PUBLIC

News Release

Lomé 4 December, 2020

Ecobank Group Reports Audited Results for the Nine Month Period Ended 30 September 2020

Tangible Book Value Per Share (TBVPS)1 of 4.98 US cents

Diluted EPS of - 0.13 US cents and Normalised Diluted EPS of 0.53 US cents

Operating income

Profit before tax

Annualised ROTE2

Tangible BVPS

$1,214m

$91m

-3.5%

4.98 US cents

up 4%; up 15% in CCY

$250m (excl. goodwill charge)

14.1% (excl. goodwill charge)

up 6% YTD

Cost-to-income ratio

Attributable profit/(loss)

Diluted EPS3

Tier 1 / Total CAR4

63.4%

-$32m

-0.13 US cents

9.2% / 11.6%

$127m (excl. goodwill charge)

0.53 US cents (excl. goodwill charge)

UEMOA

NIGERIA

AWA

CESA

ROE 19.1%

ROE 5.9%

ROE 28.8%

ROE5 16.5%

Cost/income 59.5%

Cost/income 79.0%

Cost/income 47.1%

Cost/income 58.2%

Ade Ayeyemi, Ecobank Group CEO, said: "Globally economic conditions remain challenging due to the pandemic, affecting businesses and households, especially with the effects of the second wave in Europe and the US. Our continued support for our various customer segments has made it easier for them to interact with us through digital channels, which have enjoyed increased transactions of 49% year-on-year. Ecobank has also been supporting communities across sub-Saharan Africa, in line with our commitment to the continent. We celebrated our annual Ecobank Day, focusing on our three year 'Together for Better Health' campaign to heighten awareness of diabetes and other non-communicable diseases, the care of which, may have been partially neglected due to the COVID-19 pandemic. We are therefore continuing our positive impact and helping to save lives.

"Momentum in the underlying performance of our businesses remain solid, despite the headwinds. Corporate and Investment Bank wasa big driver of the firm's earnings with FICC generating significant revenues. All our businesses grew deposits, leading to year-to-dateincrease of $1.1 billion and total deposits of $17.3 billion, with Consumer Bank strongly up by 11%. Within Commercial Bank we are rolling out self-onboardingcapabilities for Omni Lite and EcobankPay, our client disbursements and billing solutions. We are also consolidating our payments solutions to enable us to be more agile and consolidate our position as a key enabler of payments in Africa.

"Our results for the nine months to September saw pre-impairment income increase by 13%, or 40% excluding the impact of foreign currency movements, to $444 million. We recorded a non-cash, non-recurringgoodwill charge of $159 million, relating to our acquisitionof former Oceanic Bank in 2011, and a $33 million net monetary loss due to hyperinflationary conditions in Zimbabwe. These charges impacted our profit before tax by 70%, resulting in profit before tax of $91 million. Excluding the one-off goodwill charge, thanks to the hard work of all Ecobankers, our profit before tax would have been $250 million. The goodwill charge has no impact on our liquidity or capital adequacy whatsoever. Our plan to achieve cost savings of $60-80 million remains on track, despite a one-off $12.5 million restructuring charge.

"The trajectory of the economic recovery in sub-Saharan Africa remains unclear for at least the remainder of this year and possibly into 2021. Nevertheless, we are confident of the sustained stability of our business as we continue to enable our clients to carry out their banking transactions across our footprint. I must thank my fellow Ecobankers for their continued exceptional performance in these challenging times," Ayeyemi concluded.

Business Highlights

  • Encouraging underlying business momentum despite COVID-19 headwinds.
  • Our trade business maintained its 8% share of the Letters of Credit (LC) market. In addition, Corporate and Investment Bank supported their clients and were lead arrangers in some major syndicated bonds and loan facility transactions for governments and large corporates.
  • Our FICC business generated significant revenues thanks to episodic client-related FX sales and trading income on market volatility
  • Commercial Bank rolled-out in all our 33 markets self-onboarding functionalities on Omni Lite and EcobankPay
  • We consolidated our Payments Business, to bring focus, enhance execution agility, increase volumes, and drive better outcomes for customers.
  • Transactions on our digital channels rose 49% year-on-year (YoY) from the continued acceleration in digital adoption across all channels. In-branch transactions decreased by 52%.
  1. TBVPS is computed by dividing tangible shareholders' equity with the end-of-period number of ordinary shares outstanding
  2. The Group changed its computation of ROTE to better align to the way investors and analysts assess the Group's use of equity.

ROTE is computed using profit attributable to ETI shareholders divided by the average end-of-period tangible shareholders' equity. Tangible shareholders' equity is ETI shareholders' equity less non-controlling interests, goodwill, and intangible assets.

