Ecobank Transnational Incorporated (ETI) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the review of Ecobank's audit result for the year ended December 31, 2020. [Operator Instructions]. I also must advise you that this conference is being recorded today. And I would now like to hand the conference over to your first speaker today, Ato Arku. Thank you. Please go ahead, sir.

Thank you, John, and good afternoon, everyone, and welcome to Ecobank's full Year 2020 Earnings call. I'm joined this afternoon by Ade Ayeyemi, our group CEO, Ayo Adepoju, our group CFO; and Eric Odhiambo, our Group CRO. We will be discussing our full year results and answer your questions. So with that, I would like to remind you that our financial results and press release are available on our website at ecobank.com. Please note that some of the statements we will be making today are forward-looking and are based on our best view of the world and our businesses as we see them today. For more information on forward-looking statements, please refer to the disclaimer at the back of the Slide Deck. I will now pass the call to Ade.

Thank you, Ato, and good afternoon, everyone, and thank you for joining us today for the earnings call. [Technical Difficulty] My sincere apologies, the line seems to have dropped and we are now back. And I'll just start. Thank you, Ato, for the introduction. 2020 has been a challenging year for Africa, for the world and also for our bank and some of the results that we'll talk about today has been impacted by the pandemic. For 2020, it's also the fifth year in the road map to leadership strategy that we put out 5 years ago. The journey has both been exciting and challenging for the Board, for management and for the staff of the company. We are comfortable with our progress, which also sometimes included taking tough and Board decisions to ripen the shape of the firm. Let me provide you with a bird's eye view of some of these actions we've taken and the challenges that we were forced to face. Also, I'll give you an indication of what we see are the drivers of the [ senior- ] and medium-term potential going forward. From the outset, the franchise potential of our financial and diversified business model wasn't doubted. However, the first go-to-market approach needed evaluation, especially as the wave of technological advances and competitive forces swept through the banking industry. 5 years ago, we captured our roadmap to [ view this ] strategy with the designed to ensure that the funds remain relevant, wins in the marketplace [ is active ] and generate sustainable long-term shareholder return. Just like a tower block, we need a strong foundation. We also needed to reinforce our condition. We set about the designing our business model to be more customer-centric and transfer from power of our region where necessary, though in a controlled way. We streamlined our operations using the model of manufacturing centrally and distributing in various local markets to capture our One Bank concept. We were able to restructure some of our country, including Nigeria and central region, to position them for growth in the future, while deepening our platform with Africa and outperform with Africa leadership positions and we are able to increase the capital position of Ecobank Cote d'Ivoire to be able to participate in the growth that we are seeing in the [ banco for maxum ]. We were able to take action on the cost structure of the group and same time, invested in technology, people and processes. [ Leverage ] has digital capabilities to efficiently serve customers and we also understand that we need to permanently close about 576 physical branches. At the same time, created 2 regional processing centers in Lagos and [ azurebygone ] to handle our in-bank office processes and reduce [ a margin for us to set ]. In 2015, we've actually made a net expense reduction on a normal basis, over $300 million and improved our efficiency ratio to 62.7% as at the end of 2020. Through a rightsizing exercise, we're able to take our headcount down by about 5,000 people. We upgraded our aging technology infrastructure to ensure that we can meet the evolving needs of our customers and expectations and the challenges of the market. For example, we spent over $400 million on modernizing our technology, not already a core banking application but creating 2 data centers and making sure that all our product technologies, whether it is payment technology as our previous technology, are all of this adds to ensure that we can meet the challenges of this time. At the same time, we saw that our credit quality was [ qadro ] to growth, especially in our large markets, Nigeria, where the problem loans are monitored from past acquisitions and some of the lending that we've done in the past. But right now, as a result of concerted efforts, taking a large impairment provisions over 5 years, we've been able