Published On: Sun, Jul 15th, 2018

Ecobank risk assets deteriorate as Kie bows out

By FELIX OLOYEDE

Charles Kie, Ecobank Bank, immediate past MD

The exit of Ecobank Nigeria’s erstwhile Managing Director, Charles Kie, has raised a groundswell of speculation in the financial community as sector analysts believe that his exit was abrupt, untimely and suspicious. Over a period of two years, Kie had succeeded in reversing the banks bedraggled balance sheet and profit and loss account as he pulled the bank from the brink of serial losses. Nevertheless, a sore point for the MD who got a stiff boot by the bank’s board recently, is that he appeared to have left the bank’s loan book worse than he met it.

Kie’s resignation was announced by the bank on July 9, 2018 after 30 months as Managing Director, having succeeded Jibril Aku in January 2016. The management of Ecobank failed to give reasons for Kie’s resignation, but there are speculations that he had challenges coping with the domestic operating environment.

The bank’s profit after tax (PAT), which was N21.25 billion in 2015, shot up by a whopping 229 per cent to N69.99 billion in 2017, buoyed by Nigeria’s recovery from 18 months recession, which it exited in June 2017. Ecobank struggled immensely during the meltdown, which was triggered by as oil prices that stumbled significantly from $108 per barrel in July 2014 to below $29 in January 2017. The bank recorded -68 per cent drop in its post-tax profit at the end of 2015, and it actually went downhill when Kie took charge at Ecobank Nigeria in 2016 as it posted N52.6 billion loss, on the back of harsh operating environment and its decision to adoption of a full impairment charge on its legacy loan portfolio.

The quality of the bank’s risk assets continued to deteriorated in the two and a half years that kie held sway, with its non-performing loans increased from 8.2 per cent in  2015 to 10.7 per cent in 2017 as the bank tries to ramp up its profitability. It, however, dropped to 10 per cent in the first three months of 2018, which was the last performance he was in involved as Managing Director of its Nigerian operations.   The bank is targeting a NPL ratio of 8-10 per cent at the end of this financial year.

The challenge of high NPL is not peculiar to Ecobank, several other banks in the country have been grappling with increasing toxic assets, which sent the average banking industry NPL ratio to 13 per cent at the end of March 2018 against the five per cent threshold set by the Central Bank.

The profitability of a bank is often foremost in the minds of investors than the quality of its risk assets, claims Moses Ojo, Head, Research and Business Development, PanAfrican Capital Plc. He maintained that Ecobank shareholders would be pleased with Kie, because he helped in growing their return on investment before he resigned as managing director of bank’s Nigeria operations. .

Ojo attributed the high bank’s NPL to its aggressive drive to grow interest income in order to increase profit.

He, however, argued: “Non-performing loan is like a malignant tumour that gradually kills an organisation if not treated on time.” He cautioned that Ecobank would need to further strengthen its risk management and be more stringent in assessing its credit.

 

The lender in November last year engaged, Adebiyi Olagbemi as a new Chief Risk Officer to help address its rising NPL challenge. This seemed to have begin to yield some positive results with its NPL ratio going down from 10.7 per cent in December 2017 to 10 per cent in March 2018, supported by the country’s gradually economic uptick.

Ade Adeyemi, Group Managing Director, Ecobank believes Kie has laid a strong foundation at Ecobank Nigeria with his immense contributions to the growth of the bank. He added that Ecobank has a good succession structure which would see it announce his replacement soon.

When the Business Hallmark contacted Odidison Omankhanlen, Senior Media Officer, Ecobank to find out reasons for the Kie’s resignation and what the bank was doing to tackle its high NPL, he asked our correspondent to send the questions to him through his e-mail with a promise to forward them to the appropriate quarters and afterward revert to him. This was done and he acknowledged receipt. The following day, he said was yet to get response from those in position to provide answers to the enquiry.

