Ecobank Transnational Incorporated (ETI) Earnings Call Transcript & Summary

Good afternoon. Welcome to the Ecobank Group Half Year 2026 Earnings Results. [Operator Instructions] Please note that this event 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 website. The documents include the earnings presentation that we will reference during this call. I will first turn the call over to Jeremy Awori, Group Chief Executive Officer, for some opening remarks. Afterwards, Ayo Adepoju, Group 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 upon 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 now my pleasure to turn the call over to Jeremy. Please go ahead, sir.

Thank you, Judith, and good afternoon or good morning to everyone who's joining the call. On Tuesday, we announced our half year results, which demonstrated the successful implementation of our GTR strategy. Our improvement on operational efficiency, the diversification benefits of our Pan-African business model and the relentless focus on customer satisfaction. Before I share more highlights of our performance and progress with our GTR strategy, let me first discuss the macroeconomic environment in which we operated. The global economy has shown resilience despite increasing geopolitical tensions and trade uncertainties as well as growing fiscal pressures, while the dollar -- the U.S. dollar remains strong. For Africa, this scenario has led to higher oil prices, slower trade growth and robust commodity prices. However, potential interest rate hikes could hinder access to capital markets, which have been driving in recent months. Reform momentum is continuing across the continent through various IMF programs. In Nigeria, the Central Bank cut interest rates for the first time in years in February, but then decided to pause due to global uncertainties. Despite this GDP growth is expected to remain strong with forecast ranging from 4.1% to 4.3% for 2026. Foreign reserves have increased by 38.6% year-on-year, reaching $51.8 billion. Additionally, the budget set at a record IGR 58.5 trillion, approximately $42.8 billion aims to promote further growth and reforms. The West African Economic Monetary Union, or we call it UEMOA continues to outperform the continent, having grown by 6.7% in 2025 with a projected growth rate of 6.4% for 2026. Contained inflation has allowed the Central Bank of West African states, BCEAO to reduce rates by 25 basis points to 3% in March. The CFA has provided stability despite security risks and fluctuations in commodity prices. In Anglophone West Africa, rising oil prices driven by tensions in the Middle East have led to increased inflation and varied interest rate policies, cuts in Ghana and Liberia while Sierra Leone has raised rates. Guinea Simandou project is altering regional growth dynamics and boosting export revenues. In Central East and Southern Africa, growth remains resilient yet uneven. Mining activities in the Democratic Republic of Congo and Zambia are providing support, while the Central African economic and monetary community faces vulnerability due to fluctuating oil prices. The Bank of Central African States has reduced its tender rate to 4.5% and its lending facility rate to 5.25% as inflation has moderated. However, currency pressures persist outside the CFA franc zone amid the ongoing strength of the U.S. dollar. Turning to our results. The group-wide return on tangible equity was 21.1%, significantly passing our cost of equity. Given the impact of currency translation on the group's RoTE, it is important to break it down into regional components for a clearer understanding. The CESA region was our best performer, leading with a return on equity of 35.4%, reflecting the turnaround work in previously underperforming subsidiaries. Anglophone West Africa region achieved an ROE of 29%, holding up well against CD weakness during the first half of the year and margin compression resulting from eased rates. Our UEMOA region reported a robust return on equity of 22.7% in a market where foreign currency liquidity conditions weighed in on revenue. Nigeria has slightly improved its ROE to 3%, primarily due to increasing revenues in Consumer and Commercial Bank and efficiency gains despite low asset margins. The group generated pretax profit of USD 423 million, reflecting a 6% increase from the previous year, along with a 2% growth in earnings per share and a 24% increase in tangible book value per share. We achieved a positive operating leverage of 165 basis points and continued robust growth in our payments business. Cost discipline has been a priority, especially in subsidiaries with high cost-to-income ratio. Rather than trimming at the edges, we redesigned the operating model and business structure, and that is what took our cost-to-income ratio to 48.4%. It is also what funds our continued investment in people, processes and technology. Lastly, we remain cautious in managing our credit quality and capital structure to ensure the soundness and growth of our businesses. Maintaining high credit quality is a core priority for us, and we have seen improvements in our nonperforming loans ratio, which has dropped to 7.6% -- our capital base has been strengthened