 09, 2018, Proshare in a piece titled – Is ETI The Only Bank Using CBN Rates To Convert Its USD Results Into NGN and Vice Versa? , raised concerns over the bank’s persistent use of the official Central Bank of Nigeria (CBN) exchange rate of between N305/$ and N306/$ as a conversion rate for the dollar translation of […]

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