BUILDING AFRICA’S FINANCIAL FUTURE ECOBANK GROUP ANNUAL REPORT 2018 BUILDING AFRICA’S FINANCIAL FUTURE ECOBANK GROUP ANNUAL REPORT 2018 ECOBANK GROUP ANNUAL REPORT CONTENTS 05 Performance Highlights 08 Ecobank is the leading Pan-African Banking Institution 09 Business Segments 10 Our Pan-African Footprint 15 Board and Management Reports 16 Group Chairman’s Statement 22 Group Chief Executive’s Review 32 Consumer Bank 36 Commercial Bank 40 Corporate and Investment Bank 45 Corporate Governance 46 Board of Directors 48 Directors’ Biographies 53 Directors’ Report 56 Group Executive Committee 58 Corporate Governance Report 78 Sustainability Report 94 People Report 101 Risk Management 141 Business and Financial Review 163 Financial Statements 164 Statement of Directors’ Responsibilities 165 Auditors’ Report 173 Consolidated Financial Statements 178 Notes to Consolidated Financial Statements 298 Five-year Summary Financials 299 Parent Company’s Financial Statements 305 Corporate Information 3 ECOBANK GROUP ANNUAL REPORT 3 PERFORMANCE HIGHLIGHTS 5 ECOBANK GROUP ANNUAL REPORT PERFORMANCE HIGHLIGHTS For the year ended 31 December (in millions of US dollars, except per share and ratio data) 2018 2017 Selected income statement data Operating income (net revenue) 1,825 1,831 Operating expenses 1,123 1,132 Operating profit before impairment losses & taxation 702 700 Impairment losses on financial assets 264 411 Profit before tax 436 288 Profit for the year 329 229 Profit attributable to ETI shareholders 262 179 Profit attributable per share ($): Basic EPS 0.01 0.01 Diluted EPS 0.01 0.01 Selected statement of financial position data Net loans and advances to customers 9,169 9,358 Total assets 22,582 22,432 Deposits from customers 15,936 15,203 ETI shareholders' equity 1,537 1,881 Total equity 1,812 2,172 Ordinary share outstanding at period-end 24,730 24,730 Book value per ordinary share, BVPS ($) 1 0.06 0.09 Tangible book value per ordinary share, TBVPS ($) 0.05 0.08 ETI share price ($) 2 High 0.06 0.05 Low 0.04 0.02 Closing share price at period-end 0.04 0.05 Selected ratios Profit for the year to average total assets (ROA) 1.5% 1.1% Profit for the year to average total equity (ROE) 17.8% 11.6% Profit for the year to average total tangible equity (ROTE) 21.0% 13.6% Basel II/III3 Tier 1 capital ratio 9.5% – Basel II/III total capital adequacy ratio (CAR) 13.6% – Net interest margin 5.9% 6.5% Cost-to-income ratio 61.5% 61.8% Non-performing loans ratio 9.6% 10.7% Non-performing loans coverage ratio 67.6% 52.4% 1 Book value per ordinary share (BVPS) is computed by dividing the Group’s shareholders’ equity at period-end with the number of ordinary shares outstanding at period-end. 2 ETI share price on the Nigerian Stock Exchange at period-end converted into US dollars using Bloomberg applicable rate at period-end. 3 Group consolidated Basel II/III CAR is at 30 June 2018. Final CAR as at 31 December 2018 will be available on 30 April 2019. 6 ECOBANK GROUP ANNUAL REPORT Operating income (net revenue) Operating profit before Profit before tax1 ($m) impairment losses & taxation ($m) ($m) 789 2,280 738 735 702 520 2,106 700 1,972 436 1,831 1,825 288 205 (131) 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Net loans & advances to customers Deposits from customers Total assets ($bn) ($bn) ($bn) 24.2 23.6 22.4 22.6 17.4 12.3 16.4 20.5 15.2 15.9 11.2 13.5 9.3 9.4 9.2 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Profit attributable to Earnings per share (Basic)2 Return on equity ETI shareholders ($m) ($) (%) 17.8 339 16.5 0.017 262 11.6 179 0.007 4.2 66 0.0101 0.003 (250) (9.6) (0.010) 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 1. For the periods 2014 and 2015 amounts relate to continuing operations 2. EPS for 2014 was restated to reflect a 1-for-15 bonus issue in June 2015 7 ECOBANK GROUP ANNUAL REPORT Ecobank is the leading Pan-African banking institution Founded in 1985 and headquartered in Lomé, Togo, Ecobank provides consumer and commercial banking, corporate and investment banking, and securities, wealth and asset management to over 19 million customers, ranging from individuals, small and medium-sized enterprises, regional and multinational corporations, financial institutions, international organisations and governments via 888 branches and offices, 2,731 ATMs, the internet (ecobank.com), and mobile banking. Ecobank is present in 36 African countries, with Ecobank Transnational Incorporated (‘ETI’), the international offices in Paris, London, Dubai and parent holding company of the Ecobank Group, is Beijing, to support our customers who conduct listed on the Nigerian Stock Exchange (‘NSE’), in business in the global economy. Lagos, the Ghana Stock Exchange (‘GSE’), in Accra and