to now reduce our NPL ratio from double digits, about 7.6% at the end of the 2020, with a comp rate of 74.5%, going from 9.7% at the end of 2019 and a coverage of 58.3%. This strategic journey has not been all on [ sincerely ], while intentional regulatory and accounting rules, sometimes inadvertently created setbacks. Mandatory compliance with the Central Bank of West Africa [ is set ], but Q3 capital rules require foreign currency transition reserves to be deducted from Tier 1 capital when the completing regulatory [ adequate ]. The FCTR is usually negative for the group because African currencies typically depreciate against the U.S. dollar, our reporting currency, while we've been able to continue to deal with this because we believe in the future of the continent. Equally, the adoption of IFRS9, which everybody has adopted, also meant that we have to have reduction to our capital. And therefore, all of these have been taken into consideration. Today, with the stronger foundation and crucial investments in technology behind us, we are focused on activating momentum in our SMEs. One of our primary goals is to be the bank that enables SMEs to succeed by supporting and nurturing their growth from infancy into larger businesses and part of that is to make sure that we are appropriately positioned within the value chain from the micro, small, medium to large businesses. What I see on underpins to drive customer excellence, ensure that we have revenue growth, [ due ] [ partnership ] has found that regional capacity, as trading and payment and fixed income commodities and commodities business. [Technical Difficulty] efficiency to get an [ opportunity ] to [ 5% ] of cost-to-income ratio in the medium term. The NPL ratio will move towards [ 5% ] with an 100% provision level, which is our target. Ultimately, we aim for the firm to get a sustainable path of an impressive ROE generation. 2020 turned out to be a difficult year in which COVID-19 tested the resilience in human spirit in rising to many challenges. I'm extremely proud of how Ecobank cash rose to the challenge and continues [ to this ] time. In fact, we are starting to see economic growth slowly [ banking ] and vaccine rollout on some of the [ inter graph ] tests towards returning to normality. Thanks to the investments we made in technology and our people, we are able to adjust to offer more in a seamless way. We're proud of our progress, especially in 3 areas that tackled the firm's ability to grow. The credit portfolios for quality, liquidity and availability of capital. We were able to raise the convertible debt and we're also able to lengthen the liquidity of the fund through Eurobonds and all of these are improvements that will serve -- that has now reduced the constraint to growth of the fund. We're also happy with the fact that Nigeria, where we've had a couple of challenges over the years, has been able to close 2020 with a capital adequacy ratio of 21.4%, which is no longer -- Nigeria is no longer required to have a 15% capital liquidity, so which means that we now have enough capital to participate fully in the emerging opportunities in Nigeria. The lockdown operated received from physical to Digital, that was already beginning to happen. We saw transaction volumes in our digital channels increased by 46% to $40 billion with that played well across all our regions. Now turning to our results. Revenue increased by 4% to $1.7 billion, with tax 3x and free provision profit rose 14% to USD 626 million despite the pandemic and reflecting the power of our African diversified One Bank business model. Our tangible book value per share rose 16% to USD 5.47 (sic) [ USD 5.47 million ]. We announced pretax profit of USD 174 million, which is down 57% on last year. This decline in the free cash was driven majorly by $164 million goodwill charge and USD 61 million net monetary loss and restructuring costs of about $2 million that was taken before. That said, our customer deposit grew by a record of $2 billion to $18.27 billion and due to digitization and COVID-19, we were able to continue to serve our customers. We are also [ studying ] the call on asset quality. The nonperforming loans reduced substantially as evidenced by the 7.6% NPL ratio. And we're able to close our coverage at over 74%, as I said before. To conclude, we are glad that we have invested substantially in building back better, to position us for long-term sustainability. We'll be driven -- we'll be driving our execution momentum agenda towards utilizing that this investment to grow revenue and generate long-term growth for [ coming future ]. Our holding company and our portfolio of banks and nonbank records allows us to take advantage of emerging opportunities in the marketplace. We remain excited with the value this group can create and capture in years to come. Thank you. I will now hand you over to Eric, our Chief Risk Officer. Eric?

