Ecobank - Performance / Reports

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Ecobank Group
Annual Report
2013
Celebrating 25 years
of pan-African banking
Celebrating 25 years
of pan-African banking
Ecobank would like to thank our customers, staff,
shareholders and partners who have supported
us in reaching this milestone of twenty five years
of operations.
The Group has come a long way since opening
its first branch in Togo in 1988. Africa has also
developed rapidly during this time. We are
confident about the opportunity and potential
for the next 25 years, both for the Group and
the continent.
The future is pan-African, and Ecobank
is the pan-African bank.
Ecobank Group – Annual Report 2013
1
Contents
2013
Highlights
2
Ecobank at a glance
4
Performance highlights
6
The year in review
8
Board and Management Reports
10
Group Chairman’s statement
12
Directors’ report
14
Board of Directors
16
Group Chief Executive’s review
24
Group Chief Operating Officer’s review
28
Business report: Corporate and Investment Bank
30
Business report: Domestic Bank
31
Operations and Technology report
32
Business
and Financial Review
34
Corporate
Governance
64
Corporate Governance report
66
Sustainability report
76
People report
94
Risk Management
100
Financial Statements
124
Statement of Directors’ responsibilities
126
Auditors’ report
127
Consolidated financial statements
128
Notes to consolidated financial statements
133
Five-year summary financials
206
Parent Company’s financial statements
207
Index to notes to the consolidated financial statements
211
Corporate Information
212
Executive management
214
Shareholder information
216
Shareholder contacts
222
Holding company and subsidiaries
223
Customer contact centers 224
2
2013 Highlights
2013 Highlights
Our brand and appearance may have
evolved over the years, but our core values
have always remained the same.
Vision
Our vision is to build a world class
pan-African bank and contribute to the
economic development and financial
integration of Africa.
Mission
Our mission is to provide all of our
customers with convenient and reliable
financial products and services.
This is our newest Ecobank Direct branch, located
in Accra, Ghana. It was opened in April 2014.
1988
1995
2000
2002
2013 Highlights
2005
2007
2009 – Present
3
4
2013 Highlights
Ecobank at a glance
Ecobank is the leading pan-African banking group, with a presence in 35 African
countries and international offices in Paris, London, Dubai and Beijing. At year‑end
2013, the Group had US$22.5 billion in assets and US$2.1 billion in total equity.
Ecobank is listed on the Lagos, Accra and Abidjan (BRVM) stock exchanges.
Our vision and mission
Our vision is to build a world-class
pan-African bank and contribute
to the economic development
and financial integration of Africa.
Our mission is to provide all of
our customers with convenient
and reliable financial products
and services.
We believe we have a responsibility to be
socially relevant to the communities that we
serve. We are also strongly committed to
sustainable development of the region and
are a signatory of the Equator Principles,
the UNEP Finance Initiative and the UN
Global Compact.
We are optimistic about both Africa’s future
and the prospects for its financial services
sector. That optimism continues to underpin
our pan-African strategy today, just as it
did 25 years ago at the opening of our
first branch in Togo. Every day our 19,546
employees work hard to service our more
than 10.4 million customers, who range
from households to governments, domestic
and multinational businesses. By providing
innovative products and excellent customer
service, over time, we hope to create
sustainable value for all Ecobank stakeholders.
Our businesses
Our geographical regions
Through our two customer-centric business
segments, Domestic Bank and Corporate
and Investment Bank, we provide a full
range of retail, wholesale, investment and
transactional banking services.
Our geographical regions in Africa are
segmented according to shared attributes
like common currency and central bank,
size and along existing Regional Economic
Communities. Within these clusters,
Ecobank is structured as a network of locally
incorporated, regulated banking entities.
Corporate and Investment Bank
See page 30
We provide financial solutions to global,
regional and public corporates, financial
institutions and international organizations.
Products and services include pan-African
lending, trade services, cash management,
internet banking and value-chain finance.
We also provide treasury, corporate finance,
investment banking and securities and asset
management services.
Domestic Bank
See page 31
We provide a full range of convenient,
accessible, and reliable financial products and
services to more than 10 million individuals,
small businesses, local corporates and public
sector organizations, through our extensive
network of 1,284 branches and offices,
2,314 ATMs and over 10,000 POS terminals.
