ETI: Sturdy FY'24 earnings amid moderating costs

Ecobank Transnational Incorporated (ETI"”TP: N45.58) delivered a solid performance in its audited FY'24 results, with PAT rising by 21.3% YoY to $493.6 million. The strong earnings growth underscores the effectiveness of the bank's Growth, Transformation, and Returns (GTR) strategy, which has driven meaningful cost efficiencies across key expense lines. Notably, the bank recorded a reduction in interest expenses (-3.2% YoY), impairment charges (-1.9% YoY), and operating expenses (OPEX) (-3.9% YoY).

Despite a 0.8% decline in interest income to $1.9 billion, the bank's lower funding cost helped offset the impact, as Net Interest Income (NII) edged up by 0.6% YoY to $1.2 billion. The improvement in interest expenses was driven by a strategic pivot toward low-cost deposits, boosting the CASA ratio to 86.4% (vs. 83.4% in FY'23). Meanwhile, Non-Interest Revenue (NIR) grew by 2.1% YoY to $913.7 million, supported by a 10.3% uptick in net fee and commission income to $524.5 million, fueled by higher credit-related fees, cash management fees, and card payment fees. Consequently, total operating income increased by 1.2% YoY to $2.1 billion.

On asset quality, impairment charges declined by 1.9% YoY to $323.6 million, primarily due to a sharp 99.0% YoY drop in impairment on investment securities ($1.2 million). However, impairment on loans and advances rose by 12.7% YoY to $325.0 million, reflecting increased provisioning for stages 1 and 2 loans, particularly in the Commercial Banking segment in Ghana and Côte d'Ivoire. As a result, Cost of Risk (CoR) rose by 50bps to 1.78%, while the NPL ratio climbed to 6.7% (vs. 5.4% in FY'23), driven by higher delinquencies in Ghana, Burkina Faso, Guinea-Bissau, Senegal, and, to a lesser extent, Corporate Banking in Nigeria.

Cost-to-income ratio (CIR) moderated to 53.0% (vs 55.8% in FY'23) as OPEX tapered by 3.9%, on the back of lower staff expenses, alongside other operating expenses"” underscoring the bank's ongoing cost optimization strategies.

The bank also benefited from a deferred tax asset linked to its participation in the Republic of Ghana Eurobonds "Exchange Offer" leading to a 5.9% drop in income tax expense to $164.2 million and a lower effective tax rate of 25.0% (vs. 30.0% in FY'23). Hence, PAT sustained a sturdy growth of 21.3% to reach $493.6 million (with an EPS of 1.36 cents).

Ultimately, ETI sustained its profitability momentum, with ROA expanding to 1.8% (vs. 1.4% in FY'23) and ROE rising to 28.0% (vs. 21.6% in FY'23).

Please click here for the full result.

CardinalStone Research

research@cardinalstone.com