Thank you, Ade. Once again, thank you all for joining the call today. I will talk you through the performance of some key risk and credit portfolio metrics. As we have noted in our previous quarterly calls with you, COVID-19 presented challenges for many of our borrowing clients as their businesses suffered cash flow impact. We proactively engaged with our clients throughout the period, supporting where needed, and where possible, forbearance and payment extension assistance. This year, 2021, as countries slowly returned to some level of normalcy, we expect to see most of our clients gradually begin to recover from the pandemic crisis, with some sectors recovering faster than others. Our experience in managing the portfolio during difficult times will help through 2021 and beyond. On Slide 14, we see that net impairment losses increased by $72 million or 65% to $182 million, predominantly because of the impact of COVID-19 and the macro overlay reserve buffer of $55 million that we took in 2021. On the other hand, the loan portfolio has generally performed well, despite, and in part, due to the client forbearance and payment deferral support that we were able to provide. We ended the year with a cost of risk of 185 basis points, up from 112 basis points in 2019 but still below our downside scenario of above 200 basis points. If we were to adjust for the $55 million overlay of macro overlay, the cost of risk would have been 129 basis points. Moving on to Slide 15. Growth loan impairments of $558 million was flat on 2019 with a slight net increase of $1 million. The net increase is better understood by looking at the components resulting in increase, which are comprised of the following: incremental reserves in 2020 of $257 million, as well as a macro overlay of $55 million, against which we had recoveries and collections of $131 million. During 2020, we wrote off fully provided loans amounting to $171 million, with a difference of $9 million arising from exchange differences. We took a strategic stance to build up reserves to improve our nonperforming loans coverage gradually. At year-end, the coverage ratio had improved to 74.5% compared with 58.3% in 2019. We will continue to build reserves as we target our ultimate objective of holding an NPL coverage of 100%. Nonperforming loans decreased by $206 million to $745 million, primarily driven by our cost at hand on credit underwriting, an aggressive implementation of our NPL collections and recovery strategy and, in parts, loan write-offs. The net decrease of $206 million in gross NPLs was made up of the following: there are new migrations into Stage 2 of $125 million during 2020. Against this, we made recoveries of $131 million, wrote off fully provided loans amounting to $171 million, and we were able to resolve and upgrade a level of Stage 2 facilities amounting to about $30 million. Turning to Slide 16, on which we show loan movement among the 3 different IFRS9 staging buckets, total gross loans as at year-end were $9.8 billion, up $36 million from the prior year. Compared to December 31, 2019, Phase I loans increased by a net of $74 million to $7.8 billion. The increase in Stage 2 loans was driven by additions of $543 million on the one hand, this comprised of downgrades from Stage 1 and upgrades from Stage 3 and a reduction of $447 million on the other hand, comprising of repayments and recoveries, as well as some downgrades from Stage 1. I've already provided details on the reduction of Stage 3 loans when explaining the previous slide. Finally, on Slide 17. Our balance sheet is liquid and resilient, giving us the ability to deploy funds when the credit environment improves and loan growth opportunities present themselves. Overall, our liquidity received a boost from the record increase in deposits that we enjoyed in 2020. $2 billion of new customer deposits were added during 2020, with most of that getting deployed in treasury and bond securities. As the charts on this slide depicts, we saw improvements in all our liquidity measures. Our liquid assets to total assets increased from 44% in 2019 to 48% in 2020. Demand deposits as a proportion of total deposits also increased. Our loan-to-deposit ratio of 54% in 2020 was down from 61% in 2019. On the foreign currency front, we have seen improvements in many countries facing challenges in FX liquidity as the year drew to an end. We expect the cross-border risk profiles of these countries to continue to improve over time, especially as vaccination rollout points to some level of return to normality in the not so distant future. Thank you and Ayo will now take you through our financials.

