Ecobank Transnational Incorporated (ETI) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the Ecobank Group Unaudited Half Year Results for 2025. [Operator Instructions] Please note that, this call is being recorded. I trust everyone has had the opportunity to review the earnings release documents, which are available on the Investor Relations section of the ecobank.com website. These documents include the earnings presentation that we will reference during the call. I will first turn the call over to Jeremy Awori, Group Chief Executive Officer, for some opening remarks. Afterwards, Ayo Adepoju, Chief Executive Director and Chief Financial Officer, will take you through the results presentation. Before we proceed, I would like to remind you that the company may make forward-looking statements, which will be based on our current perspective of the world and our business. For more information on these forward-looking statements, please refer to the disclaimer at the back of the slide deck. With that, it is my pleasure to turn the call over to you, Jeremy. Please go ahead.

Thank you, Judith, and good afternoon, ladies and gentlemen. Welcome to our Half 1 2025 results call. On 29th of July, we released our half year results for 2025, showcasing the strong implementation of our growth transformation and return strategy and more importantly, the resilience of our diversified business model in a challenging macroeconomic environment. In the first half of the year, the U.S. raised tariffs to near century highs, disrupting global trade flows and injecting much uncertainty into investment decisions. Now whilst we have little direct exposure to U.S. trade, the ripple effects are tangible. Fortunately, this situation is beginning to ease. Recent U.S. policy adjustments have brought more clarity. And in several markets, tariff burdens have decreased, including Côte d'Ivoire from 21% to 15%, Malawi from 17% to 15%, Zambia from 17% to 15% and Zimbabwe from 18% to 15%. Lower trade tensions are improving sentiment and visibility, especially in commodity exporting countries where we operate, and that's translating into better funding conditions and a more stable risk environment across the region. Notably, most African countries are now facing significantly lower tariffs than many Asian counterparts. For instance, the average tariff rates in markets like Thailand, Vietnam, Bangladesh and India sit around 21%, whereas key markets such as Ghana at 15%, Kenya, 10%; Senegal, 10% benefit from lower U.S. tariffs with Nigeria also at 15%. This creates a substantial opportunity. African exports are becoming more competitive, which could open new trade corridors. And overall, the trade landscape's growing clarity drives more confident decisions across our markets. In our operating region, we are observing disinflationary trends and the relaxation of monetary policies by central banks, which should positively impact the economic outlook. Our key currencies either appreciated or remained stable against the U.S. dollar. For example, the Ghana and CD appreciated by approximately 40%, while the CFA franc showed stability as did the naira. The stability increased household and business confidence. Amid this complex operating environment, we delivered strong results for the half year. We can move to the next slide. With a profit before tax of USD 398 million, which was up 23% year-on-year. We achieved a robust return on tangible shareholder equity of 30.5%. And on a per share basis, we saw a 23% increase in earnings and an 83% increase in tangible book value. Our results surpassed guidance, demonstrating our commitment to our strategic priorities. We're pleased with the progress that we've made in executing our GTR strategy. A key growth metric for us, which is revenue rose 12% to ZAR 1.1 billion, marking the strongest half year growth since 2014. Our Corporate and Investment Banking revenues increased by 13%, and our Consumer and Commercial Banking revenues rose by 9%. This growth resulted from prudent management of our net interest margins driven by increased primary banking relationships, which led to a rise in low-cost and stable deposits. Underlying fee drivers such as cross-border trade, wholesale payments, increased card usage and treasury management solutions saw significant growth, fueling a 13% in nonfunded income. Payments revenue grew by 12%, representing 13% of our total revenues. Our strong customer deposit franchise provides stability, especially with low-cost CASA -- CASA deposits. This combination of substantial customer acquisition and improved product innovation resulted in an increase in deposits by USD 3.4 billion to date, and $4.9 billion year-on-year, bringing the total deposit level to USD 23.9 billion. We also saw growth in key customer segments with our high-value customer base increasing by 11% and our small- and medium-sized enterprises portfolio growing by 6%. Regarding our transformation, we are making significant strides to enhance operational efficiency and improve customer and employee experience. Our focus on expense discipline is yielding positive results. We continue to eliminate waste and invest in product innovation, distribution, technology and personnel to establish a solid foundation for long-term growth. For instance, we are rolling out over 300 modern state-of-the-art ATMs. We are enhancing our mobile and business applications, which we have recently rolled out in Nigeria and a few other markets and are introducing new Xpress Point app -- a new Xpress Point agency app in 5 markets. As a result, we're starting to see the benefits with revenue growth significantly outpacing expense growth, achieving a record cost-income ratio of 49.1%. This marks the first time in more than a decade that the cost-income ratio has fallen below 50%. To ensure