Ecobank has the Network Advantage Customers, Products, Geography.
Ecobank Group Annual Report 2015 Contents Contents
2015 Highlights 02 Ecobank at a glance 04 Unique pan-African footprint 06 Performance highlights 08
Board and Management Reports 10 Board of Directors 12 Directors’ biographies 14 Group Chairman’s statement 18 Directors’ report 21 Group Chief Executive’s review 24 Group Chief Operating Officer’s review 30 Corporate and Investment Bank 32 Domestic Bank 33 Treasury 34
Business and Financial Review 36
Corporate Governance 64 Corporate Governance report 66 Sustainability report 81 People report 96
Risk Management 100
Financial Statements 126 Statement of Directors’ responsibilities 128 Auditors’ report 129 Consolidated financial statements 130 Notes to consolidated financial statements 135 Five-year summary financials 217 Parent Company’s financial statements 218
Corporate Information 222 Executive management 224 Shareholder information 226 Holding company and subsidiaries 233 Shareholder contacts 234 Customer contact centers 235
01 2015 Annual Report
2015 highlights
Our challenge remains to extract the maximum shareholder value from Africa’s largest financial services platform. With a clear strategic roadmap to market leadership in Middle Africa and a reinvigorated senior management team to implement it, we are confident of achieving our medium-term objectives.
02 03 2015 Annual Report Ecobank is the leading pan-African banking institution in Africa
Founded in 1985 and headquartered in Lomé, Togo, Ecobank provides banking, consumer and commercial finance, investments, and securities and asset management to approximately 11 million customers ranging from individuals, small and medium-sized enterprises, regional and multinational corporations, financial institutions and international organisations through 1,268 branches and offices, 2,773 ATMs, the internet (ecobank.com) and mobile banking.
We are present in 36 African countries, Ecobank Transnational Incorporated (ETI), the parent with international offices in Paris, holding company of the Ecobank Group, is listed on the Nigerian Stock Exchange in Lagos, the Ghana London, Dubai and Beijing to support our Stock Exchange in Accra and the Bourse Régionale des customers who conduct business in the Valeurs Mobilères SA (BRVM) in Abidjan. global economy. Ecobank is organised,1 for management reporting We use our vision to steer us toward growth and purposes, into three business segments and four success. Our vision is to build a world-class pan-African geographical regions. The business segments – bank and contribute to the economic development and Consumer Banking; Commercial Banking; Corporate financial integration of Africa. and Investment Bank – are defined by customer segment and supported by a range of product suites. Our mission is to provide all of our customers with convenient and reliable financial products and services. The geographical regions are – Nigeria, Francophone West Africa (UEMOA), Anglophone West Africa (AWA), As of 31 December 2015, Ecobank had $23.6 billion in and Central, Eastern and Southern Africa (CESA). total assets and $2.5 billion in total equity.
Ecobank business segments and geograpical regions
Consumer Commercial Corporate and Banking Banking Investment Bank
Francophone Anglophone Central, Eastern Nigeria West Africa West Africa and Southern (UEMOA) (AWA) Africa (CESA)
1 Ecobank’s organisation reflects changes made to our business and geographical segments effective 1 January 2016. Prior to this date Ecobank business segments were – Domestic Bank, Corporate and Investment Bank and Treasury. Our geographical clusters (now regions) were – Nigeria, Francophone West Africa (UEMOA), Rest of West Africa (WAMZ), Central Africa (CEMAC), East Africa (EAC), Southern Africa (SADC) and International
04 2015 Highlights Business Model
At Ecobank we serve our customers in each of our geographical regions – Nigeria, Francophone West Africa, Anglophone West Africa, and Central, Eastern, and Southern Africa through our three customer-centric business segments – Consumer Banking, Commercial Banking, and Corporate and Investment Bank – with a product suite that meets the financial needs of our customers.
Business segments
Consumer Commercial Corporate and Banking Banking Investment Bank
Customers
Premier Small and Medium- Governments Advantage Sized Enterprises (SMEs) egional and Classic Medium Local Global corporations corporations Direct Financial institutions High Value Local International Corporations organisations Non-government public sector (schools, Faith, non-governmental organisations, professional bodies)
Products
Cards Fixed income, currencies Transaction banking Current and and commodities (FICC) Investment banking Savings accounts Transaction Banking and FICC Mortgages Loans and Liquidity Security, wealth and emittances asset management Personal loans and Loans and Liquidity asset management for High Net Worth Individuals (HNWI)
05 2015 Annual Report Our pan-African footprint
Our geographical footprint is segmented into four regions1 – Francophone West Africa (UEMOA) Nigeria, Anglophone West Africa (AWA) and Central, Eastern and Southern Africa (CESA).
TUNISIA TUNISIA MOROCCO MOROCCO
ALGERIA ALGERIA LIBYA LIBYA EGYPT WESTERN WESTERN EGYPT S AHARA S AHARA
MAURITANIA MAURITANIA CAPE VERDE CAPE VERDE
MALI MALI NIGER NIGER SUDAN ERITREA ERITREA CHAD SUDAN SENEGAL SENEGAL CHAD THE GAMBIA THE GAMBIA BURKINA BURKINA GUINEA-BISSAGUINU EA-BISSAU DJIBOUTI DJIBOUTI FASO FASO GUINEA GUINEA BENIN BENIN Addis Ababa NIGERIA NIGERIA Addis Ababa (Representative Office) (Representative Office) CÔTE CÔTE G HANA SOUTH ETHIOPIA SIERRA LEONE SIERRA LEOND’E IVOIRE D’IVOIRE G HANA SOUTH ETHIOPIA CENTRAL AFRICACENTN RAL AFRISUCADAN N SUDAN REPUBLIC REPUBLIC Lomé Lomé CAMEROON (Headquarters) (Headquarters) CAMEROON SOMALIA SOMALIA
EQUATORIAL GUINEQUAEATORIAL GUINEA UGANDA KEUGANNYADA KENYA SÃO TOMÉ & PRÍNCIPESÃO TOMÉ & PRÍNCIPE CONGO CONGO GABON GABON RWANDA RWANDA D.R. CONGO D.R.BURUND CONGOI BURUNDI
TANZANIA TANZANIA
Map Key Map Key
ANGOLA FrancophoneFr Weancstophone Africa (F WeWAst) Africa (FWA) ANGOLA ZAMBIA ZAMBIA
Nigeria Nigeria
ZIMBABWE ZIMBABWE Anglophone West Africa (AWA) Anglophone West Africa (AWA) MADAGASCAR MADAGASCAR BOTSWANA BOTSWANA
Central, EasternCent andral, Eastern and NAMIBIA NAMIBIA Southern Africa (CESA) Southern Africa (CESA) SWA ZILAND Johannesburg Johannesburg SWA ZILAND (Representative Office) (Representative Office) Non-Ecobank Region Non-Ecobank Region SOUTH SOUTH AFRICA AFRICA LESOTHO LESOTHO Ecobank ReprEcesenobanktative Re prOfesenficestative Offices
1 As part of our strategic overhaul, we segmented our geographical regions into four as of 1 January 2016 as noted above. Prior to this, our geographical regions were seven: Francophone West Africa (UEMOA), Nigeria, Rest of West Africa (WAMZ), Central Africa (CEMAC), Eastern Africa (EAC), Southern Africa (SADC), International
06 2015 Highlights
(In millions of U.S. Dollars, except countries, branches and offices, and employee, data)
Nigeria Francophone West Anglophone West Central, Eastern Others* Africa (UEMOA) Africa (AWA) and Southern Africa (CESA) Net revenue Net revenue Net revenue Net revenue Net revenue $876 $441 $370 $408 $326 Profit after tax Profit after tax Profit after tax Profit after tax Loss after tax $57 $85 $90 $50 ($28) Total assets Total assets Total assets Total assets Total assets $9,189 $7,112 $2,649 $4,250 $4,648 Countries Countries Countries Countries Countries 1 9 5 18 7 • Nigeria • Benin • Gambia • Cameroon • Burkina Faso • Ghana • Chad • Côte d’Ivoire • Guinea • Central Africa Republic • Cape Verde • Liberia • Congo Brazzaville • Guinea Bissau • Sierra Leone • Gabon • Mali • Sao Tome and Principe • Niger • Equatorial Guinea • Senegal • Burundi • Togo • Kenya • Rwanda • Uganda • South Sudan • Tanzania • DR Congo • Malawi • Mozambique • Zambia • Zimbabwe
Branches and offices Branches and offices Branches and offices Branches and offices Branches and offices 512 292 150 285 33 Employees Employees Employees Employees Employees 9,182 3,187 2,822 3,691 686
* Others comprise entities of the group which are not classified within the four geographical regions, namely the parent company ETI, EBISA (subsidiary in Paris), eProcess (technology and shared services centre), EDC (Investment Banking and Securities and Asset Management businesses) and other entities. Total amounts for net revenue, profit after tax, and total assets will differ from reported numbers because of consolidation adjustments relating to the elimination of intra-Group transactions and balances.
