Ecobank Ghana maintained a strong revenue growth of 18.5%y/y (versus 19.5%y/y in 9M-2019) to GHS1.52 billion in 9M-2020 despite the impact of the coronavirus pandemic on banking activity. Revenue was mainly driven by a 14.5%y/y growth in interest income to GHS1.16 billion on back of a strong growth (+41.3%y/y) in interest bearing non-trading assets to GHS4.13 billion. However, non-interest income contracted on the back of lower fees and commissions as well as net trading income arising from slowdown in banking activity emanating from the covid-19 pandemic.
However, there are still concerns about the bank’s asset quality, which may have contributed to its decision to slowdown the expansion of the loan book in favor of increasing its holdings of the less risky non-trading assets. The loan book grew by just 0.8%y/y to GHS4.68 billion. Ecobank’s Non-Performing Loans ratio rose by 280bps to 12.8% in 9M-2020 from 10.0% in 9M-2019. Moreover, the bank’s cost of risk heightened to 3.9%, up from 2.6% last year. This was attributed to a 52.3%y/y rise in impairment charge to GHS184.31 million in 9M-2020 from GHS120.99 million in 9M-2019.
Fortunately, despite the increased cost of risk, the bank managed to preserve its margins largely due to cost savings during the height of the pandemic as some customers shifted to digital banking platforms. Ecobank’s implementation of a digital banking strategy, which resulted in the closure of some branches a couple of years ago, may have come in handy during the height of the covid-19 pandemic in Ghana. The bank’s cost-to-income ratio dropped by 130bps from 46.4% last year to 45.1% in 9M-2020.
Ecobank’s net earnings improved by 15.6%y/y to GHS388.59 million in 9M-2020 from GHS336.31 million in 9M-2019 on the back of lower cost-to-income ratio and robust revenue growth. The bank is likely to end the year on a strong footing as ongoing recovery in business and consumer confidence boost economic activity, which could lead to increased demand for banking services in the final quarter of the year.