disciplined capital allocation, we continue to reevaluate each country's operating model and collaborate with its Boards and management to develop effective strategies that will enable success in chosen customer segments and product offerings. We have formed in-country cross-functional transformation scores focused on specific initiatives to enhance execution and accountability. Partnerships are central to our strategy with our collaboration, with Google Cloud being a prime example. This partnership is the first of its kind in Africa and positions us to modernize our infrastructure while scaling payment innovations and banking-as-a-service solutions. We're not just upgrading our infrastructure or service, but fundamentally resetting how we build and deliver our services. We are transitioning from being more -- having a more monolithic core to a modular cloud-native platform. This shift means faster build cycles, interoperable components and freedom from vendor lock-in. What used to take us 36 months can now often be done in between 6 and 12 months, resulting in much better outcomes. This transformation is already evident in our execution. In payments, we are enhancing real-time routing capabilities. Concurrently, we are rolling out digital lending products quickly in consumer banking, providing greater control and scalability. Our remittance platform is also being developed to enable global players like Revolut, TransferTo, XTransfer, among others, to connect seamlessly to our systems. We are fully in delivery mode. Workloads are shifting, teams are innovating, and we are embedding a cloud-first mindset throughout our organization. In summary, this partnership equips us with the speed, flexibility and scale we need to compete and succeed, aligning perfectly with our GTR or growth transformation and returns agenda. Regarding our returns, we are performing exceptionally well, significantly exceeding our cost of capital at the group level. The return on tangible equity stands at 30.5%, even with an increase in equity. This performance is driven by a solid return on assets and a reduction in our financial leverage. Our regional return on equity figures are also promising. In CESA ROE improved to 36.9%. UEMOA remained stable at 26.7% and our Anglophone West Africa saw a slight decrease due to regulatory challenges, but still maintained a high ROE of 30.2%. Nigeria's ROE has risen significantly from 1.1% at year-end to 6.5%, indicating a positive trend, although it still falls short of our desired threshold. We are also gradually expanding our lending activity, but doing so cautiously and prudently. As a result, gross loans grew by $1.1 billion year-to-date, reaching $11.6 billion, with decent growth in Corporate and Investment Banking and Consumer and Commercial Banking. Our common equity Tier 1 capital ratio stood at 11.4%, and our total capital adequacy was 15.6% as of 31st March 2025, 300 basis points above the regulatory minimums. Our liquidity buffers also remain robust. As you may have seen in the news, we have decided to divest of our entire stake of 98.87% in our Ecobank Mozambique affiliate, and we are divesting to FDH Bank of Malawi. This decision aligns with our commitment to our growth transformation and return goals of being a competitive and impactful player across our markets. We anticipate a smooth transition for employees, customers and partners. And at the same time, we are exploring strategic partnerships with FDH to maintain Mozambique's access to our Pan-African digital ecosystem for seamless cross-border payments. This divestment will unlock value for the firm and its shareholders. And I want to personally acknowledge the unwavering resilience and exceptional dedication of our colleagues in Mozambique during challenging times and throughout this journey. Their professionalism, resilience and commitment to our customers have been remarkable. You may also have noted that Nedbank has announced its intention to sell its 21% stake in Ecobank as it realigns its strategy to focus on the SADC and EAC regions where it owns and controls businesses. We welcome and respect their decision. Nedbank has been a valuable strategic partner. And as a Board member and shareholder, we wish them the best in their strategy reset. It is also essential to state that the fundamentals of our own business remain strong as evidenced by our first half results, and we are positioned to deliver sustainable value to our shareholders. As we enter the second half in anticipation of Ecobank's 40th anniversary, I feel honored by Ecobank's continued contribution to Africa's economic and financial integration built on the foundation laid by our visionary founders and dedicated Ecobankers. Across the group, we are advancing key initiatives to deepen client engagement and drive execution. In Corporate and Investment Banking, we are enhancing cross-border execution, scaling up investment banking and advisory services and sharpening our sector focus in high potential industries. In Consumer and Commercial Banking, we're also intensifying our efforts around high-value retail and SME segments, supported by a strong digital lending and employee banking momentum. In parallel, our payments, remittances and Banking-as-a-Service platforms are scaling rapidly, underpinned by a strategic partnership with Google, as I mentioned, growing volumes and a modernized technology stack. These businesses are central to our digital ecosystem strategy and expected to be key growth drivers in H2 and beyond. We remain confident that our growth transformation and return strategy will deliver for our customers, people, partners and shareholders. Let me take this opportunity to thank you. And with that, I will turn it over to Ayo, who will share further details of our performance. Thank you. Over to you, Ayo.