Thank you, Eric, and good afternoon, everyone. I'm going to start on Slide #20. For the year ended 2020, the group reported profit before tax of $174 million on a revenue base of $1.7 billion, earnings per share of $0.01 and delivered a return on tangible equity of 0.3%. These numbers are unadjusted for some one-offs, which they are earlier highlighted. We did our fair share of the COVID challenges. On top of that, our results were further negatively impacted by the $164 million goodwill charges, which is a one-off $61 million in hyperinflation charges in Zimbabwe and South Sudan, and a total of $44 million of legal and restructuring costs. Adjusting for these items, the pretax profit, excluding goodwill charge and excluding net monetary loss, was $399 million versus $450 million recorded in 2019. Moving on to the next slide, Slide #21. Here, we provide our income statement summary. Like I said, net asset -- net revenue was about $1.7 billion, which was up by $58 million, driven by an increase in the net interest income, but partially offset by a decrease in the noninterest revenue. Expenses were down on a year-on-year basis, and the efficiency ratio improved by 342 basis points to end at 62.7%. As a result, the pretax, pre-provision profit, which reflects the core business performance and capacity to absorb credit losses, increased by $77 million or 14% to $626 million. The effective tax rate, excluding the one-off goodwill charges, was 26.4%, down from 33.3% in 2019. Moving on to Slide #22. On this slide, we've done a deep dive into the drivers of the decline in pretax profits impact [Technical Difficulty] and the net monetary losses were significant. Our COVID-19's impact was substantial in our fees and commissions generating businesses. Consequently, the noninterest revenue reduced by $100 million, partially offset in the growth that we recorded in the net interest income of $157 million. Impairment losses were higher, understandably so, as Eric highlighted, we proactively engaged with our clients with our ability to repay loan obligations were temporarily hampered and provided support where feasible by our restructuring. Our credit losses increased as a result on a year-on-year basis. But more so, we took the conservative stance to book about $55 million in terms of macro overlay reserves as a buffer to mitigate against potential losses which may or may not arise, depending on the position of the operating environment. The goodwill charge negatively impacted on performance. The $164 million was comprised of $159 million booked during the third quarter of the year relating to Oceanic Bank Nigeria, which we acquired in 2011 and another $4 million booked in the last quarter of the year relating to our microfinance entity, SOFIPE, in Burkina Faso, acquired in 2014. I've explained during our review call for the 9 months audited results, the economic recession in Nigeria, coupled with COVID-19, affected the near-term economic prospects, which triggered an impairment test under goodwill, with growth forecasts substantially lowered and risk relatedly higher, this resulted in lower applicable growth rates and higher discount rates used in the computation of the recorded amounts. In summary, the recoverable amount of Ecobank Nigeria was higher than its value-in- use amounts, prompting us to take the full write-down of the Oceanic goodwill during the third quarter. Kindly refer to the appendix of our deck for more information on the goodwill as well as our financial accounts, which [ highlight ] impacting our pretax profit is the net monetary loss arising from IPA inflationary conditions in Zimbabwe and South Sudan. We've also provided more details in the appendix of the earnings presentation. Moving on to Slide #23. Here, we take a look at the revenue and its components, net interest income and the non-interest revenue. The net revenue increased year-on-year by 4% or $58 million, which is primarily driven by the growth that we saw in our net interest income. I must mention that the significant growth in our customer deposits was a strong factor for the increase that we saw in our net interest income because this drove down at the average cost of funds by 110 basis points. On the other hand, the noninterest revenue fell by about $100 million, which primarily was driven by the impact of the pandemic, lower levels of outset and business activity affecting all layers of transactional banking activities. Moving on to Slide #24. Here, we continue to maintain expense discipline across the firm, especially so in the current environment, expenses were down by $19 million and the cost-to-income ratio of 63.7% compared to the 66.2% that we recorded in 2019. The expenses in the period included some one-off legal restructuring costs, totaling about $44 million, which were needed in order to rightsize at the resources of the bank. Excluded these one-offs, the cost-to-income ratio would have been circa 60%. In nominal terms, operating expenses would have reduced by $63 million, excluding these one-offs, instead of the reported decline of $19 million year-on-year. Moving to Slide #25. This slide shows the balance sheet and the major drivers, a balance sheet size of about USD 25.9 billion, increased by USD 2.3 billion in 2020. The record customer deposit growth of $2.1 billion accounted for this increase. I will hop to the drivers of the deposit on the next slide. With the operating landscape challenge because of the COVID pandemic, we experienced limited loan demand, and coupled with our cautious lending approach, loans were flat on a year-on-year basis. The liquidity that we garnered from the significant increase in customer deposits went to further boost the ratio of our liquid assets to our total assets, which is now at the highest level in recent years of the [ ace ] the share movements in the components of customer deposits. The record increase in customer deposit reflects the deliberate mind and decision to grow our low-cost CASA deposits and improve our cost of funding. We met this goal in 2020. As you can see, our current deposits increased by $1.7 billion. Savings deposit also increased as well and the more expensive term deposits fell by $364 million, in line with our strategic plans. The cost of funds for the group improved by about 110 basis points to 2.3%. Moving to Slide #27. The group remains capitalized at a Tier 1 ratio of 9.4% and a total capital adequacy ratio of 12.3%, both above the minimum regulatory requirement and these are estimates as of now, as we're yet to submit our December capital ratios to our regulator. I must mention that both ratios, Tier 1 and the total capital adequacy ratio, improved on a year-on-year basis by 60 basis points and 70 basis points, respectively. The improvements that we experienced in our capital ratio is primarily due to our internal profit generation and the impact of Tier 2 capital instrument. Our profit levels will be a strong