By Patrick Andrew Abuja
Ecobank Nigeria has said that its 2016 profi t margin was adversely aff ected by the country’s economic recession and the movement in the foreign exchange rate.
Th e bank, which operates in nearly 40 African countries, said the combination of these activities hurts its business resulting to fi ve percent drop in shares. 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 midsized operation in Nigeria, is the fi rst lender listed on the Lagos bourse to report a 2016 loss.
Other banks have seen profi ts fall, such as rival Fidelity Bank whose 2016 net income slid 21 percent. Ecobank said its loss before tax narrowed to $131.3 million in 2016, from a loss of $205.2 million a year earlier. Its shares shed 5 percent, adding to a 20 percent fall this year. Th e 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 International 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. Th e rest would help restructure the holding company’s debt profi le.
