Ecobank Transnational Inc (ETI)released its first quarter earnings report for 2013 today to the delight of investors. The company increased its Gross Earnings by 21% to N94.1billion when compared to the same period last year (2011 Q1: N77.7billion). Pre-tax profits also rose an incredible 95% to N15.5billion (2011: N7.9billion). The banks earnings per share at the end of the period was 66kobo more than double the 32kobo posted same period 2011.
ETI’s 2012 result was a mix bag of higher profitability but lower margins. Their profits after tax rose 41% to N45.4billion during the year whilst profitability margins dropped on nearly all fronts. The bank had claimed that the increase in operating expenses as well as loan losses was as a result “one time cost” incurred in acquisition (including Oceanic bank) and provisioning. In 2012, Nigeria contributed over 40% of the banks revenue whilst only contributing 18% of pre-tax profits. However, in the first quarter of 2013, pre-tax profits increased 95% to N15.5billion whilst profitability margins all came out higher than the prior year. This indicates that the bank had not only bettered the prior year earnings, it also did so more efficiently.
A downside of the results for me however, is the increase in loan loss expenses to N4.1billion during the period. In addition, the banks lent less on average than they did the prior year whilst deposits also dropped marginally. The banks lower lending probably is an indication that they are willing to allocate funds to safer assets represented by an increase in their Treasury Bill Assets by 71% to N254billion.
ETI closed today (23/4/2012) at N15per share. Their trailing P.E ratio is 5.8x whilst their price to book ratio is just under 70%. The share price appears under valued at the moment and an investment I will like to own. However, their ability to reign in on the rise of operating expenses resulting from their M&A activities and expansions into other regions in Africa is key to their underlying growth.
Ecobank posted its results on the website of the NSE