the Bourse Régionale des Valeurs Mobilères Our vision, which steers us towards growth and SA (‘BRVM’) in Abidjan. success, is to build a world-class Pan-African bank and contribute to the economic development and For management purposes the Group’s activities financial integration of Africa. are organised into three major reportable business segments. The Groups’ consumer business is the Our mission is to provide all of our customers Consumer Bank and its wholesale businesses with convenient and reliable financial products are the Commercial Bank and the Corporate and and services. Investment Bank. As at 31 December 2018, Ecobank had $22,582 Additionally, the Group is organised into four million in total assets and $1,812 million in reportable geographical regions: Nigeria, total equity. Francophone West Africa (UEMOA), Anglophone West Africa (AWA) and Central, Eastern and Southern Africa (CESA). Ecobank business segments and geograpical regions Consumer Commercial Corporate and Bank Bank Investment Bank Francophone Anglophone Central, Eastern Nigeria West Africa West Africa and Southern (UEMOA) (AWA) Africa (CESA) 8 ECOBANK GROUP ANNUAL REPORT At Ecobank we serve customers across our geographical markets with the financial products and services that they need to be financially successful, through our three business segments: Consumer Bank, Commercial Bank, and Corporate and Investment Bank. Business Consumer Commercial Corporate and segments Bank Bank Investment Bank – Wealthy and Mass – Small and Medium-Sized – Governments Customers Affluent Enterprises (SMEs) – Regional and Global – Mass Market and Youth – Medium Local Corporations Corporations – Financial Institutions – High Value Local – International Corporations Organisations – Non-Government Public Sector (Local Governments, Domestic NGOs, Faith-based Institutions, Educational Institution, Healthcare 5% Institutions) 11% 24% 11% – Cards – Cash Management – Transaction Banking Products 51% – Current and Savings – Trade Finance – Investment Banking 13% Accounts – Fixed Income, – FICC 66% 19% – Mortgages Currencies – Securities, Wealth and – Remittances & Commodities (FICC) Asset Management – Personal loans – Internet and e-Banking – Loans and Liquidity – Loan and Liquidity – Asset management Corporate and Investment Bank Corporate and Investment Bank for High Net Worth Commercial Bank Commercial Bank Individuals (HNWI) Consumer Bank Consumer Bank Others Others Operating income ($1,825 million) Operating profit before impairment Profit before tax ($436 million) losses and taxation ($702 million) 5% 5% 11% 11% 18% 24% 24% 11% 11% 14% 51% 51% 13% 13% 66% 66% 61% 19% 19% 7% Corporate and InvestmentCorporate Bank and Investment Bank Corporate and InvestmentCorporate Bank and Investment BankCorporate and Investment Bank Commercial Bank Commercial Bank Commercial Bank Commercial Bank Commercial Bank Consumer Bank Consumer Bank Consumer Bank Consumer Bank Consumer Bank Others Others Others Others Others The breakdown of operating income, operating profit before impairment losses and taxation, and profit before tax reflects performance figures specifically for each business segment and has not incorporated the impact of ETI, other subsidiaries, affiliates, and structured entities, and consolidation adjustments, which are captured in Others. Consolidation items include items such as intercompany adjustments, mainly elimination of intra group dividend income, intercompany assets and liabilities and other adjustments for consolidation. 18% 18% 9 14% 14% 61% 61% 7% 7% Corporate and InvestmentCorporate Bank and Investment Bank Commercial Bank Commercial Bank Consumer Bank Consumer Bank Others Others ECOBANK GROUP ANNUAL REPORT OUR PAN-AFRICAN FOOTPRINT Our Pan-African geographical footprint is segmented into the four regions of Nigeria, Francophone West Africa (UEMOA), Anglophone West Africa (AWA) and Central, Eastern and Southern Africa (CESA). TUNISIA MOROCCO ALGERIA LIBYA WESTERN EGYPT SAHARA MAURITANIA CAPE VERDE MALI NIGER SUDAN E R I T R E A SENEGAL CHAD THE GAMBIA BURKINA GUINEA-BISSAU D J I B O U T I FASO GUINEA BENIN Addis NIGERIA Ababa (Representative Office) TO CÔTE GO SIERRA LEONE LI D’IVOIRE GHANA SOUTH E T H I O P I A BE CENTRAL AFRICAN SUDAN RI REPUBLIC A Lomé (Headquarters) CAMEROON S O M A L I A EQUATORIAL GUINEA UGANDA K E N Y A SÃO TOMÉ & PRÍNCIPE CONGO GABON RWANDA D.R. CONGO BURUNDI Map Key TANZANIA Luanda Francophone West Africa (UEMOA) I ANGOLA AW AL Nigeria ZAMBIA M UE IQ Anglophone West Africa (AWA) ZAMB ZIMBABWE MO Central, Eastern and M A D A G A S C A R Southern Africa (CESA) BOTSWANA NAMIBIA Non-Ecobank region SWAZILAND Johannesburg (Representative Office) Ecobank representative offices SOUTH AFRICA LESOTHO 10