Ecobank Transnational Inc. cut loan loss expenses by 34 per cent in the second quarter, which enabled it to push after-tax profit by a clear 36 per cent to close at over N105 billion at half year.
At less than N18 billion in the second quarter, loan loss charges were down from N27 billion in the same quarter last year as well as from N32.6 billion in the first quarter.
The drop in credit losses in the second quarter diluted an increase in the first quarter and left a low rate increase of 5 per cent year-on-year to N50.5 billion at the end of June. The bank’s management is so far keeping loan impairment expenses in check for the second year after a 5 per cent drop to N84.6 billion at the end of 2022.
The interim financial report of the transnational bank for the half year ended June 2023 shows a much improved second quarter, accounting for 55 per cent of gross earnings and 61.5 percent of after tax profit at half year.
Generally, earnings growth accelerated in the second quarter while costs slowed down to power the stronger profit delivery in the quarter.
Revenue growth in the second quarter was led by other operating income that jumped more than three and half times to over N13 billion. This is followed by trading income, which rose by 60 per cent to N61.6 billion and then by interest earnings that grew by 48 per cent to N238.7 billion.
Interest expenses posed a challenge in the quarter with a more rapid growth of 72 per cent to over N94 billion than the 48 per cent increase in interest income.
The rapid growth in cost of funds was however largely diluted by a slowdown in operating expenses, which grew by 38 per cent to a little over N147 billion and further by the drop in loan loss expenses.
The favourable cost-income balance in the second quarter powered a leap of 85 per cent in pre-tax profit for the quarter to N117.9 billion.
Two major cost increases snatched a good part of the pre-tax profit – a 267 per cent jump in net monetary loss arising from hyperinflationary economies to over N25 billion as well as a 55 per cent increase in tax expenses to N27.8 billion for the quarter.
The stronger second quarter earnings quickened the first quarter numbers to register gross income of N695.7 billion at half year – an increase of 38 per cent year-on-year.
Interest income rose by 41 percent to the region of N446 billion while non-interest earnings, led by other operating income and trading revenue, grew by 38 percent to close at N239 billion at half year.
On the side of costs, interest expense is posing a greater challenge this year so far than seen in 2022, as the margin by which it beats growth in interest earnings has widened. Cost of funds grew by 60 per cent to almost N179 billion at half year compared to the 41 per cent increase in interest income.
Net interest income grew by 30 per cent to N267 billion but a stronger growth of 38 per cent in non-interest earnings helped to step up operating income improvement to 33 per cent to close at N506 billion at the end of June 2023.
At about N275 billion, operating expenses showed a moderated behaviour with an increase of 29 per cent, which strengthened operating profit before loan impairment charge to an increase of 38 per cent to over N231 billion.
A significant cost saving came from net loan impairment expenses with the moderate increase of 5 per cent to N50.5 billion. That powered operating profit after loan loss charges to a leap of 52 per cent to close at N180.7 billion at half year.
Net monetary loss arising from hyperinflation jumped by 202 per cent to N30.4 billion, which limited pre-tax profit to N150 billion or an increase of 38 per cent.
Also, a strong growth of 43 per cent in income tax expenses to N45 billion again stepped down growth in after tax profit to 36 per cent to close at N105 billion at the half year.
Earnings per share at half year amounted to N3.19 for ETI, which is an increase from N2.20 per share in the same period last year.
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