Ecobank Nedbank Alliance: the
African champion banking network
Formed in 2008, the Ecobank Nedbank
alliance is the largest banking network in
Africa, with more than 2,100 branches in
37 countries. As part of its commitment to
offering a uniquely One Bank experience,
the alliance provides tailored banking and
business advisory solutions to Ecobank and
Nedbank clients across Africa. This includes
our advisory service, LocalKnowledgeAfricaTM,
which provides tailored research and market
intelligence for businesses seeking to expand
their presence or taking their first steps in
Middle Africa.
Our key figures
As at 31 December 2013
Total equity (US$)
Ecobank employees
Branches and offices
2.1bn
19,546
1,284
Total assets (US$)
Ecobank customers
Ecobank ATMs
22.5bn
10.4m
2,314
2013 Highlights
5
Unique pan-African footprint
International
Revenue
$30m
Total assets
$0.5bn
Addis Ababa
(Rep. Office)
Lomé
(Headquarters)
Countries
5
• France
• UK
• Dubai
• South Africa
• China
Luanda
(Rep. Office)
Branches
–
Employees
86
Johannesburg
(Rep. Office)
Francophone
West Africa
Nigeria
Rest of
West Africa
Central Africa
East Africa
Southern Africa
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
$434m
$819m
$383m
$185m
$68m
$76m
Total assets
Total assets
Total assets
Total assets
Total assets
Total assets
$6.5bn
$9.2bn
$3.0bn
$2.3bn
$1.0bn
$0.6bn
Countries
Countries
Countries
Countries
Countries
Countries
9
1
5
7
7
5
Branches
Branches
Branches
Branches
Branches
Branches
262
610
150
85
93
53
Employees
Employees
Employees
Employees
Employees
Employees
2,954
10,097
2,475
1,200
1,311
598
• Benin • Burkina Faso
• Côte d’Ivoire
• Cape Verde • Mali
• Niger • Senegal
• Togo • Guinea-Bissau
• Nigeria
• Ghana
• Guinea
• Liberia
• Sierra Leone
• Gambia
• Cameroon • Chad
• Central Africa
• São Tomé and Príncipe
• Congo • Gabon
• Equatorial Guinea
• Rwanda • Kenya
• Burundi • Uganda
• Tanzania
• South Sudan
• Ethiopia (rep. office)
• DR Congo
• Malawi
• Zambia
• Zimbabwe
• Angola (rep. office)
The number of employees for the Group is inclusive of employees of ETI, EDC and eProcess which are not represented in our geographic clusters. The number of branches for the Group is inclusive of number of offices which are
not part of the numbers of the clusters. The Group total assets and revenues are made up of numbers from our geographic clusters, other entities not part of our cluster grouping and the impact of consolidation adjustments.
6
2013 Highlights
Net revenue for 2013 surpassed US$2.0bn, showing strong year-on-year organic
growth of 16% despite a tough operating environment.