07 2015 Annual Report Performance highlights
Selected income statement data
For the year ended 31 December (in millions of US Dollars, except per share data) 2015 2014 Net revenue 2,106 2,280 Operating expenses 1,368 1,491 Pre-impairment profit 738 789 Impairment losses 532 267 Profit before tax 205 520 Profit for the year from continuing operations 107 395 Profit attributable to owners of the parent (from continuing operations) 68 339
Profit attributable per ordinary share:1 Basic (U.S. Dollar cents) 0.28 1.69 Diluted (U.S. Dollar cents) 0.28 1.60 Cash dividends proposed per ordinary share 0.20 0.00
Selected statement of financial position data
As at 31 December (in millions of US Dollars, except per share data) 2015 2014 Loans and advances to customers, net 11,200 12,312 Total assets 23,554 24,244 Customer deposits 16,428 17,437 ETI’s shareholders’ equity 2,346 2,451 Total equity 2,523 2,655 Ordinary shares outstanding (in millions of units) 24,100 22,564 Book value per ordinary share (U.S. Dollar cents) 10.47 11.77
Selected ratios
2015 2014 Return on average total assets (ROA) 0.4% 1.7% Return on average total equity (ROE) 4.2% 16.5% Tier 1 capital ratio 20.5% 18.3% Total capital adequacy ratio 23.9% 20.5% Net interest margin 7.8% 6.8% Cost-to-income ratio 64.9% 65.4% Non-performing loans ratio 8.2% 4.4% Non-performing loans coverage ratio 67.9% 68.7%
1 Earnings per share for 2014 has been adjusted to reflect the 1-for-15 bonus issue of July 2015 as required by International Accounting Standard 33 – Earnings per share (IAS 33)
08 2015 Highlights
Net revenue Pre-impairment profit Profit before tax* (US$m) (US$m) (US$m) 789 2,280 738 520 2,106 2,003 598 1,730 494 338
1,196 363 277 222 205
2011 2012 201 2014 201 2011 2012 201 2014 201 2011 2012 201 2014 201
Customer loans Customer deposits Total assets (US$bn) (US$bn) (US$bn)
24.2 23.6 17.4 22.5 16.5 12.3 16.4 19.9 11.4 11.2 14.6 17.1 9.4 12.1
7.3
2011 2012 201 2014 201 2011 2012 201 2014 201 2011 2012 201 2014 201
Profit attributable to ETI shareholders Earnings per share (Basic)* Return on average equity from continuing operations* (US$m) (US$cents) (%) 339 1.76 1.67 1.69 16.5 15.9 15.8 246
182
6.9 103 0.60 68 4.2 0.28
2011 2012 201 2014 201 2011 2012 201 2014 201 2011 2012 201 2014 201
* For the periods 2012 to 2015 amounts relate to continuing operations EPS for 2014 has been restated to reflect the 1-for-15 bonus issue in July 2015 09 2015 Annual Report
Board and Management reports
Ecobank is endowed with a highly talented senior management team, eager to accept new challenges. We are applying their vast commercial experience in Africa to make the strategic decisions necessary to ensure Ecobank’s future success.
10 11 2015 Annual Report Board of Directors
1 4 2 5 3
1 Emmanuel Ikazoboh 3 Dolika E. S. Banda 5 Abdulla M. Al Khalifa Group Chairman Non-Executive Director Non-Executive Director Non-Executive Director Independent Consultant Executive General Manager Nigerian Zambian and Chief Business Officer, Qatar National Bank Qatari
2 Ade Ayeyemi 4 Dr. Adesegun Akinjuwon Executive Director Akin-Olugbade Group Chief Executive Officer Non-Executive Director Nigerian Chief Operating Officer and General Counsel, Africa Finance Corporation Nigerian
12 Board and Management Reports
7 9 11 8 10
6
6 Bashir M. Ifo 8 Dr. Daniel Matjila 10 Mfundo Clement Nkuhlu Non-Executive Director Non-Executive Director Non-Executive Director President ECOWAS Bank for CEO and Executive Director, Chief Operating Officer and Investment and Development Public Investment Corporation Executive Director, Nedbank Nigerian South African Ltd and Nedbank Group Ltd South African
7 Tei Mante 9 Alain F. Nkontchou 11 Kadita Tshibaka Non-Executive Director Non-Executive Director Non-Executive Director Economic and Financial Managing Partner and Retired Banker Consultant Co-Founder, Enko Capital American Ghanaian Management LLP Cameroonian
13 2015 Annual Report Directors’ biographies
restructure the stock exchange, equities market, stockbrokerage and corporate governance processes to meet with best practice and put in place a new management team. As Chairman of Nigeria’s Central Securities Clearing System, Mr. Ikazoboh led its restructuring and transformation to conform to global standards.
He is currently the Vice Chairman and only African board representative of The International Institute for Sustainable Development (IISD) in Canada and Emmanuel Ikazoboh (66) serves as the Chairman of Audit and Risk Committee. He also serves on the boards of a number of Nigerian Chairman and South African companies, including Dangote Non-Executive Director since 2014 Cement Plc. Nigerian Mr. Ikazoboh is a UK Certified Accountant and a Fellow Mr. Ikazoboh has more than 25 years’ experience of the Chartered Association of Certified Accountants, in senior management roles, executing high profile the Institute of Chartered Accountants Nigeria and advisory assignments for public and private sector the Nigeria Institute of Taxation. He holds an MBA clients in Nigeria, Côte d’Ivoire, Cameroon and South in Financial Management and Marketing from Africa. He spent most of his career with Deloitte and Manchester University’s Business School. He was Touche, holding the position of Chairman and CEO also one of the top CEOs seconded to the Kellogg of Deloitte West and Central Africa between 2007 Senior Management School, Northwestern University and 2009. Chicago, USA.
From 2010 to 2011, he served as Interim Administrator ETI Board Committee: of the Nigerian Stock Exchange. He was appointed Finance & Regulatory Requirements Committee. by Nigeria’s Securities & Exchange Commission to
experienced banker who, prior to joining Ecobank, had a distinguished and successful career with Citigroup, ultimately becoming CEO of Citigroup’s Sub-Saharan Africa division, based in Johannesburg.
