Ecobank Tumbles With Shareholder Nedbank After Record Loss

LAGOS (Capital Markets in Africa) – Pan-African lender Ecobank Transnational Inc. said it made a record pretax loss of $131 million last year, pushing its shares down along with those of Nedbank Group Ltd., its biggest stockholder.

Ecobank fell 5 percent to 7.79 naira in Lagos, the lowest since 2009. Nedbank, South Africa’s fourth-largest lender by assets and owner of about one-fifth of Ecobank shares, declined 4.8 percent to 221.45 rand, the most among its local banking peers.

Ecobank’s loss compared with a $205 million profit in 2015 and came after impairments soared 62 percent to $864 million. Most of them came from Nigeria, where the lender was hit by recession, dollar shortages and an almost 40 percent devaluation of the naira against the U.S. currency. Revenue dropped 6 percent to $1.97 billion and the non-performing loan ratio increased to 9.6 percent from 8.2 percent.

“It’s very surprising that Ecobank reported a loss that big,” Omotola Abimbola, an analyst at Afrinvest West Africa Ltd. in Lagos, said by phone. “Ecobank is highly exposed to Nigeria’s macro-economic troubles. It’s a major concern. Hopefully, with a recovery in oil production and the oil price, Ecobank can recover in time.”

The bank said losses were partly owing to it setting up a resolution vehicle to ring-fence soured loans in Nigeria. It will use half of a proposed $400 million convertible bond to fund the vehicle.

“We are delighted to have very high subscription levels to the issue from existing shareholders, in the region of $300 million,” Chief Executive Office Ade Ayeyemi said in a statement to the Nigerian Stock Exchange.

Ayeyemi said revenue “remained resilient despite a tough year of macro-economic headwinds including a weaker economic environment, particularly in Nigeria, and the strengthening of our reporting currency — the U.S. dollar — against all African currencies, particularly the Nigerian naira.”

Source: Bloomberg Business News