Selected income statement data
For the year ended 31 December (in millions of US Dollars, except per share data)
Net revenue
Operating expenses
Pre-impairment profit
Impairment losses
Profit before tax
Profit for the year from continuing operations
Profit attributable to owners of the parent (from continuing operations)
Earnings per share (from continuing operations)
Basic
Diluted
Dividend per share
2013
2012
Change (%)
2,003
1,405
598
377
222
156
103
1,730
1,236
494
155
338
282
246
+16%
+14%
+21%
+143%
-34%
-45%
-58%
0.60
0.55
1.67
1.28
-64%
-57%
–
0.40
2013
2012
Selected statement of financial position data
As at 31 December (in millions of US Dollars, except per share data)
Change (%)
Loans and advances to customers (net)
11,422
9,441
+21%
Total assets
22,532
19,939
+13%
Customer deposits
16,490
14,620
+13%
2,135
2,174
-2%
11.3
11.7
-3%
Total equity
Book value per share ($ cents)
Selected ratios
As at, or for year ended, 31 December 2013
Net interest margin
NPL ratio
Tier 1 capital ratio
7.2%
6.2%
13.0%
(2012: 6.5%)
(2012: 5.6%)
(2012: 15.2%)
Cost-to-income ratio
Coverage ratio
Capital adequacy ratio
70.1%
79.0%
16.3%
(2012: 71.4%)
(2012: 74.1%)
(2012: 19.3%)
7
2013 Highlights
Net revenue*
Pre-impairment profit*
Profit before tax*
(US$m)
(US$m)
(US$m)
598
338
494
2,003
277
1,730
222
363
1,196
873
241
900
169
270
101
2009
2010
2011
2012
2013
2009
2010
2011
2012
2009
2013
2010
2011
Customer loans (net)
Customer deposits
Total assets
(US$bn)
(US$bn)
(US$bn)
2012
11.4
22.5
16.5
9.4
19.9
14.6
7.3
4.7
17.1
12.1
5.2
7.9
9.0
6.4
2009
2010
2011
2013
2012
2013
2009
2010
2011
2012
2013
2009
10.4
2010
2011
2012
2013
Attributable profit*
Earnings per share (basic)*
Return on average equity
(US$m)
(US cents)
(%)
246
1.76
1.67
15.9
182
15.8
1.14
10.4
113
103
0.60
0.58
6.9
5.6
51
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
* 2012 and 2013 figures relate to continuing operations
8
2013 Highlights
The year in review
Q1 – January – March
Q2 – April – June
Ecobank hosted its inaugural Capital Markets
Day at its Lomé headquarters, providing major
shareholders and investment analysts with
insights into the Group’s strategic priorities
and its growth targets for 2013.
Ecobank won 2013 Award for Innovation
in Banking in African Banker’s awards,
in recognition of its significant contribution
to improving financial inclusion across
Africa, leveraging technology and its
pan-African footprint.
Launched in 2013, Ecobank’s
“MobileMoney” service
enables customers to make
payments, collections and
transfers, check balances and
buy airtime via their mobile
telephones.
Senior management attend Ecobank Capital Markets Day
(L–R Patrick Akinwuntan, Head of Domestic Bank;
Graham Dempster, COO Nedbank Group, Evelyne Tall;
Group COO, Samuel Ayim, Company Secretary;
Laurence do Rego, Group Executive Director, Finance).
February 2013
African Development Bank approved US$200m facility to support
Ecobank’s trade finance activities across Africa.
Ecobank sold majority stake in Oceanic Life, its life assurance business
in Nigeria, to Old Mutual.
March 2013
Celent, the financial services consultancy firm, recognized Ecobank’s
Omni online corporate cash management platform with a Model
Bank award for its innovative approach, business success and
integration excellence.
April 2013
Ecobank senior management conducted “facts behind the figures”
presentations at the Nigeria, Ghana and BRVM stock exchanges.
June 2013
Ecobank Ghana won the Bank of the Year category in the annual
Ghana Banking Awards. The award is given to the bank with the
highest weighted scores for customer satisfaction, corporate social
responsibility and financial performance.
Ecobank announced that it is working with authorities in
Côte d’Ivoire and Nigeria to finance the Abidjan–Lagos transport
corridor, a transnational highway passing through five West African
countries, due to be completed in 2016.
2013 Highlights
Q3 – July – September
Q4 – October – December
Ecobank Research won Africa Investor’s award
for Best Africa Research team for the third
consecutive year.
Ecobank and the Global Fund to Fight
AIDS, Tuberculosis and Malaria launched
US$3m of innovative funding, aimed at
strengthening financial management
capabilities of grant recipients.
Albert Essien, Head of Corporate and Investment Banking, receives the award
on behalf of Ecobank Research from Africa Investor’s MD, Hubert Danso.
July 2013
Ecobank supported the development challenges facing Africa’s
youngest state by setting up its 32nd African banking subsidiary
in South Sudan.
Charles Kie (far right), Ecobank’s Head of Corporate Banking attends launch
of the Global Fund’s Fourth Replenishment in Washington DC in the presence
of Bill Gates and other corporate donors.
September 2013
October 2013
Airtel partnered with Ecobank to provide mobile banking in nine
African countries.
Ecobank held its first ‘Ecobank Day’, encouraging all employees
to devote a day of their free time to community volunteering.