Yes. Thank you, Jeremy, and good afternoon to you all. I'd like to walk you through our financial results, and I will start with Slide #7. The key takeaways show that nearly all of our key performance indicators are trending positively, demonstrating robust revenue growth, operational efficiency, diversification benefits and the effective execution of our growth transformation and return strategy. The net interest revenue as a percentage of total revenue increased to 44.1%. The cost-to-income ratio reached a record level of 49.1%, and we achieved positive operating leverage, resulting in a jaws ratio of 930 basis points. Profit before tax was $398 million and earnings per share grew by 23%. Our balance sheet has significantly increased and now totals $32 billion, supported by strong growth in both deposits and loans. Our capital levels remain healthy with common equity Tier 1 CET1 ratio of 11.4% and total capital adequacy ratio of 15.6%, both showing 300 basis points above the regulatory minimum. Moving on to the next slide. We generated $194 million in profit attributable to our shareholders, representing a 23% increase or 28% when adjusted for currency translation impact. Revenues grew by 12% or 15% in constant currency, totaling $1.1 billion. The key drivers behind this growth were significant increases in net interest income and noninterest revenue, along with operational efficiency resulting from disciplined expense management and prudent credit risk management. I'll provide further details on these aspects in the following slides. On the right-hand side of the slide, we offer a snapshot of the regional diversification benefits of our operating model. Revenues from UEMOA and CESA regions each contribute on average 30% of group-wide revenues. Nigeria contributes only 6%. Moving on to Slide #9, where I will deep dive into revenues. This slide shows the growth and diversification of our revenue streams. Revenue were ahead of guidance, increasing by 12% on a year-on-year basis on modest margin expansion on the back of the lower funding costs. We also witnessed higher investment securities balance in UEMOA and substantial nonfunded related fees. It is important to note that the double-digit revenue growth is the highest we have seen since 2014 and is indicative of the growing success of our GTR strategy. Additionally, as you can see on this slide, our revenue streams are diversified across our regions, businesses and types. Particularly noteworthy is the diversification in our nonfunded income streams, where annuity-like and stable fees represent 25% of total revenues. I'll now move on to the next slide, Slide #10, on the net interest income. The net interest income for the half year rose 12% or 15% in constant currency, driven mainly by interest income from higher treasury bills and loan balances in the consumer and commercial banking space, balance sheet optimization actions, and supported by efficient funding cost management. The net interest margin improved by 3 basis points on a year-on-year basis. Turning on to Slide #11 on the noninterest revenue. The noninterest revenue was up 12% or 15% in constant currency. Growth in fees from cash management, deposits, cards and brokerage drove a $26 million increase in fee and commission income. In comparison, fees derived from treasury management and foreign currency sales drove trading income by $21 million. Additionally, the noninterest revenue increased on a quarter-on-quarter and linked quarter basis, benefiting from strong underlying client activities. Moving on to Slide #12 on payments. The key to our growth prospect lies in our payment business. Payments revenue increased by 12% over the last 1 year, reaching $141 million, which accounts for 13% of the total group-wide revenues and a significant portion of our noninterest revenues. Also payments, primarily driven by activity on our Omni Plus and Omni Lite platforms and card usage continue to be a strong growth contributor. Additionally, our ongoing investment in cross-border payments platforms and the partnership with Google Cloud aim to establish a solid foundation for our remittance and Banking as a Service offering, which are expected to support revenue growth further in the future. I'll now move on to Slide #13 on operating expenses. Operating expenses increased by 3% or 6% in constant currency, slightly exceeding our guidance. The rise is mainly due to the persistent inflation in some of our markets, although inflation appears to be on the downward trend. Despite this, our disciplined expense management and enhancements in operational efficiency helped contain cost growth. As a result, we achieved a record cost-to-income ratio of 49.1%, below 50% for the first time in over a decade. Across our various regions, the cost-to-income ratios either improved or remained stable, especially in the case of UEMOA. Notably, Nigeria experienced a significant improvement in its efficiency ratio driven by positive operating leverage. Overall, our businesses saw enhanced efficiencies, leading to improvement in the cost-to-income ratio. As we right size our costs, we are also investing for long-term future growth. Turning on to the next slide on deposits. Customer deposit growth exceeded our expectations significantly, driven by robust client activity in payments, innovative product initiatives, expanding primary banking relationships and in some cases, targeted deposit campaigns across our businesses and regions. For the first half of the year, deposit reached $23.9 billion, reflecting a substantial increase of $3.4 billion year-to-date and $4.9 billion compared to last year. Additionally, our Consumer and Commercial Banking segment saw robust deposit growth with an increase of $2.3 billion year-to-date and $3 billion year-on-year. Low-cost current and savings account, CASA now account for 83% of our total deposit base, up from 80.9% in the previous year. We are pleased with the competitive advantage that our deposit franchise continues to provide. Furthermore, we have slightly reduced the average rate paid on our deposits. I'll now turn to Slide #15 on loans. In the first half of the year, we increased our lending activity as we identified opportunities to support our SME customers. As a result, our gross loans exceeded expectations, reaching $11.6 billion. This represents a 14% increase or $1.4 billion compared to the previous year. In constant currency, our customer loans grew by 5% on a year-on-year basis. Moving on to the next slide on our businesses. Our Corporate and Investment Banking division reported a pretax profit of $323 million, an increase of 44% on revenues of $578 million. We experienced strong revenue growth in NII and NIR driven by deep client engagement, enhanced cross-selling partnerships and effective deposit mobilization. Particularly notable was the growth in our global transaction banking business, which was followed by cash management and trade services. Additionally, revenue growth was supported by our treasury management solutions through prudent asset liability management and assistance to clients with their foreign currency requirement. We continue to position our international business, EBI SA, as a key correspondent bank for affiliates as evidenced by the increasing share of affiliate letters of credit that they processed during the period. I'll now go to the next slide, #18, which speaks to our CCB business. In our Consumer and Commercial Banking business, profit rose by 10% to $216 million, driven by positive operating leverage. Revenues rose 9% to $573 million. Key growth drivers were cards and deposit-related fees in consumer and SME in commercial. Overall, we are pleased with the underlying momentum in our CCC business as we grow its customer base, deposit and innovate and launch new products to meet customers' financial needs and improve the customer experience. As noted in our GTL strategy, we are excited about the prospect of our CCB business for growth as we invest and grow our high-value and education, faith and social services businesses. Now, moving on to the regions, starting with our Francophone West Africa region, which