A Chartered Accountant, Ade holds a Bachelor of Science degree in Accounting (First Class Honours) from the University of Ife (now Obafemi Awolowo University, Ile-Ife) in Nigeria. He also holds a Masters in Financial Management from the University of London and is an alumnus of the Harvard Business School’s Ade Ayeyemi (53) Advanced Management Programme. Executive Director since 2015 ETI Board Committees: In attendance in the Finance & Regulatory Group Chief Executive Officer Requirements Committee; Social, Reputation & Ethics Nigerian Committee, and Risk Committee. Ade Ayeyemi became Group CEO of Ecobank on 1 September 2015, following the announcement of his appointment in June that year. Ade is an
14 Board and Management Reports
Adesegun Akinjuwon Akin-Olugbade (53) Abdulla M. Al Khalifa (42) Dolika E. S. Banda (53) Non-Executive Director since 2014 Non-Executive Director since 2015 Non-Executive Director since 2014 Nigerian Qatari Zambian Dr. Akin-Olugbade is the Chief Operating Abdulla Mubarak Al Khalifa is the Executive Dolika Banda is an independent Officer and General Counsel for the Africa General Manager and Chief Business Officer consultant, with over 25 years’ experience Finance Corporation (AFC), where he of the Qatar National Bank (QNB) Group, in international banking and financial oversees the Corporate Governance, Legal, the largest bank in Middle East and Africa, management who, more recently, has Administration, Corporate Communications, with a network spanning 26 countries. focused on supporting the banking and ICT and Country membership functions. He has Group-wide responsibilities for economic development of sub‑Saharan Africa. Between 2009 and 2014 he was AFC’s QNB’s business functions, including Group Executive Director (Corporate Services) and Corporate and Institutional Banking, Retail She joined the UK’s Commonwealth General Counsel and their General Counsel Banking, International Banking Division, Development Company (CDC) in 2013 and Corporate Secretary in 2008. Group Treasury, Group Asset and Wealth where she served as Regional Director Management, QNB Capital, and QNB for Africa. Prior to this, she was a senior With over 30 years’ experience as a Financial Services. advisor and director of the International practicing lawyer and of the financial services Finance Corporation (IFC), working for sector, Dr. Akin-Olugbade was a Director and Abdulla joined QNB Group in 1996, 16 years in the Financial Markets, Credit, General Counsel at the African Development subsequently holding a variety of executive Accounting and Treasury departments. Bank Group (2000-2007) and Chief Legal positions and gaining extensive experience She has also held senior roles in Corporate Officer for the African Export-Import Bank of strategic planning, sales & marketing, and Merchant Banking at Barclays Bank, (1994-1997). risk management, business partnerships, Zambia, -and in Financial Control, Credit and mergers and acquisitions and customer Treasury and International Relationships at He currently chairs the Board of Governors relations. Abdulla is also an Executive Citibank, Zambia. of the African Law Institute and the Dr. board member of QNB Capital, Qatar, QNB Adesegun Akin-Olugbade Foundation. He Al Ahli, Egypt, and Housing Bank Trade & Mrs. Banda is a non-executive director of is on the Advisory Board of International Finance, Jordan. Harith General Partners and UK AID’s Financial Lawyers for Africa (ILFA) and serves as non- Sector Deepening Africa and Financial Sector executive director of OBA Transport Limited Abdulla holds a Bachelor’s Degree in Business Deepening Zambia. She also chairs the Focus and Axion Realty and Development Company Administration from Eastern Washington Investment Group, a SME financial services Limited. University (USA). provider in Zambia. ETI Board Committees: Dr. Akin-Olugbade graduated from King’s She holds a Bachelor’s degree in International Finance & Regulatory Requirements College London with Bachelors and Masters Business and Marketing from Schiller Committee; Risk Committee degrees in International Finance and International University (UK), and a Masters Corporate Law. He holds a Masters and in International Business and Banking from Doctorate from Harvard Law School. He Schiller University (France). was called to the Nigerian Bar in 1984. The Nigerian Government conferred him with the ETI Board Committees: National Honour of Officer of the Order of the Social, Reputation & Ethics Committee; Niger (OON) in 2012. Risk Committee
ETI Board Committees: Finance & Regulatory Requirements Committee; Governance Committee
15 2015 Annual Report Directors’ biographies
Bashir M. Ifo (56) Tei Mante (66) Dr. Daniel Matjila (53) Non-Executive Director since 2011 Non-Executive Director since 2014 Non-Executive Director since 2012 Nigerian Ghanaian South African Bashir Mamman Ifo is currently the President Tei Mante is an economic and financial Dr. Daniel Mmushi Matjila is the Chief of the ECOWAS Bank for Investment and consultant with around forty years of Executive Officer and Executive Director of Development (EBID) in Togo. He has more experience in financial markets, including the Public Investment Corporation (PIC), one than 30 years of experience within the public Investment Banking, Project Finance, and of the largest investment managers in Africa and private sectors. Between 1995 and Private Equity. He worked with the World with assets under management in excess 2011, he held several senior management Bank Group in Washington D.C. from of R1.8 trillion (circa $110 billion). He also roles at EBID, including Head of the Financial 1975 to 2000, where amongst a variety spearheads the offshore investment and Operations Division, Director of the Treasury of assignments, he headed up the Africa Africa investment strategies for PIC. Prior Department, Head of the Finance and and Agribusiness Departments of the to this role, he was PIC’s Chief Investment Administration Department, Acting Managing International Finance Corporation (IFC). Officer. Director of the former ECOWAS Regional Investment Bank (ERIB) and Vice President Mr. Mante has also worked as a consultant He was previously Senior Manager, for Finance and Corporate Services. From for the African Development Bank, the Quantitative Research Analysis for Stanlib, 1982 to 1995, Mr. Ifo worked in both the Government of Ghana, the European where he introduced the application of public and private sectors in Nigeria. Commission, UNECA and the Government of quantitative techniques in fund management Sierra Leone. He served as a special advisor and managed the Quant Portfolio. He served He holds a Bachelor’s degree in Business to the Ghanaian Government’s Economic on the Board of Erin Energy Corporation, a Administration (Banking and Finance) and an Management team between 2001 and 2004. New York-listed company until 8 December MBA in Finance, both from the Ahmadu Bello He was Chairman of the Board of Ecobank 2015. He also served for five years as Senior University, Zaria, Nigeria. Ghana Ltd from 2006 to 2010. He is currently Manager, Quantitative Research Analysis, at an Independent Member of the Investment Anglo-American Corporation, a Johannesburg ETI Board Committees: Committee of the West Africa Emerging Stock Exchange (JSE)-listed company. He Nomination & Remuneration Committee; Markets Growth Fund. started his career in academia, working as a Governance Committee Senior Mathematics lecturer at the University He graduated with a BSc in Administration of the North for over nine years. from The University of Ghana and holds an MBA from Columbia University, New York. He Dr. Matjila is currently a non-executive is also an alumnus of INSEAD (IEP). director and board member of Capital Appreciation, a JSE-listed company. ETI Board Committees: Audit & Compliance Committee; Dr. Matjila holds a Ph.D. (Wits), Governance Committee M.Sc. (Rhodes), and B.Sc. Hons (Fort Hare), a Post‑Graduate Diploma in Financial Mathematics (Oxford), AMP (Harvard) and SMP (University of Pretoria.
ETI Board Committees: Finance & Regulatory Requirements Committee, Risk Committee
16 Board and Management Reports
Kadita Tshibaka (68) Alain F. Nkontchou (52) Mfundo Clement Nkuhlu (49) Non-Executive Director since July 2014 Non-Executive Director since 2014 Non-Executive Director since 2015 American Cameroonian South African Kadita Tshibaka has had an illustrious Mr. Alain Nkontchou is the Managing Partner Mfundo Nkuhlu is the Chief Operating Officer banking career with over 40 years of and co-Founder of Enko Capital Management and Executive Director of Nedbank Limited experience in corporate and retail banking, LLP, an asset management company based and Nedbank Group Limited since January risk management, operations, treasury and in London and Johannesburg that focuses on 2015. He has worked in senior roles with people development. African investment opportunities. Nedbank for 12 years, including Managing Executive of Nedbank Corporate (2009-2014), Mr. Tshibaka spent 33 years at Citigroup, Mr. Nkontchou was an adviser of Laurent Managing Executive of Corporate Banking reaching the position of Head of Corporate Perrier, the French champagne company, (2005-2009) and Managing Executive of Risk Management, responsible for some having been a board member there from Nedbank Africa (2004-2005). 77 emerging markets between 2002 and 1999 to 2009. He previously worked 2004. After his retirement, he moved to in London between 1995 and 2008 as Prior to joining Nedbank, he was the the Lloyds TSB Group, where he worked Managing Director of Credit Suisse’s Global executive responsible for strategy, revenue as the Divisional Risk Director, Wholesale Macro Trading Group and also with JP Morgan and economic analysis at the South African and International Banking, (2005-2007) Chase & Co. Between 1989 and 1994, he Revenue Services (SARS). He also worked in London and Executive Vice-President worked with Chemical Bank in Paris and for the Department of Trade and Industry and Country Manager USA (2007). He New York, where he became Vice-President, as Chief Director for Africa and the New subsequently provided leadership support, Head of Trading and Sales. Alain has a track Partnership for Africa’s Development including as interim CEO and Board member, record of business success, having generated (NEPAD) programme. to Opportunity International, a global significant dollar revenues for each of these microfinance organisation, between 2008 bulge bracket institutions. Mfundo holds a BA Honours degree and 2013. from the University of the Western Cape, Alain has an MSc. in Electrical Engineering and completed a course on Strategic He currently serves on the Boards of from Supelec and P.M. Curie University, Management in Banking at INSEAD Citibank Kazakhstan, the Tucker Foundation, Paris, and an MSc in Finance and Accounting (France). He is an alumnus of the Advanced Dartmouth College, the Eleazar Wheelock from ESCP (Ecole Supérieure de Commerce Management Programme (AMP) from Society, Dartmouth College and Africa de Paris). Harvard Business School, USA. New Day. ETI Board Committees: ETI Board Committees: Mr. Tshibaka holds a Bachelor of Economics Nomination & Remuneration Committee; Nomination & Remuneration Committee; degree from Dartmouth College (USA) and an Governance Committee Social, Reputation & Ethics Committee MBA from The Amos Tuck School of Business Administration (Dartmouth College).
ETI Board Committees: Audit & Compliance Committee; Risk Committee; Social, Reputation & Ethics Committee
17 2015 Annual Report Group Chairman’s statement A pathway to sustainable value creation
“Our ‘Roadmap to Leadership’ will provide a framework to serve our customers more efficiently, whilst improving cost and risk management and optimising the Group’s balance sheet.”