African Guarantee Fund provided Ecobank with a US$50m portfolio
guarantee to support SMEs in Benin, Burkina Faso, Nigeria, Cameroon,
Côte d’Ivoire, the Democratic Republic of Congo and Kenya.
Ecobank opened its Ethiopian representative office in Addis Ababa,
bringing the total of African countries in which the bank is present
to 35.
Ecobank was a first-time participant in SIBOS, the global financial
services forum, in Dubai in a joint initiative with Nedbank.
Ecobank won Global Finance’s inaugural Best Frontier Bank Award.
Omni, Ecobank’s real-time cross-border payment and cash
management system, successfully deployed in 30 African countries.
Chairman Kolapo Lawson stepped down and André Siaka assumed
Ecobank chairmanship
December 2013
Ecobank signed a US$50 million, 10-year loan agreement with
French development institution, Proparco, to support the growth
of its banking network.
Ecobank and Nedbank teams at SIBOS 2013 in Dubai.
Ecobank Capital acted as the Mandated Lead Arranger for a
US$500 million pre-export deal on behalf of Orion Oil in the largest
syndicated loan transaction in Central Africa to date funded solely
by regional banks.
9
10
Board and
Management Reports
Our founders and early shareholders
had an entrepreneurial spirit of resilience
and determination that saw them through
many challenges.
This passion continues to drive us to learn
from the challenges of today to build a
stronger institution for the future.
The Ecobank spirit remains strong,
over 25 years on.
A meeting of the early shareholders/founders of Ecobank.
11
12
Group Chairman’s statement
shape the future of pan-African banking,
thereby creating unprecedented opportunity
and value for our customers, employees and
shareholders alike.
We also consider ourselves to have been
pioneers within the African banking sector in
terms of the adoption of international best
practice. So, the fact that management and
corporate governance issues have dominated
the headlines about Ecobank over the past
year is a matter of deep regret. On behalf
of the Board, I wish to convey our sincerest
apologies to all our stakeholders that, of late,
we have not always lived up to our own
high standards in terms of business practice
and transparency.
“The Board is committed to establishing the highest
standards of corporate governance... we will learn
from the past, address all of the issues and lay firm
foundations for Ecobank’s continued success in the
next 25 years.”
I consider it a great honor to have the, albeit
unexpected, privilege of reporting to you
on Ecobank’s progress in 2013, our silver
anniversary year. This represents a significant
milestone in the life of any company, but
particularly so for an organization which has
become such a vital part of the banking and
commercial life of Middle Africa. The past
25 years have proved to be an incredible
journey, not least in terms of our growth
from humble beginnings to becoming the
leading pan-African bank, with more than
US$22 billion of assets, revenue in excess of
US$2 billion and more than 1,200 branches
in 35 countries across our continent.
For, when Ecobank started out, nobody had
a mobile phone, letters were being written
with typewriters and correspondence was
sent by post. Our strategy of leveraging
technology to drive product and service
innovation has been a hallmark of Ecobank’s
success over the years and it will continue
to be a key component in our mission to
Given that Ecobank has more than doubled
in balance sheet size over the past five years,
these are the almost inevitable “growing
pains” associated with accelerated business
expansion. Nevertheless, the Board takes
corporate governance very seriously –
hence our decision to commission leading
practitioners, such as the International
Institute for Management Development and
Ernst and Young (EY), to carry out independent
reviews of our practices. We also welcome
the open and constructive dialogue that we
have had, and will continue to have, with the
regulators of each of the three West African
exchanges on which Ecobank Transnational
Incorporated (ETI) is listed.
As a result of these interactions, we have
instituted a detailed governance action
plan to strengthen our ability to meet
these challenges going forward, as well
as measures to improve our systems and
internal controls. Such a comprehensive
refresh of our corporate governance should
assure our stakeholders of the seriousness
of our intent.
Environment
Our marketplace, Middle Africa, continues
on its robust growth trajectory. According
to the International Monetary Fund, GDP
growth for the region is expected to rise
to 6% this year, from 5% in 2013, ranking
second only to developing Asia in terms
of its pace of development. The larger
economies of Nigeria, Ghana and Kenya are
witnessing rapid economic growth, with
substantial gains in the banking and financial
services sectors. Elsewhere, growth has
been particularly buoyant in resource-rich
countries, including the Democratic Republic
of Congo and Sierra Leone. Improved political
stability and security have led to economic
recovery in the likes of Mali and Côte d’Ivoire.