The CBN earlier in the year stopped banks with NPL ratio above the five per cent regulatory benchmark, capital adequacy ratio (CaR) below 15 per cent for tier 1 lenders and 10 per cent for tier 2 lenders and liquidity ratio under 30 per cent, which is the regulatory requirement, from paying dividends to the shareholders.

Ecobank could not pay dividend in 2017 as it fell short of the minimum NPL requirement as its NPL ratio stood at 10.7 per cent, though its CaR at 28.8 per cent and liquidity ratio were above threshold.

The management explained that the bank was unable to pay dividend last year due to the need to create buffers and maintain a solid profit position.

The bank stock was down -0.97 per cent to close N20.35 on Friday, but has appreciated 25 per cent year-to-date on the back on improved investors’ sentiments in the Nigerian stock market.

Nedbank owns 21 per cent shareholding in the Pan-African bank, QNB 20 per cent; IFC 14.1 per cent, while PIC (GEPF) and others hold 14 per cent and 31 per cent equities respectively.

Actions taken by Ecobank Management to tackle its toxic assets in 2017 include

  • Hiring a new Chief Risk Officer with extensive experience
  • Implementing an enhanced credit operating model
  • Aggressive on loan asset recovery and collateral realisation
  • Strengthening of the banks Remedial function –in the process of hiring Group Head, Remedial Management
  • Building capacity through targeted training
  • Separating management of NPLs from PDOs
  • Engaging Third-party contractors to assist with recoveries of PDOs and NPLs

© 2018, Hallmarknews. All rights reserved. Reference and link to this site is required if you wish to reuse any article.

Reactions from Facebook

comments and opinions

Leave a comment

XHTML: You can use these html tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Most Shared

Recent posts

  • Python Dance 3: Uwazurike condemns planned military operation in the South East as unnecessary intimidation

    By OBINNA EZUGWU Senior lawyer and president emeritus of Igbo think tank group, Aka Ikenga, Chief Goddy Uwazurike has condemned the planned military operation in the South East zone, Python Dance 3, as unnecessary and an attempt to intimidate the people of the zone. Chief Uwazurike who registered his displeasure over the planned military exercise […]

  • Stocks: Oil sector stocks defy economic downturn in 2nd Quarter

    By TESLIM SHITTA-BEY Despite a mild economic recovery in 2018, Oil sector stocks listed on the main board of Nigeria’s stock exchange are only recently shaking off the anguish of last year’s sector melt down. Indeed of the six leading Oil-related companies that have published 2nd quarter results in 2018, Seplat beat the blues by […]

  • Bears clobber Bulls in major rout

    By FELIX OLOYEDE After a stellar 2017, The Nigerian Stock Exchange (NSE) has collapsed to becoming the fourth worst performing equity market on the global over the last six months as political pressure and a United States of America (USA) interest rate hike intensify investor’s apathy. The local bourse plunged 18.24 per cent over the […]

  • PDP Coalition: anxiety mounts over flag bearer

    By OBINNA EZUGWU With the recent defection of Senate President, Abubakar Bukola Saraki and Sokoto State governor, Aminu Waziri Tambuwal to the People’s Democratic Party (PDP), the list of anticipated presidential hopefuls under the main opposition party’s platform is complete. But it now faces an imminent danger of being torn apart by the collision of […]

  • H1: Zenith Bank waves the magic wand

    By OKEY ONYENWEAKU Despite weak economic tailwinds, Zenith Bank Plc is fashioning a path to stronger corporate earnings in the year 2018. The bank’s management has recently struck a pact with lower operating expenses relative income while putting a spear through the heart of nonperforming loans (NPLs) as the banks half year (H1) 2018 results […]

  • I will disclose my 2019 presidential ambition in due time – Saraki

    By OBINNA EZUGWU Senate President, Abubakar Bukola Saraki has said he will tell Nigerians whether or not he will run for president in 2019 when the time is ripe. Saraki who stated this while responding to questions from journalists during his world press conference earlier on Wednesday in Abuja, following Tuesday’s invasion of the National […]