This, my second Chairman’s statement to you, also marks the second year of the current Board of Directors’ stewardship of Ecobank, your bank.
2015 was indeed a challenging year in more ways than expected. The precipitous fall in crude oil prices, a slowing in China’s impressive economic growth and economic malaise in Europe combined to create a perfect storm that adversely impacted the economies of Middle Africa and, in turn, household and business incomes. We also had to address some internal issues that negatively affected the financial performance of the Group.
Your Board has worked closely with executive management to tackle these challenges head on. We remain focused on forging ahead with the business of creating value for our shareholders through the ebbs and flows of the business cycle.
2015 performance Our financial results for 2015 were poor and clearly not representative of the earnings potential of our diversified pan-African business model.
Ecobank generated reported diluted earnings per share (EPS) of 0.28 U.S. Dollar cents, a fall of 83% compared with the 1.69 U.S. Dollar cents reported in 2014. Return on total shareholders’ equity (ROE) was 4.2% in 2015 versus 16.5% in the prior year. Profit attributable to shareholders of ETI amounted to $66 million, compared to $338 million in 2014.
Emmanuel Ikazoboh Group Chairman Ecobank Group
18 Board and Management Reports
The major reason behind these less than satisfactory Developments during the year results was the high level of impairments on loans and financial assets made in 2015, totalling $532 million, 2015 witnessed far-reaching changes, aimed at almost double 2014’s level. This was the result improving both Ecobank’s governance and value of a comprehensive review of our asset portfolio creation for all our stakeholders. On the governance and processes. front, we created two additional Board Committees: the Finance and Regulatory Requirements Committee The macroeconomic environment affected our financial and the Social, Reputation and Ethics Committee, results in various ways. Our revenue generation bringing the total number of Board committees to capacity was stifled by weak economic activity and six. This recognises the need for a wider, in-depth the depreciation of Middle African currencies against corporate governance framework, which affords the U.S. Dollar, our reporting currency. For instance, the Board of Directors with effective oversight and whilst reported revenues decreased by 8% in 2015, profound insights into all critical aspects of the Group. underlying revenues would have increased by 9%, assuming constant exchange rates. Another key development was the appointment of Ade Ayeyemi as Ecobank’s new Group CEO in September The cost base remained fairly stable, with a cost-to- 2015. Ade comes to Ecobank with considerable income ratio (CIR) of 64.9%. We are confident that experience with Citibank, where he honed his skills greater efficiencies remain to be achieved and your in both African and international banking in a career management team is working hard to reduce the CIR spanning more than 25 years. further. Our balance sheet is healthy, with a Tier 1 ratio of 20.5% and a total capital adequacy ratio (CAR) Finding the right person to lead our pioneering of 23.9%. institution was seen as a strategic priority, both by the Board and myself. We are confident that, in Ade, Dividend we have identified an international banker with the business acumen and strategic insight necessary to I am happy to report that, in light of the improvement take on the critical role of capital stewardship and to in the parent company’s profit, which increased drive Ecobank’s performance to levels that reflect the from $5.8 million in 2014 to $60.8 million in 2015, true potential of our unique footprint. the Board has recommended a total cash dividend of $48.2 million, which translates to a dividend of Ade has indeed ‘hit the ground running’. Working 0.2 U.S. Dollar cents per ordinary share for the closely with the executive team, he has formulated a 2015 financial year. revised strategic plan for the Group, dubbed ‘Roadmap to Leadership’, which the Board has approved. This The Board recognises the importance of dividends to focuses on the optimisation of our Middle African our shareholders. Our capacity to pay cash dividends platform to deliver consistent and sustainable in the future hinges largely on two factors; firstly, shareholder returns in the long-term. In summary, the implementation of effective strategies to greatly the ‘Roadmap to Leadership’ is expected to deliver enhance the earnings potential of our subsidiaries a framework that will serve our customers more relative to their regulatory capital constraints and, efficiently, with tailored, convenient products, whilst secondly, ensuring that the parent company remains improving cost and risk management and optimising lean and efficient in performing its supportive strategic the Group’s balance sheet. role for the Group as a whole.
Nevertheless, the Board is committed to paying the maximum sustainable dividends to shareholders that ETI’s earnings permit. The Board, working closely with the executive management team, is confident that the strategy currently being implemented will underpin the long-term growth of your company.
19 2015 Annual Report
Ade has also strengthened the executive management individually to the growth and progress of Ecobank team with rotational changes and new hires. and we wish them the very best in all their I encourage you to read his first CEO’s review on future endeavours. page 20 of this annual report to better understand his strategic thinking and planned change management Please also join me in welcoming Mr. Mfundo Nkhulu, initiatives within Ecobank. On behalf of the Board Mr. Abdulla Al-Khalifa and Mr. Alain Nkontchou to the and all Ecobank shareholders, I should like to extend ETI Board; we look forward to working with them to a warm welcome to Ade and to assure him of our deliver on the mandate and the expectations of you, support of his efforts to drive the institution forward. our esteemed shareholders.
Elsewhere, we continued to build on our relationships Outlook with Nedbank and Qatar National Bank (QNB), our two major shareholders and both highly respected As we look out into 2016 and beyond, informed and successful banking institutions in their own right. commentators have predicted challenging economic Not only are we cooperating at Board level to achieve times ahead. This does not worry us; the key is to common strategic goals; our on-the ground customer have the flexibility to adapt to external factors with a relationship teams are working closely with their strategy that turns challenges into opportunities. This is counterparts to identify and commercialise mutually a mark of a great company and that is what we aspire beneficial business opportunities across Middle Africa to become. and the Middle East. As such, despite a gloomy economic outlook for Middle Africa in 2016, we are confident in the strategy being We also witnessed key political events in our countries implemented by management. With the Board’s of operation, paramount of which was the very continued support and oversight responsibilities, which remarkable, peaceful transfer of power from a ruling we take seriously, we believe we stand in good stead political party to an opposition party in Nigeria, the first to rise above the challenges. in the country’s history. This represented a watershed moment for Africa’s still nascent democracies. Going forward, our priorities will be: Unfortunately, we also experienced continued civil • Putting our customers first, which has informed unrest in various hotspots on the continent, such as our go-to-market structure and simplified the conflicts in the Central African Republic, continued operating model Boko Haram terrorist attacks in North-East Nigeria and • Generating returns on equity (ROE) consistently political turmoil in Burundi. These unhappy events in excess of our cost of capital throughout the continued to dampen economic activity and growth in business cycle these countries. • Careful risk and cost management • Better stewardship of capital, investing only Board changes when the risk/return dynamics add value to our In addition to Ade’s appointment as Group CEO, there businesses and for our shareholders were a number of Board changes during 2015. As part • Transparency in corporate governance, senior of its reorganisation, both Mrs. Eveline Tall-Daouda management compensation and stakeholder and Mrs. Laurence do Rego stepped down from the communications Board after the Annual General Meeting (AGM) of 19 June 2015, whilst remaining members of the Group For Ecobank, Middle Africa remains the fulcrum and Executive Committee (GEC). My predecessor, Mr. André centerpiece of our strategy. Africa is our home and Siaka, also retired from the Board after 2015’s AGM. our commitment to the region is unquestionable and Mrs. Sheila Mmbijjewe resigned from the Board on unshakeable. Let me continue to reassure you that we 1 July 2015, following her appointment as the Deputy are fully committed to working for Africa’s growth and Governor of the Central Bank of Kenya. Following Mr. development and that we shall continue to surmount Graham Dempster’s retirement from Nedbank, Mr. any challenges to deliver sustained value for all Mfundo Nkuhlu replaced him as Nedbank’s Board our stakeholders. representative. Mr. Albert Essien, our former Group CEO, left the Board following his retirement from Ecobank. Mr. Abdulla Al-Khalifa joined the Board in December 2015 as a representative of QNB and Mr. Alain Nkontchou was also appointed as a Non-Executive Director at the 2015 AGM.
Please join me in expressing our sincere appreciation to Mr. André Siaka, Mrs. Sheila Mmbijjewe, Mr. Graham Emmanuel Ikazoboh Dempster and Mr. Albert Essien for the profound Group Chairman contributions they have made collectively and
20 Board and Management Reports Directors’ report
Principal activity Results Ecobank Transnational Incorporated (ETI), the parent The Group’s revenue for the year ended 31 December company of the Ecobank Group, is a bank holding 2015 was $2.1 billion while that of the parent public liability company incorporated in Lomé, Togo, on company was $174 million. Profit before tax for 3 October 1985 under a private sector initiative led by the Group was $205 million and $61 million for the the Federation of West African Chambers of Commerce parent company. The Group’s profit after tax stood at and Industry and ECOWAS. $107 million.