recorded an ROE of 26.7% with a profit before tax of $176 million and total revenues of $361 million. The net interest income primarily drove revenues, which increased due to higher balances in our investment securities. However, we saw a decline in the noninterest revenue on the back of the tighter foreign exchange market conditions and also due to some instability in the AES countries of Burkina, Mali and Niger. Turning to the next slide, which speaks to Nigeria. In this region, our performance improved as we continue to work hard to optimize its balance sheet, invest in capital-light driven business such as trade and payment and position the bank for growth in the long term. The ROE of 6.5% was significantly higher than the previous year, albeit still below our desired target range. The profit before tax increased by 45% on higher net interest income and improved operational efficiency, which improved the cost-to-income ratio to 67% from the 78% in the prior year. I'll now move to the next slide, which speaks to the Anglophone West Africa market. Household and business confidence in Ghana has improved following the country's post-debt restructuring exercise. This positive shift is partly attributed to the appreciation of the CD, strong export performance, increased remittance flows and coordinated fiscal and monetary policies. These factors have positively impacted this region's performance over the past 6 months. Although the ROE stood at 30.2%, slightly lower than expected due to regulatory headwinds, it was primarily supported by the performances, the strong performances in Guinea. Profit before tax increased by 19% due to positive operating leverage. Revenues rose by 14%, driven by growth in card, trade and remittances. However, this growth was somewhat offset by lower-than-anticipated growth in the net interest income, primarily as a result of the banks of Ghana's cash reserve requirement related to the loans-to-deposit ratio. Additionally, the cost-income ratio improved to 39% compared to the previous year. Finally, moving to our CESA region, the Central, Eastern and Southern Africa region. This region achieved ROE of 37% with a PBT of $207 million and revenues of $392 million. This strong performance was primarily driven by the significant noninterest revenue growth, which benefited from increased fees from account-based services, trade loans and other services. The net interest income rose due to margin expansion and higher balances in loans and investment securities. CESA also improved its efficiency, lowering its cost-to-income ratio from 48% last year to 43% in the current period. Now, let's quickly move to liquidity on Slide #24. The group's liquidity remains strong, bolstered by client confidence, which led to an increase in deposits. As a result, total deposit rose significantly to $23.9 billion as of June 2025. Demand deposit account for approximately 66% of the total deposits and with a loan-to-deposit ratio of 49%, we have a greater capacity for asset growth. On the next slide, Slide #25, which speaks to the credit quality overview. The key takeaway from this slide is that our credit metrics have shown improvement and exceeded expectations. The nonperforming loans, the NPL ratio decreased significantly from 6.7% to 5.7% during the current period. This improvement was driven by loan migrations and also due to the write-offs that we saw, especially in our commercial banking portfolio. While the cost of risk remained within guidance, it did increase due to our proactive measures in building central impairments for emerging risk. As a result of booking the central impairment, the coverage ratio improved to 90.1% for this period. On Slide #27, which is our capital metrics, we show on this slide that the group's capital levels as of 31st March was CET1 ratio of 11.4% and our total capital adequacy ratio of 15.6%, both showing buffers of 300 basis points above regulatory minimum. Our capital ratios have benefited from solid organic capital accretion, which has helped improve our capital ratios and also partly due to the weakness in the dollar, United States dollars related to our local currencies as well, which have reduced the reserves for the foreign currency translation. Moving on to Slide #28. We have made significant efforts to reduce our double leverage ratio through various strategies. Dividend payouts have increased and more affiliates are paying dividends as our group performance improves. The negative impact of the foreign currency translation reserves on equity has notably decreased due to the strengthening of our local currencies against the U.S. dollars. These efforts are producing results as illustrated in the bar chart on the left-hand side. Our double leverage ratio has been declining since 2023, and we expect it to be below 163% by the end of this year. The key factors contributing to this improvement include a continued focus on organic growth, increased dividend payment and optimizing our funding cost. On the next slide, I will provide updates on Ecobank Nigeria. On this slide, we show a brief recap of the capital situation for Ecobank Nigeria. Firstly, I must mention that ETI, the parent company injected NGN 7 billion, approximately $5 million in common equity towards the end of last year to help Ecobank Nigeria meet the Central Bank of Nigeria's minimum capital requirement of NGN 200 billion for a National Bank. In August last year as well, as we reported to the market, Ecobank Nigeria's capital ratio fell below the regulatory minimum of 10%, primarily due to the impact of the naira devaluation. This triggered a bridge in one of our covenants at Ecobank Nigeria level, the Eurobond, the $300 million Eurobond Nigeria issued a couple of years ago. As a result, Ecobank Nigeria sought consent from its bondholders to suspend the covenant until September 2025, allowing time to restore capital. Since then, Ecobank Nigeria has initiated a second consent solicitation with note orders to remove the capital adequacy ratio covenant from the deed, and that modification has been successfully achieved. Additionally, Ecobank Nigeria launched a tender offer to buy back $150 million of the notes, which was also successful, demonstrating the robust liquidity buffers that exist at Ecobank Nigeria. Management is currently working on other streams to restore the capital adequacy ratio, and we have provided updates on this particular slide. Firstly, progress is ongoing with regard to the $200 million AT1 bond expected to be raised in 4 tranches of $50 million each. ENG is actively engaging with potential investors with the aim of raising 2 tranches of $50 million each in the second half of this year. ETI has also paid $50 million out of the $200 million of promissory notes it owes to Ecobank Nigeria. I must also mention that Ecobank Nigeria also is working through its plan of reducing, rightsizing its risk-weighted assets of approximately $300 million. We've achieved about $53 million so far. Lastly, concerning the plan to convert foreign currency loans of $200 million to local currency, we've also achieved circa $30 million to $40 million in conversion, and we expect that to ramp up in the second half of this year on the back of the FX liquidity that has improved in the market. Finally, I will turn to Slide #32 on our guidance. Our performance against guidance has been impressive, particularly benefiting from the stability and in some cases, the appreciation of the key African currencies related to the U.S. dollars. But more importantly, from the underlying drivers of growth, the primary customer relationships grew, loan deposit CASA deposits increased, margins improved. We improved our lending. We underwrote more trade loans as trade activity increased, card fees climbed, higher business confidence drove activity in the FX sales market, and we manage our expenses very well. These actions have led us to exceeding most of our guidance metrics, as you can see on this particular slide. And with that, Jeremy and I are ready to answer any questions you may have. I will now hand over to the operator for us to take the live questions. Thank you.