factor for capital growth, coupled with optimizing the ratio with subordinated instrument. Moving to Slide number 28. Now let me provide you with the summary details of the financial performance of our business segments. Our Corporate & Investment Bank stands at $337 million in pretax profit, on a revenue base of $945 million. The pretax profit was up by 2% due to the high levels in our pretax pre-provision operating profit, but was also partially offset by higher impairment losses. CIB's revenue benefited from a net impact of lower rates, which showed up in a lower cost of funds, and in turn, higher margins. I must also mention that we also benefited from some structured fixed income and treasury-related transactions in the course of 2020, which ultimately mitigates the impact of the COVID pandemic on our transactional banking activities. Commercial Bank posted a profit before tax of $23 million, which was down against last year, primarily due to the higher levels of impairment charges. From a top line point of view, the net revenue grew by 3%, for us to record a $372 million in revenue for this business segment. Commercial banks business suffered more from the pandemic because its customers are largely SMEs. These small businesses were particularly at [ it ] due to the lockdowns that we experienced in the course of 2020. Despite the challenges, the pretax pre-provision profit increased by 11% on positive operating leverage. The IR impairment levels drove down profits. Switching over to our consumer banking business, which is our retail franchise, focusing predominantly on individual clients. The profit before tax was at $42 million, which was lower than last year and also, the net revenue of $400 million was also lower than last year by 4%. The impact of reduced consumer spending and also the regulatory pressure on fees, the lower volumes of the remittances across most markets in Africa contributed to a lower levels of revenue. And also, the card businesses, we also experienced lower spending activity due to the reduced level of travels due to the lockdowns in most of the countries. Moving to Slide #29. Here, we show a snapshot of the performance of our geographic regions. Starting with our UEMOA region, profit was about 13% lower than last year, primarily due to higher impairment charges. However, the top line revenue grew 1% despite the pandemic. So the return on equity for this region was at 18.6%. We continued to enjoy leadership position in the UEMOA region across most of all the countries. Nigeria's performance continued in a positive trajectory, albeit, from a lower base in 2019, we have made progress with its turnaround despite the headwinds. The Nigerian region posted a pretax profit of $35 million, up by $29 million from a year ago and also, we experienced a growth in revenue by 5%. The return on equity improved on a year-on-year basis from 0.4% in 2019 to about 4.2% in 2020. We also witnessed a reduction in the operating expenses by 9%, despite taking some restructuring charges in that region. Anglophone West Africa's business, the performance was very, very good with growth in all the key metrics. The return on equity for this region was about 26.9%, and we continued to enjoy leadership position across the region, whether it is Ghana or Guinea or Liberia or Gambia or Sierra Leone. Finally, our last region, CESA's profit was about $120 million for the year 2020 and this was largely impacted by what I earlier mentioned, which is the hyperinflation and monetary losses in Zimbabwe and South Sudan. The top line revenue grew by 3% for this region and the return on equity was about 16.1%, but would have been set at 20%, adjusting for the net impact of hyperinflation. The rest of the slides -- Slide 33 to 36 provide more details on each of our regions, so please refer to those at your convenience. Moving to Slide #30. Let me briefly report on how we have positioned Nigeria for growth. We have reset its cost base by taking bold actions to optimize costs by rightsizing the resources of the bank. The efficiency ratio of 82% is still high, largely due to the revenue headwinds. Internally, capital levels were falling, but no more. Ecobank's capital adequacy ratio is now at 21.4% as of December 2020, and its ability to access capital market has improved. In December, it secured a 10-year bilateral NGN 50 billion subordinated debt, which is equivalent of circa $125 million, which helped in boosting its capital adequacy ratio. In February of this year 2021, we had sought out the Eurobond market for a senior debt of about $300 million. This transaction was oversubscribed by more than 300%, and is currently the lowest coupon of any outstanding Nigerian bank issuer. The bank now has the wherewithal to compete meaningfully in the marketplace. To accelerate growth, hinged on driving low-cost deficits, trade and payments, it has already tucked up success on the deposit mix front, with CASA deficit becoming a bigger portion of deficit. Ecobank Nigeria is also making serious investments in people to enhance product knowledge and sales force capacity. Moving on to Slide number 31. Let me end with targets we have set for 2021. The operating environment remains challenging. Despite COVID-19 vaccination rollouts and the gradual rebound in economic output in Africa, the situation continues to deplete and fragile. These and other factors inform our expectations for 2021. On the balance sheet, we expect loan growth of between 0 and 2% in U.S. dollar terms, as we aim to deploy some of our liquidity into transactional trade [ loans ], deposit growth of about 0% to 4% in U.S. dollars, comparatively lower than last year. The reason is that as economies open and COVID-19-induced restrictions ease, our customer transactional demands will increase and deposit balances may taper off slightly. On the income statement, we expect revenue to increase in U.S. dollar terms between 0 and 2% on higher interest-bearing assets and modest net interest margin. Expenses will continue to trend lower with our expectations to achieve an approximately 61% efficiency ratio in 2021. We have reduced the upper end of our range target for cost-of-risk, and now expect to achieve between 150 basis points to 180 basis points for 2021. On the credit quality outlook, NPL ratio, just like Ade had earlier mentioned, is expected to be between 5% to 7% for 2021 as we continue to drive our coverage ratio towards the 100% mark in the near term. For 2021, we expect our coverage ratio to be above 90%. So to wrap up, 2020 was an incredibly challenging year but it demonstrated the benefit of a fine African diversified business model and the passion that we put into serving our clients. While the downside risks do remain, we are confident with the dynamism of our strategy and prospects for our business in the medium and in the long term. So with this, I will pass on to the operator, so please open the line for Q&A. Thank you.