Thanks to regulatory reforms, urbanization,
the expanding middle class and advances in
technology, the prospects for Africa’s banking
sector remain highly attractive. According
to Ernst and Young, at current growth rates,
the financial services sector could make up
around 20% of the continent’s collective
GDP within the next decade, compared with
10% today. Significant growth opportunities
remain in both the retail and wholesale
sectors that will allow Ecobank to create
significant shareholder value in the
longer term.
Financial results
Despite a challenging operating environment
in 2013, Ecobank registered impressive
organic growth in terms of both revenues
and assets. Revenue broke through the
US$2 billion mark, whilst strong growth in
both customer loans and deposits led to a
13% year-on-year increase in total assets
to US$22.5 billion.
Our continued focus on efficiency across our
diversified platform is bearing fruit, with the
cost-to-income ratio improving in each of
our six geographical clusters in Africa.
However, the 2013 results have been
impacted by our conservative decision to
take a one-off US$165 million provision
against certain legacy non-performing assets
in Nigeria. This led to a 34% decline in pretax profit to US$222 million in comparison
with 2012 and a 48% decline in net profit to
US$148 million.
As our parent company, Ecobank
Transnational Incorporated, generated no
distributable earnings in 2013, we are unable
to propose a dividend payment for the
financial year in review.
Board and management changes
Mr Kolapo Lawson stepped down as Group
Chairman in October and retired from the
Board at the end of 2013, after more than
20 years of dedicated service. During this
period, he was instrumental in bringing into
fruition his father’s and the other founding
members’ vision of a genuinely African
private sector bank. On behalf of the Board,
employees and shareholders, I should like
to express our appreciation to Kolapo for
his entrepreneurial spirit, leadership and
unwavering commitment to Ecobank.
In addition to the departure of Mr Thierry
Tanoh as CEO, three of the Group’s nonexecutive directors (Dr Babatunde A.M.
Ajibade, Mr Paulo Gomes and Mr Isyaku
Umar) resigned their Board positions during
the first quarter of 2014. On behalf of the
Board, I should like to thank them all for their
valued contributions and wish them well
in their future endeavors.
In line with a directive from the Securities
and Exchange Commission of Nigeria, Mrs.
Laurence do Rego has been reinstated to
the position of Group Executive Director
of Finance and Risk. We also recently
announced the co-option of Hewitt Benson
as a non-executive director. He will be the
Board representative for Asset Management
Corporation of Nigeria (AMCON), which
currently holds a 10.4% equity interest in ETI.
As a result of these changes, Ecobank’s Board
currently comprises five executive officers
and eight non-executive directors. At our
recent EGM, shareholders agreed to limit the
size of the Board to a maximum of 15. Our
new Search Committee (which includes two
former chairmen, honorary president Gervais
Djondo and Chief Philip Asiodu, two current
Board members and three shareholder
representatives) has been charged with
finding a permanent Chairman with the
banking industry stature and experience
to reinvigorate the Board and ensure that
Ecobank’s strategic direction is implemented
effectively. The reconstituted Board should
also reflect Ecobank’s cultural diversity, with a
more balanced gender and professional mix.
The Search Committee will also recommend
potential new Board members for
shareholder approval at the Annual General
Meeting, to be held in June.
Appreciation
On behalf of the Board and all of our
stakeholders, I wish to express a sincere vote
of thanks to Mr Albert Essien for taking the
helm at Ecobank. With a wealth of African
banking and management experience and
having been a loyal servant to the Group for
over 20 years, we believe there is no-one
better qualified to lead Ecobank at this stage.
He has the business acumen, integrity and,
indeed, passion, to re-establish Ecobank as
the proud and successful institution it always
has been and always will be.
13
2013 proved to be a testing year for
everyone associated with the Group. We
were particularly struck by the forbearance
and rectitude of Ecobank’s staff. On behalf
of the Board, I thank everyone for their
efforts and encourage you all to embrace
the undoubted challenges ahead with
renewed confidence and vigor. For, make
no mistake, we need to work in unison to
restore Ecobank’s world-class reputation and
regain the trust of our customers, partners
and investors.