[Operator Instructions] Our first question comes from [ Ketu Makuru ] of EFC.

Thank you so much for the very good and detailed presentation. I think the first question for me is I saw the Mozambique deal. And I wanted to understand what's next in terms of -- it's a small country, so its impact won't be monumental, but I believe this is the beginning of probably a rationalization. If I'm correct, I just want to understand how you're coming to these decisions and what's next? And if you can share any light on the valuation you received for that business, it would be great, I think, for all. In Nigeria, with the business in Nigeria, I just wanted to understand, have you any of your -- have any of your loans benefited for the forbearance regime? Have you officially exited that regime? If you had any, that is. I appreciate that. Those are the first 2 questions I have.

Okay. I'll come in and answer and then if Ayo has any additions, he can answer. So, thank you for the questions. Just starting on Mozambique and the way we think about our businesses. In line with our growth transformation and return strategy, we reviewed all -- we did a strategic review of all our businesses, right, in terms of how we participate, what business model works, opportunities within the market, levels of growth, levels of returns, et cetera. And once we completed that, we -- one of the key things is can we compete and be a meaningful player within that market, driving impact, but also driving sustainable shareholder returns. So, when we looked at our Mozambique business, we obviously had to confront the certain realities of our business. But I think what is actually vitally important to even realize even before Mozambique is that we're actually a Pan-African business that has probably more opportunities than we have time or even capital, right, because we've got many opportunities in the 39 markets. So we often have to decide where do we put our time, energy and resources in order to get the optimal returns. So in the case of Mozambique, our decision really to divest was just a key step in executing our GTR strategy. It allows us to focus on markets where we can scale effectively and drive long-term sustainable value. It aligns very much with the strategic realignment of our market participation model in all the countries in which we operate, ensuring we remain competitive and a meaningful player across our Pan-African footprint. And ultimately, by reallocating capital to higher return initiatives, we enhance Ecobank Group financial strength and market positioning, ultimately delivering stronger value for our customers and shareholders. So just tackling all of this in case there's further questions on Mozambique, we are working with FDH Bank to manage a smooth transition. They're taking over our shareholding. So there's little impact in terms of customers, operations and staff. And I've got to say this is an important factor for us. We really want to make sure that there is not an adverse impact on any of those stakeholders. So that, I think, is important. And I think you asked about the consideration. The consideration of the buyer to ETI was $14.7 million, translating to a price-to-book ratio of 1.2x. And as we've indicated, what we're going to do is we're going to take this and reallocate to general corporate purposes, as Ayo talked about. We keep our double leverage ratio firmly in focus along the lines also of driving up dividend upstreaming to the parent, right? So, this is one we are able to upstream this and reallocate to some of our other affiliates where we have strong returns. In terms of -- I think I'll just cover very quickly the capital ratios uplift. It's about 5 basis points. Return on equity uplift will be about 15 basis points and double leverage ratio will probably uplift in the region of 70 basis points. So, I think net for net, it's an indication of our commitment to returns. And also, through just the focus of the strategy. So that is why we took this after deep consideration. I want to highlight one thing before moving on to Nigeria. We remain deeply, deeply committed to our Pan-African purpose, our Pan-African network, which is second to none. This is not an indication that we are on a slash and burn and that you're going to see a whole host of other countries on the chopping block. Africa is our home. Africa is our strategy. Africa is our differentiator, and we're very much committed to that. And I want to make sure that we're clear on that. We have significant opportunities. We want to be a winner in trade, a leader in payments, and that requires the network that we actually have. So maybe pausing there, and then I can invite Ayo maybe to comment on your question on Nigeria briefly. Thank you.

Yes. Thank you, Jeremy, and thanks, Kato, for that question. I think for Nigeria in terms of the forbearance, broadly, there are 2 parts. One is performance and one is an SOL. Just for your knowledge, as far as the SOL is concerned, this has impact on ECI because the equity of ETI is much stronger. So this is just a local prudential guideline. So the SOL does not impact ECI's financials. With respect to the broad performance forbearance, if you look at the numbers of Ecobank Nigeria today, we've got about $150 million in Stage 3, and we've got about $1 billion in Stage 2. And most of the forbearance, they've already been classified as such in the books of Ecobank Nigeria. Like you know, the Stage 2 bucket contains loan where there has been significant increase in credit risk that is our Stage 2 bucket is defined, while Stage 3 bucket contains loans that are impaired. So we -- Nigeria has already classified those loans either in Stage 2 or Stage 3, depending on their peculiarity and also our assessment of the future as well. For Stage 3 bucket of $150 million, those are already in the worst loan classification. So that has been addressed accordingly. For the Stage 2 bucket of about $1 billion, if I classify this into 3 components; one, we expect circa $100 million to deteriorate into Stage 3, right? However, we don't expect this to affect our NPL guidance, which we said we expect it to be between 6% and 7% for 2025. So that does not distort our guidance that we provided. The second strata of the Stage 2 volume is another circa $400 million to $500 million, which we expect to positively migrate to Stage 1 between now and the end of 2026, supported by ongoing customer engagement and portfolio monitoring. And the third bucket is the residual of circa $400 million to $500 million, which we expect might take longer time for major cash flows to come in, but this portfolio is heavily collateralized. From a prudent standpoint, ETI has decided to take central provisions, which has been assigned against Ecobank Nigeria names of about $300 million. So, if you put this $300 million vis-a-vis this residual bucket of $400 million to $500 million, that's a coverage of about 60% to 75%, excluding collateral. But when you consider the impact of collateral, the coverage exceeds the 100%. So overall, just to summarize from a group point of view, the exposure that we're talking about, we've considered it to be adequately covered with proactive provisioning and collateral buffers in place to mitigate the residual risk.

At this stage, we have no further questions from the telephone lines. I will now hand over for questions from the webcast.