[Operator Instructions] And we have a question that came through. The first question comes from the line of Adesoji Solanke.

This is Adesoji Solanke from Renaissance Capital. I have -- okay, so -- okay, let me ask 2 or 3 questions, then I'll leave it to you. If you want to take more, please let me know. As my first few questions, the first one is, can you just clarify, what's your guidance for net interest margins? I think for last year, you closed at 5.5%. What's your guidance for growth in noninterest revenues? And for return on equity, what's the guidance for the group and Nigeria, respectively? The second question is, just to understand your thinking around the performance overall, I mean, the last few years, there's been difference of prices, whether that's goodwill, impairments, et cetera. Would you say, we're now at the end of this challenging cycle, or what other risks to earnings do you think exist for this year? And third question is, on the $300 million senior notes, the NGN 50 billion local rate, can you just clarify what were the final terms on each? So what was the tenure and the implied coupon or kind of coupon on those transactions? If you need more questions after you've responded, just let me know.

Okay. Thank you, Soji. I think your first question was broadly on guidance for net interest margin for 2021, and also, first on the noninterest revenue phase. I think, broadly, we expect some stability in our net interest margin for 2021. Like we said, we grew by between 60 to [ 70 ] basis points for 2020. We expect some stability in 2021. From a yield perspective, we might see some increases in yield for 2021. We're beginning to see some of that come through in 2021 in some of our countries. But broadly for 2021, we expect about that 5% level for our net interest margin. In terms of our noninterest revenue, just like you know, the 2020 was an unusual year because of the pandemic. We expect some levels of return to normalcy in 2021. And of course, that is assuming that we don't have any new variants or any further lockdowns in our market. But on the premise of some stability returning to our market in 2021, we expect our noninterest revenue profile to be better than last year, 2020. From a return on equity guidance for 2021, looking at the group, we expect at the ROE levels to be a bit range 14% and 15% on the average. On the back of the guide, the numbers that we've guided on slide, if that is one of the presentation, so we expect that by 2022, that would further improve, and we'll be able to say we are delivering return on equity above our cost of equity. I know you specifically also asked for the ROE for the Nigerian business. We expect that should also continue to improve in 2021 and 2022 as you go along. But from a group-wide point of view, the return on equity should be greater than 14% for 2021. You talked -- let me take the third question on the transaction in Nigeria. The senior debt of about $300 million, that has a tenure of 5 years, priced at 7.125%. In terms of the subordinated transaction in local currency, NGN 50 billion, that has a tenure of 10 years and a pricing of 6.5%. I think, your second question on the surprises, risk to any, I'd like to pass that over to the group CEO. Thank you.

