Ecobank Boosts Liquidity Buffers Amid 22% Drop in H1’20 Profit

By Dipo Olowookere

Despite recording a decline in its profits in the first six months of 2020, Ecobank, a bank with a presence in over 30 African countries, boosted its liquidity buffers in the period under review.

The lender, according to its financial statements for the period ended June 30, 2020, increased its customer deposits by 3 per cent year-on-year to $16.7 billion from $16.2 billion on June 30, 2019.

This increase was driven by significantly higher deposit balances in AWA and CESA, mostly within consumer bank.

In addition, the stay-at-home orders and lockdowns due to the pandemic drove accelerated adoption in the use of digital channels by customers, which contributed to the increase in deposits.

A large portion of the incremental deposits was non-interest-bearing, which helped reduce the cost of funds to 2.5 per cent from 3.3 per cent in the year-ago period.

Loans to its customers in H1 2020 decreased to $9.2 billion from $9.8 billion in FY 2019, reducing the loan-to-deposit ratio to 55.1 per cent from 60.5 per cent.

The bank’s non-performing loans decreased to $904 million from $955 million, while the NPL ratio rose to 9.8 per cent from 9.7 per cent.

In the first half of the year, the operating income reduced to $771 million from $776 million as a result of the decline in the non-interest revenue to $342 million from $413 million on the back of the COVID-19 related lockdowns and border closures, leading to lower transaction activity resulting in lower fees and commissions on trade finance, credit, cash management, debit card payments, and ATMs.

Thus, fees and commissions fell by 11 per cent to $189 million.

Another contributor to the decline in non-interest revenue was the additional customer relief mitigants such as fee waivers.

During the period under review, the net trading income of Ecobank depreciated by 23 per cent to $136 million, reflecting a decrease in client-driven foreign exchange sales and the adverse impact from the depreciation of Zimbabwe’s currency.

In the financial results, the operating expenses of the lender decreased to $494 million from $515 million.

Also, the profit before tax dropped 16 per cent to $170 million in the first half of the year from $203 million in the first half of last year, while the profit after tax declined by 22 per cent to $129 million from $165 million.