Its principal activity is the provision of banking and The detailed results for 2015 are set out in the financial services through its subsidiaries and affiliates. consolidated financial statements. The Board of Directors approved the financial statements of the Business review parent company and the Group for the year ended 31 December 2015 at its meeting held on 1 April 2016. 2015 was a challenging year for the Group where business conditions were less favourable due to Messrs. Emmanuel Ikazoboh and Ade Ayeyemi were adverse macroeconomic developments – lower oil authorised to sign the accounts on behalf of the Board. prices, depreciating African currencies and slowing GDP growth. These developments coupled with International Financial Company-specific issues, including elevated impairment losses on financial assets, adversely Reporting Standards impacted business performance. The accounts of both the parent company and the Group are prepared in accordance with International A revised strategy, dubbed ‘Roadmap to Leadership’ Financial Reporting Standards (IFRS). has been formulated by the Group CEO, Ade Ayeyemi and his executive team and approved by ETI’s Board of Dividend Directors in December 2015. This sets out a framework that focuses on generating sustainable shareholder The Directors recommend the payment of a dividend returns through the business cycle by serving our of 0.2 U.S. Dollar cents per ordinary share, totalling customers well with a simplified business model $48.2 million based on 24,100,028,534 ordinary shares and the right products, as well as improving risk outstanding as at 31 December 2015. management and being extremely efficient.
A detailed review of the Group’s business and financial performance for 2015 is contained in the ‘Business and Financial Review’ section of the full annual report.
21 2015 Annual Report
Capital Directors The authorised share capital of the Company is The names of the Directors of the Company appear on $1.3 billion, divided into 50 billion ordinary shares pages 12 and 13 of this annual report. of 2.5 U.S. Dollar cents per share and 1.07 billion preference shares of 2.5 U.S. Dollar cents. There were As of 31 December 2015, the Board was composed of 24.1 billion ordinary shares issued and outstanding as eleven (11) Directors: ten (10) Non-Executives and one at 31 December 2015. (1) Executive Director.
During the year, there was a change in the number of The Board of Directors met six (6) times during the shares in issue resulting principally from the issuance year. The Governance Committee met four times. of One Billion, Five Hundred and Six Million, Two The Audit and Compliance Committee and the Risk Hundred and Twenty Thousand, One Hundred and Four Committee met three times whilst the Finance (1,506,220,104) bonus shares to shareholders from and Regulatory Requirements Committee and the retained earnings on the basis of one (1) ordinary Social, Reputation and Ethics Committee met two share for every fifteen (15) ordinary shares held on the times to deliberate on issues under their respective closure of the Company’s share register in accordance responsibilities. The Special Nomination Committee with the rules of the stock exchanges on which the met two times to deliberate on the search of the new Company’s shares are listed. Group CEO.
Thirty Five Million, Eighty-Five Thousand, Seven During the year, we were deeply saddened by the Hundred and Ten (35,085,710) preference shares passing away of Mr. André Bayala on 11 March 2015. were converted into Twenty-Six Million Nine Hundred Mr. André Siaka, Mrs. Laurence do Rego and Mrs. and Eighty-Eight Thousand, Nine Hundred and Eighty Eveline Tall Daouda resigned from the Board on 19 (26,988,980) ordinary shares. Under ETI’s Articles of June 2015. Following her appointment as Deputy Association, the holders of ETI preference shares have Governor of the Central Bank of Kenya, Mrs Sheila the option, at any time between the third and fifth Mmbijjewe resigned from the Board on 1 July 2015. anniversaries of the issue date, to convert at the rate Mr. Graham Dempster, the representative of Nedbank of 0.76923 ordinary shares for each preference share. Group Limited resigned from the Board on 31 July 2015 Preference shareholders have up to 23 October 2016 following his retirement from Nedbank. to exercise their options. Any preference share that is not converted on 24 October 2016 will be redeemed Mr. Albert Essien, our former Group Chief Executive by the Company at a premium of 6% to the issue price Officer, retired from the Group on 30 September 2015, per preference share. after more than twenty-five years of service. He was replaced by Mr. Ade Ayeyemi who was co-opted to the Three Million, Three Hundred Thousand (3,300,000) Board on 11 September 2015. ordinary shares were issued to staff under the staff option scheme. Messrs. Alain Nkontchou and Mr. Abdullah Al Khalifa, representative of Qatar National Bank joined the Board The ordinary shares of the Company continue to be on 19 June 2015 and 4 December 2015 respectively. traded on three West African stock exchanges, namely, the BRVM (Bourse Régionale des Valeurs Mobilières) in Abidjan, the Ghana Stock Exchange in Accra and the Nigerian Stock Exchange in Lagos.
22 Board and Management Reports
Corporate governance and compliance Responsibilities of Directors There has been considerable improvement in the The Board of Directors is responsible for the Group’s corporate governance practices, more details of preparation of the financial statements and other which are included in the Corporate Governance Report financial information included in this annual report, in the full annual report. The Company continues to which give a true and fair view of the state of affairs of maintain corporate policies and standards designed to the Company at the end of the financial period and of encourage good and transparent corporate governance, the results for that period. avoid potential conflicts of interest and promote ethical business practices. The Group Corporate Governance These responsibilities include ensuring that: Charter was revised and adopted by the Board in May • Adequate internal control procedures are instituted 2015. Highlights of the revised Corporate Governance to safeguard assets and to prevent and detect fraud Charter are provided in the Corporate Governance and other irregularities Report in the full annual report. • Proper accounting records are maintained The Board and the Group are committed to improving • Applicable accounting standards are followed the governance of the institution and are working • Suitable accounting policies are used and closely with regulators and other stakeholders to consistently applied. strengthen this area. Independent External Auditors Subsidiaries The Joint Auditors Akintola Williams Deloitte, Nigeria, In 2015, the number of ETI subsidiaries remained and Grant Thornton, Côte d’Ivoire, have indicated their unchanged from 2014. The Group’s erstwhile willingness to continue in office. geographical expansion across Middle Africa has been replaced with a focus on translating the achieved A resolution will be presented at the 2016 Annual pan-African scale advantage into sustainable long-term General Meeting to authorise the Directors to fix value for stakeholders. their remuneration.
ETI has a majority equity interest in all its subsidiaries and provides them with management, operational, technical, training, business development and advisory services.
Post-balance sheet events
There were no post-balance sheet events that could Dated in Lomé, 1 April 2016 materially affect either the reported state of affairs of By Order of the Board the Company and the Group as at 31 December 2015 or the profit for the year ended on the same date that Samuel K. Ayim have not been adequately provided for or disclosed in Company Secretary the notes to the accounts in the full Annual Report.
23 2015 Annual Report Group Chief Executive’s Review Pursuing our ‘Roadmap to Leadership’
Dear Shareholders,
It gives me great pleasure to write my first letter to you since I assumed office last September. I am honoured indeed to have the privilege of leading this great African institution, Ecobank. I take pride in what Ecobank stands for, the vision of its founders and the foundations built by many men and women before me. We have inherited a unique legacy, and I feel an immense sense of obligation to continue to drive the business forward, building on what has already been achieved.
Ade Ayeyemi Group Chief Executive Officer Ecobank Group
24 Board and Management Reports
To better understand the business, I spent my first few months in meetings with the Board, the management Total Attributable Profit, Diluted Earnings per teams and, equally importantly, our staff. I was struck share and Return on Total Equity 2011 – 2015 by the passion of all Ecobankers and their willingness (US$ millions, except per share data in US$ cents and ratio data) to discuss the issues they face openly. I also met 1.55 1.60 with our regulators, customers, funding partners and investors which provided me with a robust, 360° 1.28 338 view of the Group. From their feedback and our unquestionably disappointing 2015 financial results, it is clear that Ecobank is yet to fully capitalise on 250 its pan-African scale to create sustainable value for 0.56 our shareholders. 15.9% 182 15.8% 16.5% 0.28 Financial results In 2015, Ecobank generated a profit before tax of 96 $205 million on revenues of $2.1 billion. 66 Attributable profit to shareholders of the parent 6.9% company was $66 million, equating to 4.2% 0.28 U.S. Dollar cents of diluted earnings per share 2011 2012 201 2014 201 and a return on equity of 4.2%, versus 16.5% in 2014. These disappointing results were due to both internal Total Attributable profit (US million) issues and wider market conditions, upon which I will Diluted EPS (US Dollar cents) now elucidate. OE (%)
As part of a strategic overhaul, we performed a comprehensive review of our processes and asset The macroeconomic environment during the year portfolios. As a result, we made additional provisions was also challenging as a result of weak oil prices, for impairment losses of $357 million in the fourth a scarcity of foreign exchange and depreciating quarter, bringing the total provisions for 2015 to Middle African currencies. These factors conspired to $532 million. Of this figure, $427 million, or 80%, reduce our revenues, which fell by 8% to $2.1 billion. related to historic non-performing loans, with However on a constant currency basis relative to the remainder relating to other assets, including U.S. Dollar, revenues would have increased by 9% to $80 million from our Securities business. This elevated around $2.5 billion. level of provisioning significantly impinged upon our pre-impairment profit of $738 million, which better Our cost-to-income ratio, a measure of efficiency, represents our underlying earnings potential. remained stable at 64.9% (2014: 65.4%), benefiting from currency translation and ongoing efficiency gains. At year-end, total deposits amounted to $16.4 billion, a 6% fall versus 2014 (but a 5% increase on a constant currency basis), whilst total loans decreased by 9% to $11.2 billion (a 1% increase on a constant currency basis).