Thank you, Soji. I think you're right that we've had a lot of surprises, both recently and in the past, of course, but we're coming to the end of those, apart from other surprises. The last surprise was question of goodwill that had yet to be written off because of the change -- sudden change in the economic outlook for Nigeria, but that goodwill is circulating as of now, so we don't expect that problem -- that area to be a problem going forward. We've also improved the quality of our loan book in terms of the level of impairments we passed through. Our book in the last 5 years is significant, and that has improved the quality of the books that are going forward, we no longer have that. And that all gives us the confidence that as we go forward, a large component of our earnings is now going to go towards building on top of aptitude and ultimate return of -- to shareholders. Thank you.

Yes, can I ask additional questions? I've come back with in line.

Sure. Go ahead.

Okay. All right. The first one was, what do you think your cost of equity is? I mean, that was something you mentioned in one of your responses. The second thing is around the -- I believe the group has a convertible instrument. What's likely to happen to that? If I'm not mistaken, these instruments are probably out of the money at current share prices. So what do you think happens? What do you think happens there? And the final question is around -- if I got it different, did you say that there was a 5,000 reduction in staff counts, was that correct? I mean, if so, I mean, what is -- are these jobs you no longer need, or have this been moved to contract? And what's the staff count now at the group level?

Okay. Let me -- and I allowed, since I'm the one that mentioned 5,000. So as of 2015 December, the group was 20,000 people and as of 2020 December, the group 14,000 and change. And those were situations where we've had a reduction in terms of substitution of people for digital activities that we've been talking about. And remember as well, we've closed a large number of physical branches that are permanently closed. So those are actual reduction in the number of people that we used to have in the firm over the last 5 years -- not over 1 year, it's over the last 5 years in terms of reduction. So that's not just converting people to contract line. The 14,000 includes the contract staff, include everybody. We normally count everybody because it's not a question, once you have people sitting with us, we count everybody. Regarding the convertible. Yes, the convertible is this out of the money because of the nature of the branches where we operate. And our intention would be to repay the convertible as when it becomes due next year. I will make provisions for that liquidity. Thank you. The cost of equity, given where the market is now, in terms of interest rates, is about 14.5%. If you take the U.S. dollar to behave like this, if you look at the average prices across various other instruments, if you total that together in dollar terms, it will be about 14.5%.

And what is size of the finance -- what's the size of the convertible, in dollar term?

The convertible is $400 million and the balance sheet position is $25 million.

And the next question comes from the line of [ Nava Oledi ].

Could you please provide the number of your foreign currency liquid assets, cash and cash equivalents, and also the dollar short-term liabilities that are due within the next year?

So I think, if you look at our financial statement, the detailed one, and if you look at our IRFS 7 disclosures on client -- on page -- sorry, just a minute. So looking at our cash balances with the Central Bank as well, we have a total of $53.8 billion. That is out of a total balance sheet of close to $26 billion. So you mentioned specifically, in terms of our dollar liability. So if I look at our borrowed fund, which is about $1.9 billion as of December 31, 2020, so what we have will mature within the next 12 months, is about $600 million, $700 million across the group. I don't know if that answers your question.

So the liquid assets in dollars, are how much?

So if we are just looking at cash, that's about $3.8 billion but if you look at the entire balance sheet, liquid assets, the total asset is about 40% of our balance sheet, yes.

I'm sorry. I'm not clear about the answer. So the question is, how much cash and cash equivalents do you have in dollars?

So you're looking for the foreign currency complement of the liquid asset? Just to clarify.

Yes. Correct.

Okay. So if you look at Page 68 of our financial statement, where we have our foreign exchange risk clearly stated, so we have dollar, euro, CFA. But if I just look at the dollar and the euro component, so that is a total of about $4.6 billion.

So the amount of dollars and euros in cash that you have is $4.6 billion?

Yes.

Correct? Okay. And then, the amount of foreign currency short-term liabilities that are due in the next -- within the next 12 months, that's $600 million?

Yes, correct. So that is also shown if you look at our Page 71 of our financial statements as well, just to give you the references, yes.

So it's Page 68 and Page 71 is where you talk about the FX liquidity and the short-term liquidity in foreign currency?

Confirmed, yes.

And the next question comes from the line of [ Solana Gloin ].