Okay. Yes. Thank you very much. We received a couple of questions on the webcast, so we'll just respond to them. Some we've already responded to in the course of our presentation and answering this question from Kato. I can see one particular question, which talks to our expectation for double leverage ratio going forward, Does we see it in the presentation. If you look at the historical trend, we're beginning to see gradual improvement in double leverage ratio. 2023 was 173%. 2024, it improved to 168%. And in 2025, we're expecting that to further improve to less than 163%. So, the direction of travel is positive. And the trend has been supported by the organic accretion in earnings. You are seeing that our performances continue to be strong. You are seeing our attributable profit growing by 23% on a year-on-year basis. On the back of this profit, we're seeing more increase in dividend upstream from our subsidiaries. This year, we are projecting to get dividend income of about $280 million from our subsidiaries compared to last year where we got $217 million. So that projection is positive, which is expected to support the drive towards reducing our double leverage ratio. The second question is around the dividend policy and expectations as well. But just to say that overall, our dividend policy, our objective function is to return dividends to our shareholders. It's a key pillar of our GTR strategy. The high that GTR represents returns. We are very particular about return of capital to our shareholders as well, of course, subject to a number of binding constraints, typically capital ratios, double leverage ratio and also the capital requirement from our subsidiaries. In recent years, we decided to be conservative on the back of the limited capital buffers that we had a couple of years ago, on the back of the high double leverage ratio that we had a couple of years ago and also the series of capital requirement that we faced from a couple of affiliates in the past. But the narrative is changing. As you can see from our half year results, the underlying fundamentals remain very strong. We're seeing capital buffers expanding on the back of the strong attributable profits. We're seeing double leverage ratio coming down as well. So, we are reasonably optimistic that the performance of the bank is in a strong trajectory and the bank should be able to return to start dividend payment in a not-too-distant future. As you know, dividend conversation is reviewed on an annual basis, and that also will be done this year, reviewing that with the Board on the back of our results for 2025. And collectively, we make the right decision that will be in the interest of the bank. So, I've answered the question from Francis. The next question is concerning Ecobank Nigeria, and I think I've dealt with that extensively when I was talking to the Nigeria situation. Also, the next question around the coverage ratio, I've also dealt with that in my presentation. I've mentioned the central provisions that we have, which is circa $300 million, which is more than sufficient to cover the Nigerian risk as well. That's a question from [ Jonathan Binder ]. In terms of the other questions, the questions around the AT1 of Ecobank Nigeria, which I've also dealt with. So that process is ongoing and where there's material developments, we would come back to the market to update the market accordingly as well. I think there's one question, I will ask the group CEO to respond to that, which is on our payments business outlook, especially in relation to intra-Africa trade and remittances.

Yes. Thanks, Ayo. Our payments business remains in full focus as a core pillar of our strategy. The fact that we're in 39 countries where the fact that we have a single IT centralized platform allows us to be the only bank that can really make real-time payments across all these from our digital channels in local currency, which supports trade as well, both from small time traders who might be trading across borders, but we also have an advanced trade finance capability and the trade finance business supports our customers to trade across the 4 corridors. We've got a trade hub, which brings buyers and sellers together. We work with Africa Continental Free Trade to be able to enhance and operationalize what is a good policy across Africa, and we continue to work with them on that. In terms of our payments business, we have 2 or 3 areas that we're focusing in on. The first one is domestic payments, where we want to be fully connected into fintechs, into telcos, into retail outlets, among others as well as to the local financial institutions. We want you to be able to be -- to choose Ecobank as being your transactional and payments partner across in your market. That's number one. Number two, we want to be the remittance partner of choice when it comes to sending remittance flows into the continent. This is more than $100 billion worth of flows that come into the continent. And there, you have seen the strategy we are taking is one of partnerships. We have partnered with companies like NEOM TransferTo, XTransfer among others, and we've got some other strategic partnerships that you will see in the coming months that are coming through. They particularly are picking us because they can plug into our one IT gateway and they can get access. And they know because of our history, our connectivity into the local communities that we actually have the capacity to deliver for them without them having to go country by country. The other thing that we are doing specifically is we have invested significantly in our online account opening capabilities and digital capabilities with the intention that people can open accounts digitally. Once they open these accounts digitally, they can do so from wherever they are across the continent. They can get access to the mobile app, online banking, et cetera, and be able to transfer on that front. So that will allow people within a few minutes to get accounts and cover that. Additionally, on this, we are building out a diaspora proposition, which is more than money transfers. It basically looks after people -- Africans, the 30 million or so Africans living in the diaspora and their financial needs on the continent, whether that means moving money in to support friends, loved ones or invest in businesses, property, et cetera. We have a proposition that we will be enhancing and building to support them. The last part of this equation is really around banking as a service. We look at tech companies, whether they're fintech, edutech, agritech, health tech as opportunities. We come with banking licenses, strong connections and a trusted reputation in our markets. And when fintechs want to go cross-border, we can be the partner of choice where they plug into our API. This is where Google is coming in, and we're going to build world-class gateways and API. I mean, Google does thousands and thousands of these, and they are the leader. And they only wanted to partner with us as the first financial institution to be able to do so. So, I know it's -- I've covered a lot, but it's just to say we're only getting started on payments, right? We have a strong business. We have a great footprint, and we are investing in people and systems and processes to do so safely and effectively for our customers. I hope that answers that question.

Yes. Thank you, Jeremy. I think there were also a couple of questions on Nigeria which we responded to in terms of the AT1 process. Like we mentioned, that is still ongoing. And once there's any material development in that regard, we'll come back to update the analyst community as well. There was a question on Nedbank divestment. The question is, do we know of any other shareholders expected to increase their stake in ETI? The group CEO, do you want to respond to that?

Yes. Like I said, look, we acknowledge and respect the decision of Nedbank to pursue their own strategy going forward, as we've indicated. As you can imagine, they are the seller of this stake, and they are obviously considering who they sell to. What we can simply say is we have a very strong relationship with Nedbank. Even after they dispose of their shares, we are still banking and business partners working across the continent. We have lines with each other. We will continue to do business to develop this. So, we have a strong relationship. They are intricately aware that they want to make sure that whoever comes in as a shareholder has the interest and alignment with our growth transformation and return strategy. So as and when we reach that point, I'm sure they will communicate accordingly. And obviously, as part of this, the regulators will make sure that as a systemically important bank that we end up with a shareholder that will be supportive of our strategy. So, I'm pretty confident that when it happens, it will be for the good of the organization.