25 2015 Annual Report
Implementing our Corporate and Investment Bank will focus on servicing multinationals and regional corporations. We aim ‘Roadmap to Leadership’ Strategy to be their platform of choice, delivering cash Undoubtedly Ecobank’s unique selling management, trade and financial market solutions in proposition is its unmatched presence across Middle addition to corporate lending. Our Securities and Asset Africa, encompassing 36 countries, and including Management teams will focus on building reliable offices in Paris, London, Dubai and Beijing. transactional and regional platforms. Our 11 million-plus customers, be they multinationals, NGOs, governments, regional corporates, SMEs or We are adopting a two-pronged approach to winning individuals, chose to do business with Ecobank because in our regional markets: either by leveraging the scale of our financial services reach. This is a competitive economies of market leadership or by establishing advantage and represents a deliberate strategic profitability leadership in niche markets where Ecobank positioning of which we are immensely proud. can provide value-added services to its customers.
To ensure that these strengths ultimately translate We currently enjoy market leadership across most of into tangible shareholder value, Ecobank’s senior Francophone and Anglophone West Africa and we will management and I have formulated a five-year continue to commit resources to reinforce and defend strategic plan, dubbed the ‘Roadmap to Leadership’, these positions. which our Board has approved. Our clear objective We are yet to become a leader in Nigeria in terms is to generate long-term returns in excess of our of assets, market share and return and profitability cost of capital throughout the business cycle. We are metrics. It is critical that we achieve this objective confident that the implementation of this strategy especially, since the country accounts for around 40% will allow Ecobank to fully exploit the potential of our of Ecobank’s business, so we are implementing a franchise model. number of actions designed to improve performance. To bring focus, clarity and accountability to our For example, we have strengthened senior operations, we are introducing a streamlined business management with the appointment of Charles Kie, model. We now have three business segments: Ecobank’s former head of Corporate and Investment namely Consumer Banking, Commercial Banking and Bank and a highly experienced international banker, Corporate and Investment Bank. We have similarly as the Managing Director of Ecobank Nigeria. We have segmented our geographical footprint, reducing the reduced the senior management headcount by 40% number of regions from seven to four. These are and are seeking to achieve further cost efficiencies. For Nigeria (a region in its own right by virtue of size), example, we are looking to reduce overall back office Francophone West Africa Monetary Zone (UEMOA), unit costs by enabling our processing centre in Nigeria Anglophone West Africa (AWA) and Central, Eastern to handle transactions from other Ecobank subsidiaries. and Southern Africa (CESA). These four regions reflect We are also seeking to optimise our branch network, the major commercial opportunities that we currently either scaling down or closing unprofitable branches. see across our footprint. These actions, together with strategic credit management initiatives, are being taken to instil Our aim is to extract maximum value from this discipline and focus. business line/geographical matrix. In Consumer Banking, we see an efficient distribution platform, In CESA, where our operations are mostly leveraging mobile and online technology, and tailored sub-scale, our strategic priority is to develop relationship management for our mass market and profitability leadership. The appointment of Samuel affluent customers as the twin drivers of profitability. Adjei, who has previously led Ecobank Ghana to great Similarly, in Commercial Banking our emphasis will success, as the Managing Director of Ecobank Kenya be to unlock the hidden value of servicing the entire and CESA Regional Executive reflects our desire to value chain of corporate and public sector clients and make considerable headway in this region. to support emerging SMEs by carefully managing the Inevitably, to optimise our pan-African platform, associated risks. trade-offs will need to be made. This means having a disciplined portfolio management approach, with a focus on playing to Ecobank’s strengths. For example, we will exit markets, products or businesses if they no longer make strategic sense or if they do not present a clear path to profitability.
26 Board and Management Reports
New organisational structure
Simplified client business
Consumer Commercial Corporate and Banking Banking Investment Bank Customers Customers Customers • Premier, Advantage, • SMEs, Medium Local • Government, Global and Classic and Direct Corporates, High Value egional Corporates, Local Corporations, NGO, Financial Institutions roducts government, public sector and International • Cards (schools, Faith Organisations • CASA1 organisations, • Mortgage professional bodies) roducts • emittance • Transaction Banking • Personal loans and roducts • Investment Banking Asset Management • Fixed Income Currencies and FICC for HNWI2 and Commodities (FICC) • Security, Wealth and • Transaction Banking Asset Management • Loans and liquidity • Loans and liquidity
Rationalised geographic footprint
Francophone Anglophone Nigeria Central, Eastern West Africa West Africa Increase market and Southern (UEMOA) (AWA) share and improve Africa (CESA) profitability and Maximise and Maximise leadership return metrics Have a profitable defend leadership economics in Ghana participation model economics and improve performance in the others
1 Current and Savings Account 2 High Net Worth Individual
27 2015 Annual Report
Improving our risk management Servicing our retail customers in particular presents difficult choices. We are cognisant that, for our A bank is a risk factory. The services we provide customers, the branch will always represent a place come with a range of risks, such as credit, liquidity to engage with us personally. Yet we have to manage and market risks, all of which have to be carefully the network efficiently, potentially combining branches managed to balance the needs of our customers with or closing them down. Mobile and online banking protecting the security and reliability of the bank. As offerings clearly reduce the costs of mass market such, we have formulated comprehensive actions to servicing and, within an African context in particular, strengthen our risk management culture and improve offer wider access and convenience. However, this will the quality of our risk management personnel. This not preclude strategic branch openings where required. will enable us to strike an appropriate risk/reward balance when looking to capitalise on emergent We also see potential cost savings in the active market opportunities. management of our real estate portfolio by renting out facilities, outright sales or more efficient space Further, we will reinforce our loan policy with a utilisation. For example, by moving some of Ecobank supportive credit culture, only accepting risks that Togo’s operations to our head office in Lomé, we will we fully understand, to maintain a low level of reduce costs significantly. We are also planning to non-performing loans. For example, we will not rationalise our Nigerian real estate portfolio, many of accept the credit risk of a borrower unless we are the assets having been acquired as part of the Oceanic fully compensated for that risk through the borrower’s Bank acquisition in 2011. other revenue sources. This approach, we believe, gives us a broader insight into our customers’ Strengthening our capital position businesses, providing an early warning of any potential deterioration in our loan book. Maintaining adequate capital provides an essential buffer to absorb market or macroeconomic shocks. As Additionally, we are revising the incentive framework well as helping to improve credit ratings, it also affords for our loan officers to reinforce discipline when long-term protection for our customers, shareholders extending credit, thereby rewarding our staff for ‘doing and employees, a responsibility that we take the right thing’ by both the customer and Ecobank. extremely seriously. Maximising operational efficiency Ecobank remains focused on proactively and prudently managing our capital, liquidity and risks. At the same To achieve market leadership, we need to be time, we are alert to opportunities to expand our disciplined and more efficient in performing our capital base to meet changing regulatory requirements activities than our peers. Having pan-African scale can and to underpin the long-term growth of the Group. be a double-edged sword: being present in 36 African countries can be a costly venture yet, by standardising We will at all times maintain capital levels above and centralising appropriate systems and procedures, regulatory limits and in line with our internal risk significant efficiency gains can be realised. This is appetite. As of 31 December 2015, our Basel 1 Tier 1 the reason why we have planned to have regional capital ratio, a key measure of balance sheet strength, processing centres in Nigeria and Côte d’Ivoire to was 20.5%, whilst the total capital adequacy ratio maximise this value proposition. Our aim is to achieve (CAR) was 23.9%. Our loans-to-deposits ratio was market leadership via Group-led product and service 72.2%, slightly below our 75% target, whilst our liquid innovation, backed up by strong local distribution. assets to total assets ratio was in line with our target of 30%. Hence, ensuring adequate and appropriate As an early adopter of technology in African banking, financial leverage across the platform will remain a Ecobank inevitably has met with certain challenges. key area of focus. We have learnt from these experiences, informing our decisions to consolidate our data centres in Nigeria and Ghana, thereby streamlining our technology backbone whilst enhancing our customer service capabilities.
