RenCap says Ecobank On Track To Improve Profits

The pan-African banking conglomerate, Ecobank Transnational (Ecobank), is on the pathway to posting a correction in profit growth in the current financial year (2014), according to investment firm, Renaissance Capital (RenCap).  RenCap analysts said profit before tax (PBT) would surge from $222 million to $460 million in the 2014 financial year.

“Our FY14 PBT (profit before tax) forecast of $496 million may seem slightly optimistic at this point, with the primary risk being further unexpected write-offs,” Noluthando Ndebele and Adesoji Solanke wrote in a RenCap note released this week.  The analysts continued in the report, “Our investment case for ETI (Ecobank) remains unchanged; it is premised primarily on the successful turnaround of the Nigerian subsidiary, which comprised 42 percent of the asset base but only 4 percent of PBT at YE13, down from 27 percent.” the analysts continued in the report.

The Nigerian subsidiary, Ecobank Nigeria, shocked everyone when it disclosed a surge in write-offs in the fourth quarter of 2013, with the impairment charges rising from $42 million to $217 million.  “Our key concern is that ETI’s investment case hinges on the turnaround of the Nigerian business, in our view. While we are pleased with the operational progress achieved in FY13, we need more comfort around the group’s asset-quality position,” the analysts said.

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