Thank you. There was a question from Alex on why the cost of risk moved up in CESA and Nigeria. If you look at CESA, the cost of risk is about 0.6% is within our tolerable threshold of under 1%. So that is not a big issue. For Nigeria, as you know, on the back of the Stage 2 volumes that we have and also the Stage 3, it is important for us to accelerate provisioning in Nigeria, especially. But overall, as you know, as you can see in the numbers, our profitability continues to stay strong. And even with the cost of risk that we've shown, we're still delivering return on tangible equity of in excess of 30% and return on assets of 1.9%, and we expect that to continue as we go further into the future. I'll go to the next question from [indiscernible]. Can you provide more information on the drivers of deposit during the year? And to what extent does [indiscernible] consider it sustainable? Broadly it is a function of 2 things. We're engaging our customers more. Our brand continues to be strong in the marketplace, and that is also bringing in deposit to us. But of course, it's also important to mention that we also benefited from some currency movements like we mentioned, the dollar has weakened this year. So that also helps us. But the fundamental core is the fact that there is a positive momentum in the business, which is driving our customer deposit growth. Do we expect it to be sustainable? Yes, we do expect it to be sustainable as we're seeing even post the June, the direction is positive, and we expect that to continue as well. There's a question around we guided NPL coverage ratio at 80% to 90%. What is our expectation? Yes, we still maintain our guidance of 80% to 90%. But half year, we at 90.1%. So directionally, we would expect us to be in that 90%s bracket, just a little bit above our guidance of 80% to 90% by the end of the year. A question that talks about we should elaborate on transformation actions, which I'll ask the group CEO to respond to elaborate on transformation actions and investment that we're making for the long-term growth mentioned in some of our slides. And at what point should we begin to start seeing the significant positive outcomes on this effort?

So I think thank you for that question on transformation. What I think you can see is already within our numbers, the effect of transformation. People sometimes ask me for, are we going to see some big bang things. If you want big bang things, the signing of a partnership with us and Google Cloud is a big bang thing. It's not been done before. It is going to radically transform the way we run our platforms, the way we integrate with others. And our partnership approach is a significant departure because we want to partner with those who are best at what they do. We want to look at whether we buy, build or partner, right? And you don't always -- I think historically, the bank has typically been in a mode of building rather than -- or buying rather than partnering. And now in this world with such organizations that are specialists in their field, it is often more effective and faster to market to partners. So partnerships is going to be one. When it comes to transformation, there are big indicators that are there. First, we are looking at opportunities to simplify our processes to deliver better customer experiences because at the end of the day, if your customers are happy, you're delivering a cost-effective relevant service to your customers, then they will stay with you. We're focusing on daily transactional relevance because if they use us to transact, this is why we have seen a growth in our CASA, right? Because they will keep their money with us to move their money through us. So that, I think, is -- you can see in the growth of our CASA balances as a percentage of deposits. And we have taken some difficult moves where we have said, what we're going to move off very expensive customer deposits and fixed deposits and replace them with CASA. And I think that is coming and showing dividends in our net interest margins. We are also investing, as Ayo indicated, in capital-light fee income earning capacity that has been shown, whether that's payments, whether that's day-to-day transactions, whether that's trade finance, just to name a few. So that will be there. Digital is core to how we do our business. What you are starting to see in our strategy is that the consumer and commercial bank is going to be a good pivot for us and delivers you annuity income. It is a relatively younger business. Our consumer business is a relatively low market share, lower market share business than our other 2 businesses. To give you an idea, our corporate investment banking business is circa 10% market share. Our consumer banking business, when you look at it, is somewhere running in about 4% market share. That is not a function of weakness. That is a function of focus. So we are confident that as we invest in the infrastructure, the branches, the products, the segment focus that you're going to start seeing that delivering on a sustainable way, and it gives us a natural hedge in some of our markets to additional income where our brand is strong. So for example, in Francophone Africa, we have typically been stronger in the CIB business than in the consumer and SME business. We've also launched out things like our agri strategy that has come out. We've launched our wealth strategy, and we've got more products and services that we are delivering. That's part of transformation. We are also looking very clearly at the pain points within our processes. We have got -- we've identified what the pain points are through talking to customers. We have too many manual processes. As we automate and as we use AI, we can literally drastically leapfrog the way we do business. And that will bring inherently 3 things. One, it brings you faster response time and turnaround time. It does it in a more customer-friendly and better customer experience way. And in the third way, it does so at a lower cost. Now as we do so, you will see us focusing on our fundamental underlying structural costs. What are those people, systems, premises, yes. So we believe we've got opportunities to drive more efficiencies and the transformation around our structural organization, where we are doing a spans and layers exercise, which will flatten and broaden the structure. We are focusing much more on sales. We haven't seen that flow through into the numbers. Today, we have a lot of opportunity to drive our sales force up. We're investing in new products and services and solutions. When those come on stream, those will be net growth opportunities that are not reflected in our numbers. Just to be clear, as we grow our lending, especially in consumer and commercial, we are not going to do so recklessly. We are already investing in the credit capability. We are investing in the digital analytics capability. We're investing in systems that will drive quick decisions. We are investing in partnerships for digital lending. And we're also investing in the collections capability ahead of lending so that by the time we start lending, we know that delinquencies will come and we will push forward. The other transformation items in the corporate and investment banking side, we're building out our advisory business. We won quite a number of mandates, whether it was with Gabon when they did the restructuring of their government securities, whether it was with Benin where we did some transactions. And you will be hearing some more transactions that we're doing. This was a business that wasn't necessarily driving delivery, and we see opportunities there. We've got opportunities in cash management. We have a series of opportunities, and we've transformed our structure within the CIB business. We're going to have sectoral expertise close to customers. We're investing in client coverage solutions that will actually deliver for those customers. And we've won mandate. So, for example, we are 1 of 3 banks on the continent that banks the UN and World Bank-related organizations. The other 2 are international banks. So, we are the only African bank, and that's a testimony to what we're doing. So, the transformation agenda essentially makes sure that we execute on the biggest dial movers. And transformation includes what you've heard now in Mozambique. This is transformation, right? It is taking -- doing the work, doing the research, doing the analysis, taking some difficult decisions, reallocating to growth opportunities. And that's why I think you're seeing our revenues picking, our cost-income ratio going, and we have confidence the more we do, the more sustainable and better our results will be.