28 Board and Management Reports
Our guiding principles to become a stronger and profitable bank
1 Commitment to shareholder value creation (ROE above cost of equity) 2 Take action on businesses generating returns below cost of capital 3 Invest only where we have/can have sustainable competitive advantage 4 Improve customer service 5 Achieve distribution leadership: manufacture centrally and distribute locally 6 Strengthen control functions 7 Drive operational efficiency 8 Disciplined expense management
People and performance management Looking ahead In the final analysis, great teams build great companies, Ecobank is indeed a remarkable institution with a so it is our people who will determine whether we number of inherent strengths. Our diversified business achieve these desired outcomes. Our ultimate goal is to model ensures that the Group continues to progress, be able to count on great teams made up of talented, almost regardless of the vagaries of the international motivated individuals with integrity, intelligence and business cycle and political uncertainties. With our the ability to work collaboratively. revised strategy and simplified operating model, we aim to be more efficient in running our businesses and We are implementing numerous initiatives intended serving our customers, thereby generating improving to address human capital management and returns for our shareholders. We are blessed with loyal compensation, which are reviewed in greater detail customers and supportive shareholders and I should in the ‘People’ section of our full annual report. In like to thank them personally for their ongoing support summary, we are committed to improved staff welfare, during this transitional period for Ecobank. Equally, ensuring that we provide Ecobankers with appropriate none of this would be possible without the drive, learning and developmental tools, that their enthusiasm and commitment of Ecobank’s motivated contributions are fairly evaluated and remunerated and and professional staff, whose contributions I must that, above all, Ecobank remains a meritocracy. applaud and acknowledge.
I should like to take this opportunity to extend my The year ahead will bring its own challenges but I am sincere gratitude to the Board of Directors for their sure that by working together, keeping focused on our wisdom and counsel as I settled into my new role with priorities and by putting Ecobank’s customers first, we Ecobank. To execute our ‘Roadmap to Leadership’ plan, can all realise our ambitions. it has been necessary to make changes to the roles and responsibilities of some of Ecobank’s key senior executives and I have been extremely gratified by their enthusiasm and determination in accepting these new challenges.
To integrate the voice of our geographies into our decision-making processes, our four Regional Executives Ade Ayeyemi have now joined the Group Executive Committee (GEC), Group Chief Executive Officer Ecobank’s executive leadership team.
29 2015 Annual Report Group Chief Operating Officer’s review
Performance management Our diversified business model proved resilient in the face of these macroeconomic challenges. Our underlying growth performance was encouraging. Reported revenues, despite decreasing by 8% year‑on‑year, increased by 9% and pre-impairment profit rose 12% on a constant dollar basis, while pre‑impairment profit 12% on a constant dollar basis.
The banking industry is undergoing significant structural change and reform, our stakeholders’ expectations are increasingly demanding and Eveline Tall-Daouda competition remains intense. In this environment, we will focus relentlessly on improving efficiency, 2015 proved to be a challenging year, as falling streamlining our processes and procedures and commodity prices, especially oil, and unfavourable reducing costs, whilst remaining cognisant of our wider exchange rates for sub-Saharan African (SSA) obligations within the different markets in which currencies weighed heavily on corporate profits and we operate. business investments.
Amidst such sluggish economies and the resultant Customer service testing adjustments which had to be made, we are In 2015 Ecobank implemented a unified service very appreciative of the extraordinary efforts of strategy across our Domestic Bank (effective our teams, who have stepped up to address these 1 January 2016, Domestic Bank was re-segmented significant opportunities and challenges to continue to into Consumer Banking and Commercial Banking) and build Ecobank’s business. Corporate Bank businesses. This led to an enhanced operating performance, enabling executive supervision Whilst the pace of change in the SSA banking industry of the Client Service Management function within is accelerating, Ecobank continues to respond with all our subsidiaries, thus spurring on our drive for comprehensive measures to further improve our improved customer experience. operational efficiency. Our strategic agenda is set, which will position us to continue to adapt and thrive These programmes were aimed at improving the in an increasingly competitive and evolving industry. customer experience through whichever distribution Our key differentiators remain our commitment to channel our customers chose to engage with us. service excellence and our in-depth understanding of They included our digital products campaign, aimed the SSA markets in which our clients do business. at creating awareness and growing our customer numbers. Additionally, a Customer Service certification In addition to shifting competitive dynamics, we training programme was launched to strengthen the expect the macroeconomic environment to remain service management capabilities of our staff. challenging in 2016. So, to maintain our competitive edge, we will accelerate the consolidation of our Our efforts improved the customer experience businesses, stripping out unnecessary costs, whilst markedly, evidenced in the responses to our Net continuing to invest for the long-term. Our focus will Promoter Score and Customer Experience surveys, in be on our priority growth markets and the business which over 130,000 customers were polled during the areas that are the highest revenue contributors. We year. We will continue to invest in both our people and will also enhance the customer experience through a innovative technology, enabling us to better serve our series of initiatives targeted at areas that matter most customers. We are grateful for the strong relationships to our customers. that we have built with our customers in 2015 and will continue look to support them to succeed in 2016 and beyond.
30 Board and Management Reports
Compliance We have adopted the Treadway Commission’s Internal Control Integrated Framework as our methodology. Ecobank is committed to global standards of This encompasses the three key objectives of compliance, shaped by the highest or most effective ensuring the effectiveness and efficiency of our benchmarks prevailing in each of the locations where operations, improving the reliability of our financial we do business. Such standards are embedded in our reporting and strengthening compliance with the values, affecting all aspects of our business, including laws and regulations applicable within our numerous governance. They serve as signposts, informing jurisdictions. Through its founding components, our responses to employee issues and setting the this framework ensures that management is able tone for our customer interactions. Our compliance to identify and resolve internal control issues more function strikes the balance between meeting successfully. Furthermore, dashboards have been management’s strategic targets and the varying developed for key processes to alert management on regulatory requirements across our network. We have a monthly basis to potential anomalies and failures. developed a strong compliance culture that has been Technology solutions have been deployed to screen institutionalised in our service offerings and processes transaction details against predetermined thresholds, that is widely recognised amongst our stakeholders. including the monitoring of trends and patterns.
As the global financial regulatory framework is being Through the implementation of a Risk and Control remodelled, financial stability risks have become Self-Assessment (RCSA) programme as part of our a preoccupation for central bankers and prudential continuous operational evaluation and monitoring, macro policies have entered everyday parlance. As a internal control responsibilities have been embedded result, we see the implementation of global standards into Ecobank’s culture, products, policies and business as a source of competitive advantage, allowing us processes. This also promotes a proactive control to toughen our response to the ongoing threat of culture throughout the entire Group. financial crime, to simplify the enforcement of best practice and to strengthen the policies and processes Going forward, we are developing stronger, forward- which govern how and with whom we do business. looking risk and control mechanisms to support our We remain committed to the continual strengthening vision of proactive risk and control management. These of the compliance function at Ecobank to maintain include scenario, correlation and root cause analysis world-class standards in our businesses and processes, programmes to support the effective management both now and in the future. of emerging risks. Our active participation in the operational risk and control research programmes Internal control being championed by the Operational Risk eXchange (ORX) Consortium will serve to bolster these efforts. In 2015 we intensified our efforts to reinforce our risk and internal control systems. Our continued emphasis on best practice creates a proactive culture of internal control, anchored on a ‘three lines of defence’ organisation which permits appropriate decentralisation, with accountability for risk and internal controls spread across the Group’s management. The Board, executive management and staff are all actively engaged in risk recognition, Eveline Tall-Daouda assessment and mitigation. Deputy Group CEO and Chief Operating Officer
31 2015 Annual Report Corporate and Investment Bank
IB has adjusted its business model to reflect the changing environment. Going forward its focus will be on distribution and debt advisory in the financing space. Concurrently, additional resources will be allocated to private equity and debt capital market transactions.
Importantly, in 2015 we launched our B2B marketing campaign, ‘The Network Advantage’, which highlighted our competitive advantages and showcased our product suite capabilities to our clients and prospects across Africa.