by strong organic earnings growth and careful management of risk-weighted assets. As at 30th of June 2026, our estimated common equity Tier 1 CET1 ratio was 13.3% and our total capital adequacy ratio was 17.4%. This improvement was bolstered by the $100 million increase from our recently issued $450 million Tier 2 nature sustainability bond. This bond is the world's first nature bond designated by the International Capital Markets Association and issued by a commercial bank. It was oversubscribed by nearly 4x our target, attracting over $1.36 billion from international and African investors. This response reflects the confidence investors have in our group. Our strategic initiatives outlined in our GTR strategy are focused on creating a faster, smarter and more scalable Ecobank. The successes we are experiencing can largely be attributed to all Ecobankers who have embraced the numerous changes we have implemented and continue to work diligently to meet our customers' needs. I want to take a few moments to highlight a few key achievements we achieved together. Our clearest evidence of progress is in the system markets that were previously loss-making, for example, including Zambia, Uganda, Rwanda, the DRC and Equatorial Guinea. Cost-to-income ratios in those markets have moved from above 100% to between 50% and 60% and several now are upstreaming dividends to the Holdco again. That for us is the real test of a turnaround, improved ratios combined with cash returning to the center. Alongside this, we continue to invest in product, revenue diversification and customer acquisition and to entrench our leadership position in our and UEMOA. The turnaround in Nigeria continues, and we are seeing progress in our revenue momentum and operating efficiency with our cost-to-income ratio improving from 79.8% in 2022 to 56.1% as at the middle of this year. Whilst there is more work for us to do on our performance, it is encouraging and [ since ] our consumer and commercial businesses are showing solid growth and our pre-provision operating profit was growing 51% on a year-on-year basis. We continue to address asset quality and execute on the capital adequacy restoration process. Growth is central to our GCR strategy, and it is returning in dollar terms. Revenues declined 1% year-on-year between 2017 and 2022. Since 2022, we have achieved a compounded growth rate of 10%, absorbing the NGN devaluation along the way, which was quite material. We are pleased to see expansion in our deposit base. This growth reflects our customers' confidence in the Ecobank brand and the investments we are making in boosting transactional volumes by enhancing product deposit, product features, focusing on customer experience improvements, onboarding new relationships, deepening our relationships and improving branches along with mobile and digital channels. We are taking a disciplined approach to pricing and focused on growing our transactional balances. we are encouraged by the success we've had in driving CASA deposits, which currently account for 85% of our total deposits, providing us with low cost and sticky funding and improving our net interest margins. We have made significant progress on our transformation agenda and technology remains our core focus and will continue in the next phase of our GTR strategy, which will focus on enterprise architecture strategy and building a bank that can scale up and get even further economies of scale and also very importantly, build a bank that is even more digitally enabled, faster, cheaper to run and able to reach customers the branch network never could. At the heart of this change is a modern cloud-native API-first AI-enabled technology architecture built in partnership with Google. What matters is that the technology makes many things possible. Customers' needs are at the core of what we focus on. Business is the driver of these initiatives and the technology capability and execution is a critical enabler. We can build a product once and deploy it across every market we operate in rather than country by country. No one else on the continent can do that at our scale. And because the architecture is open, we can plug in fintech partners at the edge and get new services to our customers in a matter of weeks. We have introduced a new -- a range of new digital services such as money transfers, loan management and innovative financing options. With these services, we're not just a bank. We are building a foundation for a range of financial services available throughout Africa. Importantly, this transformation process is not limited to the group level. Each business and functional unit within the group has its own transformation agenda, utilizing squad models. We have established over 24 transformation squads that operate directly in various markets to ensure that the changes we implement are responsive to our customers' needs rather than simply following directives from higher management at the center. The positive results of these changes can be seen in our customer experiences. We significantly reduced the time it takes to open an account in our branches and also radically simplified and improved our digital account opening online. Wait times