Outlook
The Ecobank spirit, which took the Group
from a small bank in the 1980s in Togo to
one of Africa’s largest financial institutions
today, is one of resilience and determination.
Fundamentally, all of our people are
galvanized around the simple but ambitious
goal of building a world-class, pan-African
operation. The Board is committed to
establishing the highest standards of
corporate governance that enable effective
decision-making, with clear responsibilities.
We will learn from the past, address all
of the issues and lay firm foundations for
Ecobank’s continued success in the next
25 years.
André Siaka
Interim Chairman
14
Directors’ report
Ecobank Transnational
Incorporated (ETI), the
parent company of the
Ecobank Group, is a bank
holding company. Its
principal activity is the
provision of banking
and financial services
through its subsidiaries
and affiliates.
Business review
During 2013, we continued to focus on the
delivery of our key strategic pillars, namely
providing an outstanding customer service
experience to our clientele, improvement of
long-term shareholder value and return as
well as being the employer of choice in the
markets where we operate.
In 2013, South Sudan was added to the
Group’s network of banking operations while
a representative office was also opened in
Addis Ababa, Ethiopia, bringing the number
of presence countries to 39.
A detailed review of the business of the
Group during the 2013 financial year is
contained in the Business and Financial
Review section of this report.
Acquisitions and divestitures
The bank did not undertake any acquisitions
during 2013. We divested certain non-core
assets, including majority stakes in the Life
Assurance and General Insurance businesses
of the former Oceanic Bank, both sold to
Old Mutual. We also sold majority stakes in
Oceanic Health and Oceanic Homes.
Results
Directors
The Group’s profit after tax stood at US$148
million. Net profit attributable to the parent
company was US$96 million.
The names of the directors of the Company
appear on pages 16-17 of this Annual Report.
The details of the results for the year are set
out in the consolidated financial statements.
The Board of Directors approved the financial
statements of the Company and the Group
for the year ended 31 December 2013
at the meeting of the Board held on
25 April 2014.
Messrs André Siaka and Albert Essien were
authorized to sign the accounts on behalf of
the Board.
International Financial
Reporting Standards
The accounts of both the parent company
and the Group are prepared in accordance
with International Financial Reporting
Standards (IFRS). For 2013, the Group has
classified certain businesses as held for sale
in line with IFRS 5 (non-current assets held
for sale and discontinued operations). We
have therefore restated our 2012 financials
on the same basis to facilitate year-on-year
comparisons (refer to note 29 of our financial
statements in this report for more detail).
Dividend
The directors do not recommend the
payment of a dividend, given that the parent
company made a loss for the year 2013.
Capital
The authorized share capital of the Company
is US$1.277 billion, divided into 50 billion
ordinary shares of 2.5 US cents per share and
1.07 billion preference shares of 2.5 US cents.
At the beginning of 2013, there was a total
of 17.21 billion ordinary shares in issue.
During the year, there was no change in the
number of shares in issue.
The ordinary shares of the Company are
traded on the three West African stock
exchanges, namely the BRVM (Bourse
Régionale des Valeurs Mobilières) in Abidjan,
the Ghana Stock Exchange of Accra and the
Nigerian Stock Exchange of Lagos.
As of 31 December 2013, the Board was
composed of 17 directors: 11 non-executive
and 6 executive directors.
The Board of Directors met eight times
during the year. The Governance
Committee, the Audit and Compliance
Committee and the Risk Committee each
met four times to deliberate on issues under
their respective responsibilities.
On 29 October 2013, Mr Kolapo Lawson
stepped down as Chairman, with
the Vice-Chairman, Mr André Siaka, taking
over as interim Chairman of the Board of
Directors on the same date. Mr Lawson
retired from the Board on 31 December 2013
and the Board would like to thank him for his
considerable service to the Group since
its founding.
On 6 August 2013, Laurence do Rego, Group
Executive Director for Finance and Risk, was
suspended by the Board and did not play
a further part in Board activities for the
remainder of 2013. She was subsequently
reinstated on 11 March 2014.
Corporate governance
and compliance
There has been considerable focus on the
Group’s corporate governance practices,
particularly at the Board level, this year.
