Banks Must Be Resilient

In the midst of challenges on the macroeconomic front which have affected the banking sector, significantly slowing down its growth, banks have been advised to remain resilient and focus on meeting customer needs.

The Chief Finance Officer (CFO) of Ecobank Ghana, Mr Edward Nartey Botchway, who acknowledged the challenging times facing businesses, indicated that Ecobank will focus on addressing its customer needs.

Per its financial statements for the year ended 2014, Ecobank put up a sterling performance, topping the industry with a profit before tax of GH¢447 million and an asset size of GH¢5.7 billion.

“By focusing on the customer, Ecobank Ghana remained resilient in the face of the challenges, posting impressive results at the end of the year with a 67% growth in profit before tax,” Mr Botchway said in an interview with The Finder last Thursday in Accra. The bank delivered revenue growth of 45% to close at GH₵857.7 million in 2014 (2013:589.6 million).  Net interest income grew by 43% to GH₵555.7 million with net fee and commission income growing by 34% and trading income showing an impressive increase of 74%. Impairment charges and cost were well controlled. Cost income ratio declined to 44.2% from 45.3% in 2013 and the bank’s NPL ratio was stated at 1.78% compared to 5.9% last year.

On the balance sheet front, he indicated that the loan book grew by 27% to GH₵2.7 billion and customer deposits saw an impressive increase of 30% to GH₵4.2 billion. Total equity increased by 42% in 2014 to GH₵798.4 million. Overall, the bank’s total assets grew by 23% to GH₵5.7 billion in 2014 (2013: GH₵4.7 billion). Return on Average Asset improved from 4.7% in 2013 to 6.1% in 2014, Return on Average Equity improved from 37% in 2013 to 47% by the end of 2014.

According to him, the current market conditions demand of businesses to think outside of the box, refresh products, introduce new products to improve revenue. He indicated that the operational efficiency was also a critical factor, and businesses will have to focus on these issues if they are to attain their goals for the year.

“In an era of erratic power supply, which had occasioned unplanned increases in costs of fuel to generate alternative power as well as VAT financial services, there was the compelling need to review process and procedures with a view to reducing cost and operating more efficiently,” the CFO said.

One significant milestone chalked by the bank was a reduction of its Non- Performing Loans (NPL) ratio from 5.9% to 1.78% within a year. This was achieved on the back of a 27% growth in the bank’s loan portfolio to a total of GH¢2.7 billion and in respect of the fact that the industry NPL currently stands at 11.3%.

Commenting on what led to the impressive showing on the loan portfolio, the CFO noted that the bank’s low NPL was achieved by effective loan appraisals, disbursement, monitoring and recovery processes and procedures. 

He mentioned that “sometimes underfunding of customer needs, amongst other reasons, can lead to loan defaults.” He added that because loans are funded from customer deposits, it is critical that banks recover loans disbursed.

The CFO further pointed out that as Ecobank celebrates its 25th anniversary, the progress made by the bank is most remarkable. From a position of the smallest bank in Ghana, the bank is now the largest bank in Ghana and also number one in profit before tax, deposits, loans, shareholder funds and revenue. 

On the outlook, he mentioned that Ecobank is excited by the bank’s prospects and Ecobank looks forward to the next 25 years with hope and excitement.