at branches have decreased by over 48%, thanks to better management of queues, making service quicker and more efficient. We are also upscaling branch designs to create a modern, consistent experience for all our customers. These improvements demonstrate how our investments in technology is leading to a better customer experiences and operational efficiencies. Currently, our cost-income ratio stands at 48.4%, which indicates we are becoming more efficient whilst also creating new revenue opportunities. We've clearly stated that establishing strong partnerships is crucial to our success, especially in areas where we cannot buy or build our own solutions. This is particularly evident in our payments business as we aspire to become the leading payments bank in Africa. Our partnership with Google Cloud will really improve our API enablement and enable us to bring greater scale and faster integration of payments partners and customers. We have made significant progress in our cross-border payment systems and are actively expanding our partnerships to improve the availability of financial services across the continent. Our partnership with XTransfer is progressing well and will soon help support global businesses and small enterprises in managing payments more effectively in Africa. Moreover, through our collaboration with Hub2, we are strengthening our digital payment systems and improving money transfer services, which will open up new growth opportunities. These are just a few examples, and there are many more. Overall, rather than trying to build everything ourselves, Ecobank is forming a strong network of relationships with the best partners to accelerate our vision of a modern interconnected payment system across Africa. Finally, the growth transformation initiatives we've been embarking on are translating into stronger returns for our shareholders. RoTE is above the cost of equity of approximately 16%. And as I noted earlier, with strong growth across regions. Additionally, the number of subsidiaries that deliver ROE above cost of equity has increased from 22 to 27 affiliates a year ago. Moreover, dividends upstream to ETI from subsidiaries has grown at a compound average growth rate -- annual growth rate of 34.4% to USD 303 million as profitability and the number of paying subsidiaries increased. The market has recognized our progress and ETI's share price has rallied 708% and 164% in naira and U.S. dollars, respectively, since December 2022. Let me turn to the recognition we've received this year. When I take a look at this list, what strikes me isn't the number of awards, it's what they have in common, trade finance, foreign exchange, SME banking, digital, gender leadership. At first, they may appear broad in range. In reality, they mirror the actual building blocks of the strategy we set out a few years ago. I've come to think of external recognition as a lagging indicator. It tells you the what you did a couple of years back is finally showing up. So when the market recognizes us across these many dimensions at once, it's confirming something as we've already believed internally that our GPI strategy was never a single bet on one part of the business -- it's a platform and it's working the way we designed it to. And that doesn't happen on its own. It's a recognition of what our people have put in to serve our clients market by market day by day. The execution is catching up to our ambition, and that's what gives me real confidence in what we are building towards next. Let me take this opportunity to hand over to Ayo Adepoju, who is our Group CFO and Executive Director, to take us through the next part of the presentation. Ayo, over to you.

Thank you very much, Jeremy, and good afternoon to everyone joining us today. I'll take you through our financial performance and highlight the key drivers of our results. Starting with Slide #8 on the key performance indicators Overall, we delivered a resilient set of results characterized by strong revenue growth, improved operating efficiency, robust deposit growth and capital ratios comfortably above regulatory requirements. Revenue growth was achieved despite the margin compression arising from monetary easing across several of our markets. In addition, market conditions around client FX activity in the UEMOA region moderated our FX revenue and contributed to a lower noninterest revenue ratio. We delivered record cost-to-income ratio and cost-to-asset ratio while continuing to invest in technology, talent, customer experience and growth initiatives. Although [indiscernible] during the period which remain positive. [ Prudent ] cost remain elevated [indiscernible] our guidance range as you continue to prudently strengthening [indiscernible] resilience. On balance sheet, we saw expansion of approximately $36 billion supported primarily by strong customer deposit growth. We also further strengthening our capital ratio ended the period with estimated Tier 1 ratio of 13.9% and a total capital adequacy ratio of 17.4% most comfortably above regulatory requirements by over 400 basis points. Moving on to Slide 9, which shows the summary of our income statement. Our profit attributable to ETI shareholders increased 