  1. Dilutive EPS and Basis EPS are same as the convertible debt is currently anti-dilutive
  2. Provisional Group consolidated Basel II/III CAR as of 30 September 2020.
  3. Excluding the impact of net monetary loss ROE for CESA is 24.9%

PUBLIC

PUBLIC Ecobank Reports

Audited Earnings Results: Nine months ended 30 September 2020

  • Digital transactions within Consumer Bank rose 59% YoY to 26.6m transactions valued at $2.4bn, primarily driven by Ecobank Mobile and Xpress Points (our Agency Banking locations).
  • Xpress Points surpassed the 50k mark to 57,541 sites in the third quarter, representing a growth rate of 154% YoY, driven by strategic partnerships with select aggregators. We processed 2m transactions worth $1.1bn through our agent locations.
  • Remittance volumes increased 17% year-to-date (YTD) to $1.4bn within our network, despite downward projections in overall remittances into sub-Saharan Africa by the World Bank. Our European entity, Rapidtransfer International SA, released the Rapidtransfer International app that should enable customers in the diaspora to transfer money into Africa conveniently.
  • We continue to maintain strong leadership positions in our Anglophone West Africa (AWA) and Francophone West Africa (UEMOA) regions generating ROEs above the cost of equity. ROE for our Central, Eastern, and Southern Africa (CESA) region has been healthy despite the adverse effects of hyperinflation in Zimbabwe. In Nigeria, management is taking the needed actions to turnaround the financial conditions of the business.

Financial Highlights

  • Operating income of $1.2bn, up 15% in constant currency, with pre-impairment operating income up 40% in constant currency to $444m, despite the challenging operating environment caused by COVID-19.
  • We are on track to achieve targeted cost savings of $60m-80m in 2020, despite taking a restructuring charge of $12.5m. The cost- to-income ratio improved to 63.4% versus 66.4% in the preceding year.
  • Continued strong growth in customer deposits, increasing by $1.1bn YTD and $1.8bn YoY. The growth in deposits was mostly driven by our digital channels, with most of these being zero-, or low-cost deposits.
  • Cost-of-funds,as a result, decreased to 2.5% from 3.5% a year ago. Interest expense of $119m for the third quarter was the lowest since the third quarter of 2015.
  • We strategically built impairment reserves. The NPL coverage ratio, therefore, increased to 70.1% as of the third quarter from 58.3% as of 4Q19. The cost-of-risk has risen to 1.79% for the first nine months to 30 September from 0.81% in the year ago period.
  • Profit before tax of $91m impacted by the following:
    • a non-cash,non-recurring goodwill impairment charge of $159m, related to the Oceanic Bank acquisition of 2011.
    • a net monetary loss of $33m due to hyperinflation in Zimbabwe.
  • Profit before tax excluding the impact of the goodwill charge would have been $250m
  • Net customer loans decreased $737m YTD, and $160m YoY, on a cautious credit underwriting stance.
  • Tier 1 capital of 9.2% and Total CAR of 11.6% for 30 September 2020 (estimates) were higher than the 8.5% and 11.5%, for 30 June 2020, respectively, and continued to exceed the minimum regulatory requirements.
  • The Oceanic goodwill impairment arose using the value-in-use computation and carrying value of Ecobank Nigeria (ENG). The acquisition of the former oceanic took place nine years ago, and we believe we have entirely derived the intrinsic value of the former institution. The impairment charge does not have any impact on the books and financials of ENG. ENG's business is resilient, and we continue to be supportive of it as it remains a massive opportunity for the enhanced growth of our diversified pan-African business.

Key Ratios

Key Ratios

2020

2019

(Nine months ended 30 September)

Return on average total assets (ROA)1

0.2%

1.3%

Normalised ROA (i.e. excl. goodwill charge )

1.0%

-

Profit attributable to ETI to average ETI tangible shareholders' equity (ROTE)2

(3.5)%

17.4%

Normalised ROTE (i.e. excl. goodwill charge )

14.1%

-

Gross yield on interest earning assets

8.4%

8.8%

Cost of funds

2.5%

3.4%

Net interest margin (NIM)

5.5%

4.8%

Cost-to-income ratio (CIR)

63.4%

66.4%

Cost-of-risk (CoR)

1.8%

0.8%

Effective tax rate (ETR)3

26.1%

29.3%

  1. ROA (annualised)is calculated as the Group's profit after tax divided by average end-of-period total assets
  2. Profit attributable to ETI shareholders divided by the average end-of-period tangible shareholders' equity
  3. The effective tax rate for the 9M20 period excludes the goodwill impairment of $159m

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PUBLIC

PUBLIC Ecobank Reports

Audited Earnings Results: Nine months ended 30 September 2020

SUMMARY FINANCIAL REVIEW OF THE ECOBANK GROUP

Comparisons noted in the commentary below are calculated for the nine months ended 30 September 2020 (audited) versus the nine months ended 30 September 2019 (unaudited), unless otherwise specified.