  • 2019 election budget: NASS leadership meets INEC in Abuja

    The leadership of the National Assembly (NASS) is currently in a meeting with the Chairman of Independent National Electoral Commission (INEC), Prof. Mahmood Yakubu. The meeting is a special hearing on INEC’s budget for the 2019 elections. The ongoing meeting was also tweeted via INEC’s official handle, @inecnigeria, where it was stated that the meeting […]

  • At last, Senator Akpabio dumps PDP for APC

    Former Minority Leader of the Senate, Senator Godswill Akpabio, on Wednesday officially decamped from the Peoples Democratic Party (PDP) to the All Progressives Congress (APC). Akpabio was welcomed to the ruling party at a rally organised for him by the Akwa Ibom State chapter of the APC. Some of the senators in attendance were Abdullahi […]

  • Sack of DSS boss: Osinbajo has made it clear invasion order didn’t come from him – Uwazurike

    Senior lawyer and president emeritus of Igbo think tank group, Aka Ikenga, Chief Goddy Uwazurike has commended Nigeria’s Acting President, Professor Yemi Osinbajo for summoning courage to sack the Director General of the DSS, Lawal Daura over Tuesday’s invasion of the National Assembly, noting that the Acting President, has, by his action, made it clear […]

  • NASS siege: Acting President, Osinbajo sacks DSS boss, Lawal Daura

    Acting President, Yemi Osinbajo, has sacked the Director-General of the Department of State Service (DSS), Lawal Daura following the siege on the National Assembly by security operatives on Tuesday. Osinbajo’s spokesman, Laolu Akande, disclosed Daura’s sacking on his Twitter handle, @akandeoj. He wrote, “AgP Yemi Osinbajo has directed the termination of the appointment of the […]

  • We want to restore Abia to its deserved glory—Otti

    Okey Onyenweaku Dr. Alex Otti, a forefront contestant for the post of Governor of Abia State, yesterday Sunday August 5, 2018 said in Lagos that he was gunning for position of Governor of the State to change the story of the Igbo man in Nigeria and perhaps the world. Otti, who met with friends at […]

  • Stocks: Investors scout for hidden value as market turns bearish

    By TESLIM SHITTA-BEY As Nigeria’s Stock Exchange’s All Shares Index (ASI) dips below a year-to-date yield of zero per cent (-4.58 per cent at the close of the previous week’s business on Friday), a growing number of investors have put gun sights on emerging hidden value opportunities in the market. So far the results have […]

  • Naira remains stable as foreign portfolio investors take lackluster position

    By FELIX OLOYEDE Review of Nigeria’s foreign exchange market in the last one month has revealed that the Central Bank of Nigeria (CBN) regular intervention in the market has kept the naira stable as foreign portfolio investors (FPIs) adopt a wait-and-see position in the equities market.  The local currency has been stable within a band […]

  • Saraki’ defection deepens NASS-APC logjam

    …as impeachment plot thickens and lawyers sing discordant tunes By OBINNA EZUGWU Last week, Nigeria’s Senate President, Dr. Abubakar Bukola Saraki, capped what has been days of the ruling All Progressives Congress’s (APC) unraveling when he finally and formally quit the party for the opposition People’s Democratic Party (PDP), taking with him the governor of […]

  • SARAKI: Power, Wealth, Mystic

    By OBINNA EZUGWU Bukola Abubakar Saraki is a political force of nature. His meteoric rise to national prominence in a relatively short time has left even his most ardent critics grudgingly envious of his achievements that have since overshadowed that of his late father, Abubakar Saraki, who bestrode the politics of the North Central State […]

  • Booming oil prices puts Nigeria at risk

    By AYOOLA OLAOLUWA Rising oil prices, once a big blessing may now be a curse for Nigeria, BusinessHallmark findings have revealed. The nation is now daily raking in millions of dollars as proceeds from crude sales due to rising oil prices. Since December 2017, the Brent benchmark oil price has soared by about 40%, to […]