Ecobank to Boost Transaction Income to Reduce Lending Focus

LAGOS (Capital Markets in Africa) – Ecobank Transnational Inc., the most geographically diverse African lender, plans to increase revenue from transactions rather than depending on interest from loans, Chief Executive Officer Ade Ayeyemi said.

“We’ve been a big lending bank, we are now moving more and more to a big transaction services bank,” he said on the sidelines of the Africa CEO Forum in Abidjan, the commercial capital of Ivory Coast. “You need to be a balanced institution. If you’re only lending, you’re carrying substantial risk.”

The lender, which has licenses in 33 African countries, will look at offering more products around remittances, and focusing on commercial-banking customers, especially in the small- to medium-sized business segment, by providing technology that will help them manage their operations better, Ayeyemi said. Ecobank is also looking at cash-management services for its corporate customers, while continuing to concentrate on its trade business, he said.

Ecobank returned to profit in 2017 even as revenue remained relatively flat after the Lome, Togo-based company reined in lending growth to recover from a contraction in Nigeria’s economy in 2016 and foreign-exchange shortages in the continent’s largest oil producer. Net-interest income accounted for about 53 percent of Ecobank’s net revenue of $1.8 billion last year.

Here’s more of what Ayeyemi had to say:

On exiting countries

• “We want to be a profitable player and we set criteria for profitability for all our markets and we want all the markets to have a situation where the turnout equity is higher than cost of equity, which means to cover their cost of equity and generate more return.”
• “If there’s a country that cannot meet that in a foreseeable future, then there’s no point in doing business in that country. The objective is to make every country profitable.”
• “The first thing we do is to reduce the presence in the country to make sure it’s consistent with the business we can generate. So we’ll try to bring the country to size to make it profitable, the last thing we’d do is to leave a country.”
• “We said that we give the countries two years, one year is finished. We did a reorganization in central, eastern and southern Africa last year. We reduced branches, we reduced people. We increased capital where necessary; we now need to walk that out in 2018.”

On growth

• “Our expectations is for deposits to grow again this year, by 10%” after increasing by 13 percent in 2017.
• “Our loan expectation is still a little bit flattish,” depending on what happens to trade loans and infrastructure financing.
• With credit not expanding, the ratio of non-performing loans, which was 10.7 percent in 2017, is “still an issue that we need to continue to deal with” because of the situation in Nigeria. “We’ve made significant progress from where we were before.”
• Ecobank will look to “defend what we have and extend our lead” in West African countries where it is the market leader.

On some of its markets

• The improvement in the availability of foreign currency in Nigeria now allows Ecobank and its customers to “plan properly.”
• The Nigerian election in 2019 is “of no concern. There’ll be election activity, government may increase their spending, there will be focus more on campaigning rather than on governance, so all those things, every financial institutions needs to be aware that’s not business as usual.”
• “We just need to continue to navigate all these issues and hope there’s no big issues in terms of terrorism, because Burkina Faso, Mali they do have problems from time to time. Nigeria, Chad, Cameroon have problems with Boko Haram, we need to be sensitive.”