Summary Financial Review

Selected Income Statement Highlights

Nine months ended 30 Sept

Audited

Unaudited

Constant

(in millions of US dollars except per share data and ratios)

2020

2019

YoY

Currency1

Net interest income

671

541

24%

33%

Non-interest revenue

542

628

(14)%

(2)%

Operating income (net revenue)

1,214

1,169

4%

15%

Operating expenses

(769)

(776)

(1)%

4%

Pre-impairment operating income

444

393

13%

40%

Gross impairment losses on loans

(201)

(185)

8%

11%

Loan recoveries and impairment losses releases

73

127

(43)%

(41)%

Net impairment losses on loans

(128)

(58)

119%

127%

Impairment losses on other assets

(34)

(32)

7%

9%

Impairment losses on financial assets

(162)

(90)

80%

84%

Net monetary loss arising from hyperinflationary economy

(33)

-

n.m

-

Share of profit/loss of associate

0.5

(0.1)

n.m

Profit before tax and goodwill impairment

250

303

(17)%

9%

Goodwill impairment

(159)

-

n.m

Profit before tax

91

303

(70)%

(60)%

Taxation

(65)

(89)

(26)%

Profit after tax from continuing operations

25

214

(88)%

-

Profit after tax from discontinued operations

2

4

(58)%

-

Profit for the period

27

218

(88)%

(84)%

Profit / (Loss) attributable to ETI shareholders

(32)

155

n.m

-

Per Share Data (US cents)

Basic EPS

(0.13)

0.62

Normalised Basic EPS

0.53

n.a.

Diluted EPS

(0.13)

0.62

Normalised Diluted EPS

0.53

n.a.

Note: Selected income statement lines only and totals may not sum up.

(1) Constant currecy = year-on-year percentage change on a constant currency basis

Profit before tax of $91 million, decreased 70%, or in constant currency, decreased 60%. The decline in PBT was significantly driven by the one-off,non-recurring, goodwill impairment charge of $159 million related to the acquisition of former Oceanic Bank in 2011. Also, adversely impacting PBT for the period was the $33 million net monetary loss arising from hyperinflation in Zimbabwe. Excluding the goodwill charge, PBT would have been $250 million, a decrease of 17% year-on-year,or an increase of 9% in constant currency, driven by strong growth in pre-impairment operating profit.

Operating income of $1,214 million, increased 4%, or in constant currency, increased 15%, driven by significant growth in net interest income.

Net interest income (NII) of $671 million, increased 24%, or in constant currency, increased 33%, thanks to a significant decrease in the interest rates paid for customer deposits. The reduction in interest expense was also driven by the robust generation of non- interest-bearing customer deposits and to a lesser extent, a decrease in the cost of borrowed funds. The net interest margin (NIM) for the nine months was 5.5% compared to 4.8% in the prior year, while the cost of funds decreased to 2.5% versus 3.4% for the previous year.

Non-interestrevenue (NIR) of $542 million, decreased 14%, or in constant currency, fell 2%. The ongoing impact of COVID-19 on consumer and business confidence and activity was primarily responsible for the decrease in non-interest revenue. As a result, cash management fees decreased by 12%, card management fees by 18%, and corporate finance fees by 68%. Fees generated from the buying and selling of foreign exchange on behalf of clients decreased 21% reflecting the subdued economic conditions because of the pandemic. However, some fees from episodic client FX sales and fixed-income trading income on financial securities, rose 56% due to increased trading activity as market interest rates fell.

Operating expenses of $769 million, decreased 1%, or in constant currency, increased 4%. Cost reductions in operational losses and fines, business travel, rent and utilities, and repairs and maintenance, were offset by increases in restructuring costs, professional and legal expenses, and other administrative expenses. The cost-to-incomeratio (efficiency ratio) improved to 63.4%, compared with 66.4% in the prior year.

Impairment losses on loans (net) were $128 million in the first nine months of 2020, compared with $58 million in the prior year. The period's higher net impairment losses reflected the impact of lower recoveries compared with the previous year. Included in the period's impairment losses are additional impairments we recorded above those informed by IFRS-9 credit risk calculations to serve as

  1. buffer against any potential weakness in the credit environment due to COVID-19. The cost-of-risk, for the period, was 1.79% compared with 0.81% for the previous year.