2% to $198 million despite significantly higher impairment charges. Our net revenue grew strongly by 15% to $1.3 billion, reflecting healthy growth across our businesses and regions. Our diversified business model remains a key strength. UEMOA, AWA, and CESA, including Nigeria, each made meaningful contribution to our group revenues, demonstrating the resilience and balance of our Pan-African franchise. Turning to Slide #10 that speaks to the diversification of our revenue streams. Like I mentioned earlier, revenue growth was broad-based across our businesses. Corporate and Investment Banking, CIB revenues increased by 19%, driven by strong performance in global markets, transaction banking and structured financing solution. We also saw increasing momentum in advisory and capital market activities. Consumer and Commercial Banking, CCB revenues increased by 10%, supported by deposit growth, consumer lending, trade finance activities, digital payments and deeper customer engagement. Our revenue profile remains highly diversified across regions, businesses and products, which enhances earnings resilience and reduces concentration risk. CASA's contribution to group revenue has increased from 28% at the end of 2022 to 35% to reflect the success of our turnaround and transform initiatives. So turning to Slide #11. Net interest income grew 20% or 10% in constant currency terms. The growth was driven by disciplined balance sheet management, continued growth in our low-cost CASA deposit that Jeremy highlighted previously, loan growth in selected segment and a lower overall cost of funding. As a result, our net interest margin improved to 5.7% despite a gradually easing interest rate environment across some of our markets. Turning to Slide #12. Our non-interest revenue increased by 8% and remained broadly stable in constant currency terms. Growth in fees and commissions was driven by stronger cash management income, lending-related fees and higher card transaction volumes. The trading income was moderated by lower client-driven FX activity in part of the franchise, reducing resulting in the noninterest revenue ratio declining from 44% to 41%, albeit still above peer average. Despite this, the noninterest revenue continues to represent a significant and important component of our group's revenue mix. Turning to Slide #13. Our payments revenue increased by 10% to $156 million and represented 12% of group net revenue. Growth was driven by stronger client engagement across our businesses, higher transaction volumes and increased card-related revenues across our markets. Turning to Slide #14. Operating expenses increased by 13% or 4% in constant currency terms, reflecting continued investments in people, technology, customer experience and business growth. Importantly, we maintain strong cost discipline while investing for the future. As a result, we delivered a record cost-to-income ratio of 48.4% in this first half and improved our cost-to-average asset ratio to 3.5%. These metrics demonstrate the continued effectiveness of our product initiatives across the group. So turning to Slide #15 on customer deposits. Our customer deposits increased by 13% year-on-year to $27 billion with growth achieved across both CIB and CCB. Importantly, our deposit franchise continues to strengthen. CASA deposit increased to 85% compared to 83% a year ago further improving our funding mix and supporting margin expansion. This contributed to a reduction in our average cost of overall funds to 2.3% 2.6% in the prior year period. Turning to Slide #16, on customer loans. Gross loans increased by 7% year-on-year to $12.4 billion, although balances were 3% lower than year and year [ wise], but year-to-date decline reflects a combination of seasonality with payments recoveries, selected write-offs and disciplined underwriting. We expect loan growth momentum to strengthen in the second half, supported by a healthy pipeline of approved facilities and seasonal commodity financing opportunities. Turning to our business segments, beginning with Slide #18. Corporate and Investment Banking delivered another strong performance with profit before tax increasing by 5% and revenues increasing by 19%. Growth was driven by global markets, transaction banking in the areas of cash and trade and structured financing solutions. We also recorded strong momentum in securities, wealth and asset management business with revenues increasing significantly and our assets under management growing by 23% to reach $1.7 billion. As part of our strategic evolution, we continue to reposition CIB toward advisory, transaction banking, structured solutions and other capital-light businesses that enhance the quality and sustainability of earnings. Turning to Slide #19. Consumer and Commercial Banking CCB revenues increased by 10%, supported by deposit margins, consumer lending, trade finance, digital payments and lending to SMEs businesses. However, our CCB profit before tax declined by 2%, reflecting higher impairment charges and continued investment in technology and customer acquisition. So turning to our regional performance, beginning with Slide #20 on our Francophone West Africa business called the UEMOA. UEMOA remained