Yes. Thank you, Jeremy. I'll just summarize the remaining questions on the 4 buckets, just in the interest of time. The first bucket is questions around Ecobank Nigeria 831. I think we've responded to that question extensively. Once we have mature information to provide, we'll come back with additional information. But that is the status of where we are as of this point in time. The second bucket is related to the AT1 action of ETI. What is the status on that? That process is still ongoing. We're not yet done with that as well. The engagement process still continues. And as soon as we've concluded that process, definitely, we'll be coming to the market to also announce the outcome of that process as well. The third bucket of the question relates to Ecobank Nigeria is the residual Eurobond of $150 million, how will that be financed, the residual $150 million? So just to let you know that we have a multipronged approach to finance the residual of the $150 million. The first one is Ecobank Nigeria has secured access to both foreign and local funding lines of circa about $100 million. And this is something that they can easily activate and raise within a 1-month window. The second is also the fact that, I've mentioned it earlier in one of my comments that Ecobank Nigeria is also converting some additional U.S. dollar loans into local currency. We're seeing the FX liquidity in the market has improved considerably and Ecobank Nigeria is taking advantage of that window. We expect circa $50 million additional to be converted in the second half of the year as well. As you know, the process of converting the dollar loans to local currency brings in dollar liquidity into the bank. And the third bucket is the fact that Ecobank Nigeria has a receivable of $150 million from part is paid next year in 2026 and the residual is payable in 2027. So, the combination of all of this put Ecobank Nigeria in a very, very strong position to repay the residual of $150 million. Just to reiterate, liquidity has never been a concern for Ecobank Nigeria. As you can see, we came to the market, we announced that we wanted to do a tender of $150 million, and we executed that tender successfully. So, we also are reasonably confident that we'll be able to do the residual of $150 million, which is due in February next year. Then the final bucket of the question relates to the total core funding in terms of the outflows. Like you know, traditionally, we have 2 major outflows. One is operational, one is the funding cost. So the both of them, the operational is circa $50. The funding is circa $130. So, the total is about $180 million in terms of the total recurring outflows. Now if you benchmark it to the inflows that we have, we also have 2 major sources of inflow. One is the management fees of about $20 annually and the second is the dividend income. This year, we are projected to get about $280 million, like I mentioned. So, if you have to the $20 of management fee that used to be $300 million. So that is well in excess of our outflow needs of $180 million. And also to mention, as we go further into the cycle, we also expect our dividend upstream income to continue to grow as we demonstrated this year where we grew from $217 million to $280 million this year. We expect it to grow next year minimum by $40 million continuously through the cycle as well. So those are all the set of the questions by advocating them. So, at this point, I will now hand over to the group CEO for closing thoughts and closing remarks.

Yes. Thank you, Ayo, and thank you, everyone, for your questions. Sort of as we sit here at the halfway point of 2025, I can say we are pleased with the progress. We have a very clear growth transformation and return strategy. I've said repeatedly, it's really about focus. It's about discipline. It's about trade-offs. And it's also a game of inches, focusing on the -- what I would call the less things, just focusing on your underlying revenue growth, focusing on how you drive efficiency, focusing on how you price your products, how you sell your products, making some difficult trade-offs around areas that we deemphasize in terms of some of the products and services that are not adding value to us as a business. So, we're starting to see the early green shoots coming through in our numbers. We are not at all complacent. We are very focused on our task at hand. And we're also pleased that our fully diversified Pan-African model is a source of strength for us. Some markets may face challenges at some point. But as you've seen, when I came into the bank, there were questions about CESA. What is happening with CESA? It's the newer businesses. It's not delivering to expectation. Within a short 2 years, CESA is now leading the way, and we expect it to grow strongly. When we talk about UEMOA, UEMOA continues to perform strongly. Our Anglophone West Africa, after a difficult period for Ghana, in particular, is coming back strongly, and you can see that in the numbers. And even Nigeria, where we, like Ayo already said, we're facing broader challenges. We're starting to see the green shoots, whether it's cost-income ratio now moving into the 60s from almost 80% our profits up almost 45%. This is not a proclamation of victory. This is just a proclamation of focus and taking our small gains and continuing to be focused. So, we are pleased with our progress. We know what we have to do. We are not getting lost or unfocused around where we have to go. We focus on the key indicators. We're being proactive and we're cautiously optimistic. The world that we live in is very dynamic. Things can change at the drop of a hat. And we have got and built in an agile system and business model that allows us quickly to identify those leading indicators that enable us to be able to take the right course of action. And all of this fundamentally is underpinned by people. We're in the people business. Our people have strong, strong relationships at the affiliate level with regulators, with government, with our customers. There are a bunch of talented individuals. We have brought in new individuals to boost those team members to bring in skills in the areas of growth and opportunities that we have, and we are very confident that the new teams in place will continue to deliver. So for us, it's -- we are pleased, as I say, with this. We thank you for taking the time to join us on this call. Obviously, for any developments, we will keep you abreast as we do. And I think I will bring it to a close that we still are focused on being the leading Pan-African bank across the continent. There is no one -- there's no other entity that comes close to our 39 country network -- 35 countries across the continent. We are investing in those. We have great businesses, and we're looking forward to seeing them really perform even to higher potential in the future. Thank you very much, ladies and gentlemen, for joining us today, and we'll hand back to Judith to guide us to the close of this call. Thank you very much.

Thank you, sir. Ladies and gentlemen, participants can reach out to [email protected], if you have any further questions or need more clarification. Ladies and gentlemen, we have now reached the end of Ecobank Group's event. Thank you for joining us, and you may now disconnect your lines.