Income taxes were $65 million in the first nine months of 2020 compared with $89 million in the prior-year period. The effective

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PUBLIC Ecobank Reports

Audited Earnings Results: Nine months ended 30 September 2020

income tax rate (ETR) was 26.1% (excluding the impact of one-off goodwill charge) versus 29.3% for the previous year period.

Selected Balance Sheet Information

Audited

Audited

Unaudited

30 Sept

31 Dec

30 Sept

Period As At: (in millions of US dollars, except per share amounts)

2020

2019

2019

YoY

Ccy*

Gross loans and advances to customers

9,175

9,834

9,358

(2)%

Less: allowance for impairments

635

557

1,274

(50)%

Net loans and advances to customers

8,539

9,277

8,083

6%

(3)%

Deposits from customers

17,330

16,246

15,556

11%

12%

Total assets

24,443

23,641

22,572

8%

9%

Equity attributable to owners of ETI

1,380

1,477

1,447

(5)%

Total equity to all owners

1,837

1,886

1,823

1%

3%

Loan-to-deposit ratio

52.9%

60.5%

51.5%

Total capital adequacy ratio (CAR)1

11.6%

11.6%

12.3%

Tier 1 capital adequacy ratio

9.2%

8.8%

8.8%

End-of-period ordinary shares outstanding (millions of shares)

24,730

24,730

24,730

# of ordinary shares to be issued if convertible bond converts

6,667

6,667

6,667

Per Share Data (In US Cents)

Book value per ordinary share, BVPS2

5.58

5.97

5.85

(5)%

Tangible book value per ordinary share, TBVPS3

4.98

4.72

4.64

8%

Share price -End of Period

1.10

1.79

3.05

(64)%

  1. Basel II/III CAR is a provisional estimate for 30 Sept 2020. It is reported semi-annually to the regulator, the Central Bank of West African States (BCEAO). CAR for 31 December is submitted 30 April and for 30 June submission is 31 October. CAR ratios are based on transitional adjusted capital; The Group extended its transitional schedule for the recognition of IFRS 9 Day 1 impairments in regulatory capital from three years to five years, the latter being the widely adopted ECB/PRA schedule
  2. ETI shareholders' equity divided by end-of-period ordinary shares outstanding
  3. Tangible ETI shareholders' equity divided by end-of-period ordinary shares outstanding. Tangible ETI shareholders' equity is ETI shareholders' equity less goodwill and intangible assets
    *Ccy = year-on-year percentage change on a constant currency

Loans and advances to customers (gross) were $9,175 million as of 30 September 2020, compared to $9,834 million as of 31 December 2019, and $9,358 as of 30 September 2019. Loans and advances, net of accumulated impairments, were $8,539 million, down 2%, or in constant currency, down 3%, from the prior year. On a year-to-date basis, loans fell 8% or $737 million, reflecting our cautious lending approach due to the heightened risk in the credit environment because of COVID-19. Loans within Corporate Bank fell by $722 million, and Commercial Bank loans were down $25 million. Net loans in Consumer, however, increased by $40 million, partly driven our digital lending product (Xpress loans) in Ghana.

Deposits from customers were $17,330 million as of 30 September 2020, compared to $16,246 million as of 31 December 2019, and $15,556 million as of 30 September 2019. Customer deposits increased 11% year-on-year or $1,773 million, and in constant currency, increased 12%, driven by significantly higher deposit balances within Consumer Bank. COVID-19 has accelerated the adoption of digital channels, driving higher deposit balances. On a YTD basis, deposits rose 7%, or $1,083 million. A large portion of the incremental deposits was non-interest-bearing, with current and savings account (CASA) balances increasing by $1,194 million, which helped reduce the cost of funds to 2.5% from 3.4% in the year-ago period.

The Group's provisional Tier 1 CAR and Total CAR were 9.2% and 11.6%, respectively, as of 30 September 2020. The increase in CAR for the three months ended September compared to 30 June 2020 (Tier 1 of 8.5% and Total CAR of 11.5%) is partly due to profits for the quarter and a positive swing in FCTR accreting to Tier 1 capital during the period. The impairment of goodwill has no impact on the capital ratios since goodwill was already being deducted from Tier 1 capital.

Equity attributable to ETI shareholders was $1,380 million as of 30 September 2020, compared with $1,477 million as of 31 December 2019, and $1,447 million as of 30 September 2019, respectively. The YTD decline in attributable equity of 7% or $96 million was driven by several factors: the non-cash goodwill impairment charge of $159 million in the third quarter, the $33 million net monetary loss arising from hyperinflation in Zimbabwe, and to a more considerable extent a $65 million negative reserve arising from foreign currency translation (FCTR) effects.

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ETI - Ecobank Transnational Inc. published this content on 04 December 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 04 December 2020 10:28:09 UTC