resilient, delivering an ROE of 22.7% above its cost of equity and showed stable profitability despite a more constrained FX market environment. Revenue growth was supported by higher net interest income, while with noninterest revenue reflected lower client-driven FX activity and market conditions. Cost discipline remain [indiscernible] with cost-to-income ratio of 47.6%, and we expect further efficiency gains during the second half of the year. Turning to Slide #21 on Nigeria. Nigeria remains a key strategic priority. While profitability was impacted by elevated impairment charges and balance sheet constraints, revenues increased by 23% and operating efficiency improved significantly from 67% to 59%. We remain focused on capital options, asset quality remediation and balance sheet optimization. Turning on to Slide #22 on Anglophone West Africa. This region continued to generate strong returns 29% and a 26% increase in profit before tax. Performance was driven by revenue growth, positive operating leverage and lower impairment charges. The region also continued to benefit from cost discipline with the cost-to-income ratio improving to 37.1%. Moving on to Slide #23 on our Central Eastern and Southern Africa region called CESA. This is our largest contributor to group earnings and it delivered another outstanding performance. The region achieved an ROE of 35.4%, revenue growth of 20% and profit growth of 21%. Performance was supported by improved balance sheet management, increased transaction activity, stronger fee generation and positive operating leverage. The success of the turnaround initiatives across several markets continue to translate into improved financial performance. Turning to Slide #25 on liquidity. The group's liquidity position remains very strong. Customer deposit growth has significantly outpaced loan growth, providing substantial liquidity and capacity to support future business lending growth. Our lending discipline remains unchanged. We continue to prioritize opportunities that meet our underwriting standards and deliver appropriate risk-adjusted returns. Moving on to Slide #26 on credit quality. Asset quality continues to improve and remains within our guidance ranges. The NPL ratio improved from 9.4% at the end of 2025 to 7.6% at the end of June 2026. This improvement reflects disciplined underwriting recoveries, proactive portfolio management and selected write-offs. Nigeria's NPL ratio continues to have a significant impact on the group's overall NPL ratio. Excluding Nigeria, the rest of the group NPL ratio would be approximately 2.3%. Our coverage ratio increased from 83% at year-end to about 97.6%, reflecting both lower NPL balances and our continued commitment to prudent proficient. Cost-of-risk improves with 313 basis points from 500 basis points at year-end and is now well within our guidance range. While we continue to maintain prudent overlays for emerging portfolio risk, improving portfolio quality is supporting a gradual normalization in credit cost. Moving to Slide #28 on our capital metrics. Capital remains a key strength of the group. As of 30th June 2026, estimated CET1, Tier 1 and total capital adequacy ratio stood at 13.3%, 13.9% and 17.4% respectively. All [indiscernible] regulatory requirement by over 400 basis points. The increase in total capital adequacy ratio is [indiscernible] strong internal capital generation and the successful re-finance in about total capital instrument earlier this year. The issuance of [indiscernible] $450 million Tier 2 bond, replacing the prior $350 million instruments contributed to the improvements in our total capital adequacy ratio. Turning to Slide #29 on our double leverage ratio. Our FX improved in double already with yield continuity [indiscernible] positive results. The ratio declined from 173% in 2023 to 149% at the end of 2025, and we expect further improvement toward 145% by year-end. This improvement is expected to be supported by higher upstream dividends, continued earnings generation and ongoing initiatives to optimize the group's capital structure. I'll now turn to Slide #35 on our 2026 guidance. We are maintaining our guidance for the full year, our first time performance places us comfortably within our target ranges across the key financial and risk metrics, and we remain focused on sustaining momentum through the second half of the year. Jeremy and I will now be pleased to take your questions together with our other colleagues. I will now hand over to the operator.

[Operator Instructions] At this stage, I will hand over for questions from the webcast. Thereafter we will take questions from the telephone lines.

Thank you very much. We're still awaiting questions on the webcast. There is no question at the moment. So maybe we'll just give one more minute before crossing over to the audio questions, if any. [Operator Instructions] At this moment, we do not have any questions on the webcast. We also do not have any questions on the audio platform. Let me now hand back to the operator. Thank you.

Ladies and gentlemen, with no questions submitted in the question queue, we have reached the end of the question and answer session. I will now hand back for closing remarks.