I've got a few questions on the holdco statements that I haven't actually seen. So it would be very helpful if you could actually point me with the answer. For my first question is, in terms of the leverage, what's the current levels, and what's the target in terms of dividends, which were upstream from the operating and the subsidiaries? Could you provide the actual number for 2020 and the target for 2021? And In terms of liquidity at the holdco level, with the current amount of cash that you had then, how does it compare to the total outflows for 2021? And finally, after like some headlines remaining on Nigeria, finally adopting the FX rate, so I will be quite keen on having any feedback or color on this, and how it will actually affect the Nigerian subsidiary.

Okay. Thank you. I think your, first question is with respect to the double leverage ratio for the holding company. In 2019, our double EBIT ratio was about 155%. In 2020, that improves marginally, and we ended at 153%. This is despite the impact of the pandemic, which upset the dividend by 33. We were able to marginally improve the double leverage ratio from 155% in 2019 to 153% in 2020. You also asked on the amount of dividend upstream to the holdco in 2020. In 2020, we had about $80 million of dividend that we post in cost of 2020, and that is largely broadly in line with what we've seen in the last 4 years, which is average of $90 million. As you know, 2020, the reason for the decline is, we had some pressure from regulators' stricter dividend payment to further those entities. So we have, for example, the Bank of France in Paris. We have the Quebec regulator of the Central Africa region. We also had a reduced dividend payment from Ghana, which is one of our major subsidiaries. So 2020 was lower than the last 4 years' average of $90 million. In terms of 2021, our broad expectation is that dividend income will be closer to $130 million, and this is primarily on the back of increased dividend expectations from our Anglophone West Africa business. We expect Ghana to bring more dividend. We expect -- again that they did not pay dividend in 2020 to pay dividend in 2021. We also expect to see increased dividend inflow from our Francophone West Africa region. You also asked generally in terms of the liquidity profile of the holding company. I'd like to dimension the question to say, from a liquidity point of view for the holdco, there are 2 major subsidiaries of liquidity. The first one is the dividend, which we've spoken about and the second one is the management fee. For 2021, our expectation is, our dividend should be around $130 million. Our management fee should be around $25 million. So the total of those 2 components, that is about $155 million. So if you put that against our major outflows, which is the cost of running the holding company, which is circa $25 million... [Technical Difficulty]

Hello? Speakers, your line went off again.

Okay, sorry. Let me just reiterate in case I missed that part of the question. I think I started with the double EBIT ratio, which improved marginally in 2020 versus 2019, from 155% to 153%. The second question, as you ask with respect to dividend that we got in 2020, that is circa $80 million, which is broadly in line with what we've seen in the last 4 years, of $90 million. We also for the 2021 expectation of big debt income, and I mentioned that, that is circa $130 million, and that growth is primarily coming from our Anglophone and Francophone West Africa region. Then lastly, you mentioned the liquidity profile of the holding company, and I tried dimensioning that into the major inflows and the major outflows. But the major inflows, the dividend plus management fee, that should total about $155 million. In terms of major outflow, the running cost and the financing cost, that is about $150 million. So you still have a net loss of about $40 million from that profile. In terms of your last question on the rate, I'll pass that over to the group CEO. Thank you.

Thank you. Just to make the point that also, one of the actions we took in 2020 was to reduce the number of people in the holding company by about half as part of making sure we conserve costs. If I take the last question, would that be expense rates or interest rates?

For managerial, you mean?

Yes, please.

Yes. Just a question on, yes, FX rates, so I'm just thinking that in Nigeria, yes, the one for us so the -- basically, the devaluation today or yesterday, and that now, banks are basically adopting the FX rate as for exports and in the Forex.

Okay, okay. So that's good. So the first impact that has is that when it... [Technical Difficulty]

Hello? Speakers, your line went off again.

Thank you. What I'm saying is that when it comes to FX movements, whenever an economy is opened up, it allows more activities to happen, customers to trade better, come to position to happen and for banks to participate. The short-term question is whether we have sufficient capital to be able to meet our capital adequacy ratio, the expected operation [ here ]. Our expectation is that once the markets opens up, we expect to see more flows happening in Nigeria, and therefore, we'll be able to participate more. Thank you.

Thank you. And there are no further questions that came through at this time. Sir, you may continue.

John, if there are no further questions, then we will bring the call to an end.

Thank you. Ladies and gentlemen, that concludes our conference for today. Thank you all for participating. You may now disconnect.