Our growing ability to provide innovative financial Charles Kie solutions has not gone unrecognised. For example, the respected international publications, EMEA Finance 2015 was a testing year for Corporate and Investment and Global Finance, both named Ecobank as the Bank (CIB). Global developments, including a best African bank in Cash Management and Trade slowdown in China’s voracious demand for Africa’s Finance in 2015. commodities, depreciating African currencies, a scarcity of foreign exchange in some major African CIB’s strategic objective is to build a leading franchise, countries and monetary and fiscal policy uncertainty, focused on Middle Africa, and to leverage our footprint all contributed to a challenging environment. This and product capabilities to provide our clients with led to businesses reducing fixed assets and working bespoke financial solutions. Our commitment to capital investment, lower levels of trade and enhanced customer service is relentless, with ongoing reducing demand for banking advisory services. CIB technology investment to ensure that our transactional adapted quickly to these trends, whilst staying true banking business, the keystone of our strategy, to our commitment to support our clients in these delivers sustainable growth. We also plan to capitalise difficult times. on our strategic relationships with Nedbank and Qatar National Bank (QNB). In spite of these challenges, CIB delivered encouraging underlying results. Our profit before tax was In 2016, our focus has shifted to fee generation, $69 million, compared with $264 million in 2014. deposit mobilisation and structured trade transactions. Revenues increased 13% to $757 million, primarily We will be focusing on providing innovative cash driven by Corporate Bank. We grew client loans by management solutions, migrating and acquiring new 16% to $8.0 billion, while deposits decreased 3% to accounts and leveraging our trade finance expertise to $6.8 billion, driven by non-interest bearing deposits increase market share in all of our countries. (55% of CIB’s funding base). As I pass on the baton of stewardship of CIB to my Corporate Bank (CB) grew loans by 15% year-on-year, successor, Amin Manekia, I would like to extend thanks largely to loan growth amongst Local, Regional, my gratitude to all our varied stakeholders for their and Global Corporates. continued support. My thanks also must go to the executive team and staff of CIB for their unstinting Omni, our online banking platform, assisted us in contribution to last year’s encouraging results. Under providing multi-country cash management solutions Amin’s experienced supervision, we will execute our to a growing client base. We also leveraged our strategy, support our clients and aid Africa’s economic single uniform technology platform to implement a growth, notwithstanding the challenging times ahead. large number of tailored and more sophisticated host-to-host or SWIFT-based integrations, allowing us We all look forward to 2016 with eager anticipation. to gain significant traction with key customers, as well as recognition and positive market perceptions in a number of our markets. In addition, we successfully implemented a number of tailored collections solutions for key clients across our footprint.
Investment Bank (IB)’s revenues fell sharply by 54% to $4 million, reflecting the impact of U.S. Dollar liquidity constraints in Nigeria and Ghana, where Charles Kie we traditionally book most of our transactions. This, Group Executive coupled with the need to carefully manage our risks, Corporate and Investment Bank caused us to abort many significant transactions.
32 Board and Management Reports Domestic Bank
pan-African mobile financial services platform and an improved internet banking platform in 2016. These investments are in line with our vision to become the preferred choice for convenient banking across Africa. They will also accrue significant fee income, cost reduction and growth in current and savings accounts (CASA) in the medium term.
Our diversified business model helped to minimise the impact of adverse foreign exchange movements and regulatory changes on revenue in our key markets. Reported revenues, despite falling 19% to $902 million in 2015, were up 10% in constant dollars, Patrick Akinwuntan notwithstanding the fact that 2014 results included high value local corporate businesses which were The past five years witnessed significant expansion migrated to Corporate Bank in 2015. of our network, customer base and balance sheet. 2015 saw the commencement of a new phase Towards the end of 2015 and as part of the overall with emphasis on the maximisation of the business re-positioning of Ecobank, the former Domestic Bank opportunities acquired during the expansion phase. division has been restructured into Consumer Banking In this regard, we have revised our operating model and Commercial Banking to improve effectiveness, to position the business for market leadership and promote customer service excellence and extract the sustainable returns in the long term. This included latent value of our network advantage, capitalising the assessment of our customer segments, products, on growth opportunities in the emergent middle services and distribution network to determine where class, digital banking, the Diaspora and remittance we play for market leadership and where we have flows. In both businesses, the strategic ambition is a niche opportunity to achieve profit leadership. to achieve market leadership in key focus markets We have also reviewed how we gain competitive and profitability leadership in selected products and advantage in chosen segments and products. segments in more niche markets. Leveraging our customer insights, we launched Whilst growth in Commercial Banking will be powered ‘Premier Banking’ in Nigeria, Ghana and Côte d’Ivoire by key products including Transaction Banking, Loans for affluent individuals, whilst ‘Advantage Banking’ and Liquidity, progress in Consumer Banking will be and ‘Direct Banking’ were introduced for our mass driven by Cards and digital solutions, CASA, Mortgages, affluent and mass market customers respectively. We Remittances, Personal Loans and Asset Management also introduced SME Club services for SMEs in major services for high-end customers. affiliates (Nigeria, Ghana, Côte d’Ivoire, Senegal, Burkina Faso, Benin, Cameroon and DR Congo). To With this refined roadmap and the business enhance capacity to serve more SMEs we signed a reorganisation to improve efficiency, the outlook both $55 million risk guarantee facility with International for Ecobank’s Consumer and Commercial banking Finance Corporation (IFC) in addition to the existing businesses in 2016 and beyond is positive. $50 million risk facility with Africa Guarantee Fund I thank you. (AGF). These facilities will be fully utilised in 2016 to increase volumes in the SME segment. To better serve our customers, we reinforced our investments in digital banking channels to lower the cost to serve and provide convenient, wherever, whenever banking to all our customers. We now have a comprehensive suite of cards, ATM and POS acquiring services across our entire network, representing a Patrick Akinwuntan unique capability to deliver convenient banking. We Group Executive have entered into mobile money partnerships with major telcos in 22 countries to deliver convenient Domestic Bank and efficient mobile banking services. We have also commenced the implementation of a
33 2015 Annual Report Treasury
We have also invested in training and certification programmes to enhance the performance of our talented treasury staff. Our vision is to set a new standard of certification for Treasury professionals, both in Africa and internationally.
Joint marketing initiatives with both Corporate and Investment and Domestic Banking businesses (which has been spilt into Consumer Banking and Commercial Banking since 1 January 2016), aimed at expanding our client base and growing market share across all of our geographies, continue to perform well. 2015 also saw the launch of a specialised treasury desk for Abdul Aziz Dia Hedging Products Distribution (HPD). This desk will be Treasury generated total revenues of $510 million run from one of our regional centres and will specialise in 2015, a decrease of $20 million, or 4%, from the in providing hedging solutions to our clients via our previous year. However, our client-driven trading country subsidiaries. performance was encouraging, increasing 12% to Under the Group’s newly revised strategy, Treasury $144 million. Also we managed our balance sheet is no longer a line of business. Instead, it will be efficiently which helped to drive revenue growth and a product suite supporting mainly our Corporate offset the negative impact of currency translation due and Investment Bank and Commercial Banking to the depreciation of African currencies against the customers with fixed income, currencies and U.S. Dollar. Profit before tax was $258 million, down commodities products. 11% from the prior year. I would like to thank all of our 11 million customers Not only were treasury sales affected by currency for their continued trust. I also want to recognise all translations but also by regulatory restrictions on Ecobankers for their team spirit in contributing to remittances which affected our ‘Rapidtransfer’ Treasury’s performance, especially the leadership of remittance business and also reduced the volume Corporate and Investment Bank and Domestic Bank of cash notes traded in Foreign Exchange bureaus in and our internal support services teams. Nigeria. This led to 18% reduction in sales revenues to $269 million. Ecobank’s future is bright and our clients can trust in our ongoing commitment to service excellence. Net interest income increased by 45% year‑on‑year to $85 million due to efficient balance sheet management, together with the optimisation of liquidity management synergies with our country subsidiaries.
We still aim to lead the way in providing clients with innovative foreign exchange and fixed income solutions, with the ultimate goal of becoming one of the leading providers of treasury solutions in Middle Abdul Aziz Dia Africa. As a result, we have invested in two new Group Head, treasury IT systems to improve our efficiency: Calypso Treasury for Sales and Trading and SunGard for Balance Sheet Management. The roll-out of Calypso and SunGard across the Group is ongoing, with a target of onboarding all Ecobank subsidiaries by the end of 2016.
34 Board and Management Reports Securities and Asset Management
Africa. You have to know it to invest in it.
Africa is on the move, presenting a plethora of investment opportunities. With a team of more than 60 experienced professionals, each with in-depth knowledge of local markets, no asset manager knows the territory better than Ecobank.
For enhanced portfolio returns, speak to the African investment professionals.
ecobank.com 35