Ecobank: Analysts Keep Eyes on Dividend Decision, Group Raised N300 Bln

After a strong recovery from the earnings downturn, Ecobank Transnational Incorporation (ETI) has seen significant improvement in its profitability performance. Now, after an earnings beat, the market awaits the group dividend decision for 2021.

Ecobank share price had inched up 45% to N13.01 as the group un-audited financial statement showed mouthwatering profitability performance. On Friday, following a stock market rout, investors price the stock to N12.05 – still above N9.01 pre-earning release.

Would the group pay dividends? How much given a strong earnings beat? According to the Pan-African lender’s unaudited financial statement filled with regulator, Ecobank profitability soared strongly, beating expectation of a moderate growth projection after balance sheet cleaning efforts.

Following a N300 billion capital raise to drive growth and strengthen liquidity position, the pace of earnings recoveries increased strongly in 2021, especially after write-off recovery, according to the management result presentation.

Last year, amidst the need to strengthen funding position, Ecobank group raised a total sum of $425 million from investors split among Blue-chip shareholder base with a long-term investment horizon.

Its local subsidiary, Ecobank Nigeria successfully raised $300 million 5-yr Eurobond in Feb 2021 while the Group raised $350 million 10NC5 Tier 2 Sustainability Bond in June 2021, then backed by Arise B.V., an existing major shareholder who made a $75 million Additional Tier 1 investment in ETI.

Legacy loans and payment related to the acquisition of ex-Oceanic Bank has been done, dusted and this appears to have cleared the way for the bank to return to the game centre.

The stock of NPLs (Stage 3) has reduced to $638 million, according to a report reviewed by MarketForces Africa. Having started with $749 million as of 1 January 2021, Ecobank saw new migrations into Stage 3 of $291 million and $403 million of Recoveries, Upgrades, Collections and Write-offs.

Consequently, the Pan African lender’s non-performing loans (NPL) ratio decreased from 7.6% in 2020 to 6.2% in 2021, according to the group report. Following the 2021 earnings beat, the stock market also re-rate the company share price which has seen a meteoric rise in valuation to N229.369 billion on 18.349 billion outstanding shares.

In its earnings presentation, Ecobank return on tangible equity printed at 18.8%, stayed above the group cost of capital and earnings per share inched higher by 55% to 1.04 cents. Ecobank said its group revenue has staged a comeback, from $1.97 billion in 2016 to $2.215 billion in 2021 after dropping low to $1.622 billion in 2019.