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UPDATE 3-Nigeria, strong dollar take toll on Ecobank's 2016 earnings
April 18, 2017 / 7:38 PM / 8 months ago

UPDATE 3-Nigeria, strong dollar take toll on Ecobank's 2016 earnings

(Adds CEO comment)

By Chijioke Ohuocha

LAGOS, April 18 (Reuters) - Ecobank, which operates in nearly 40 African countries, said on Tuesday a recession in Nigeria and a strong U.S. dollar led to a loss for 2016, sending its shares 5 percent lower.

Ade Ayeyemi, Ecobank’s chief executive told Reuters he expected the pan-African lender to be back in the black this year, after it decided to absorb non-performing loans from its Nigerian unit through a “bad bank” to enable it compete.

Nigeria accounts for 40 percent of Ecobank’s revenues and is in its second year of recession, as lower oil prices caused chronic dollar shortages that hurt businesses and households.

Ecobank, which has a mid-sized operation in Nigeria, is the first lender listed on the Lagos bourse to report a 2016 loss. Other banks have seen profits fall, such as rival Fidelity Bank whose 2016 net income slid 21 percent.

Ecobank said it swung to a loss before tax of $131.3 million in 2016, from a profit of $205.2 million a year earlier.

Its shares shed 5 percent, adding to a 20 percent fall this year. The stock fell 39 percent last year.

Ecobank said its performance was also hit by charges as a result of a rise in non-performing loans, which climbed to 9.6 percent of total loans in 2016 from 8.9 percent a year ago.

“Our group revenues remained resilient despite a tough year of macroeconomic headwinds including a weaker economic environment, particularly in Nigeria, and the strengthening of our reporting currency - the U.S. dollar,” Ecobank said.

Ecobank’s losses prompted one its biggest investors, South African lender Nedbank, to write down the value of its 20 percent stake by 1.1 billion rand.

Nedbank bought its stake for $500 million in 2014. After the writedown, it is worth 2.9 billion rand ($217.49 million) on Nedbank’s books. It had been worth 7.8 billion rand in 2015.

Ecobank Transnational Inc., the bank holding company, has been hit by its exposure to central and West African economies that have struggled with weak commodity prices.

Ecobank said it planned to raise $400 million via a convertible bond issue at 6.46 percent above Libor and had received interest from existing investors for $300 million. Nedbank said it was not participating.

Ecobank said $200 million of the cash raised would repay funds used to set up a “bad bank” to resolve non-performing loans. The rest would help restructure the holding company’s debt profile.

Ayeyemi said key investors, which include Qatar National Bank, Nedbank, South Africa’s PIC and World Bank’s IFC, were still supporting the business both with capital and market access.

He said loans would no longer grow as quickly as they had in the past and that the focus will be to enable client payments and trade across the continent to boost revenue.

Around 70 percent of revenues was generated from Francophone West Africa, Ayeyemi said, adding that he expected the bank’s business in Nigeria to pick up. ($1 = 13.3342 rand) (Additional reporting by Tiisetso Motsoeneng in Johannesburg; Editing by Edmund Blair and Alison Williams)

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