Following a series of publications in the
local and international media from July 2013
regarding alleged breaches of corporate
governance and allegations against the
Board of Directors and certain principal
officers of the Company, the Securities
and Exchange Commission (SEC) Nigeria
undertook an independent review of these
allegations through the professional services
firm KPMG.
The purpose of the review was to ascertain
the Company’s compliance with the SEC’s
Corporate Governance Code as well as
best practice and also to determine the
veracity of the various allegations against
principal officers of the Company. The Group
also commissioned IMD and EY to conduct
independent reviews of our corporate
governance and assist with responding to
regulatory reviews.
Following the SEC/KPMG review, an
Extraordinary General Meeting of
shareholders was held on 3 March 2014
to approve a 51-point Governance Action
Plan designed to address the areas
highlighted by the SEC/KPMG.
The Company maintains corporate policies
and standards designed to encourage good
and transparent corporate governance, avoid
potential conflicts of interest and promote
ethical business practices. These policies are
being updated where relevant as part of the
above plan, and further details are provided
in the Corporate Governance Report on
page 66 of this report.
The Board and the Group are committed to
improving the governance of the institution
and are working closely with regulators and
other stakeholders to rebuild confidence in
this area.
Subsidiaries
In 2013, the Group extended its African
operations by opening an affiliate in South
Sudan and a representative office in Addis
Ababa, Ethiopia. This completes our coverage
of the East African Community (EAC) cluster.
Our investment banking subsidiary, Ecobank
Development Corporation, has also opened
an office in Kenya, adding to its operations in
Ghana, Nigeria, Côte d’Ivoire and Cameroon.
Responsibilities of Directors
The Board of Directors is responsible
for the preparation of the financial
statements, which give a true and fair
view of the state of affairs of the company
at the end of the financial period and of
the results for that period.
These responsibilities include ensuring that:
• Adequate internal control procedures
are instituted to safeguard assets
and to prevent and detect fraud and
other irregularities
• Proper accounting records are maintained
• Applicable accounting standards
are followed
• Suitable accounting policies are used and
consistently applied
• The financial statements are prepared
on a going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
Independent External Auditors
The Joint Auditors, PricewaterhouseCoopers,
Lagos, Nigeria and PricewaterhouseCoopers,
Abidjan, Côte d’Ivoire have indicated their
willingness to continue in office.
A resolution will be presented at the 2014
AGM to authorize the directors to determine
their remuneration.
Dated in Lomé, 30 April 2014
By Order of the Board,
eProcess International SA, our shared services
and technology subsidiary, continued to
provide the technology infrastructure and
platform for the Group.
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 materially affect either the reported
state of affairs of the Company and the Group
as at 31 December 2013 or the profit for the
year ended on the same date which have not
been adequately provided for or disclosed.
Samuel K. Ayim
Company Secretary
15
16
Board of Directors
4
2
5
3
6
1
1Evelyne Tall
Deputy Group Chief
Executive Officer,
Group Chief Operating Officer,
Senegalese
3Albert Essien
Group Chief Executive Officer
Head of Corporate and
Investment Bank
Ghanaian
5Eddy Ogbogu
Group Executive Director,
Operations and Technology
Nigerian
2André Siaka
Interim Chairman
Cameroonian
4Patrick Akinwuntan
Head of Domestic Bank
Nigerian
6Laurence do Rego
Finance
Beninese
7
9
10
11
12
8
7Bashir Mamman Ifo
Non-executive Director
Nigerian
9Assad J. Jabre
French
11Sipho Mseleku
South African
8Kwasi A. Boatin
Ghanaian
10Daniel Matjila
South African
12Sena Agbayissah
French
Other directors as at
31 December 2013*
Kolapo Lawson
Thierry Tanoh
Isyaku Umar
Babatunde A.M. Ajibade
Paulo Gomes
* Not pictured and no longer
directors of Ecobank Group
17
18
Directors’ biographies
Kolapo Lawson (63)
André Siaka (64)
Thierry Tanoh (51)
Chairman 2009 to 2013
Non-Executive Director from 1993
to 2013
Nigerian
Interim Chairman since October 2013
Non-Executive Director since 2006
Cameroonian
during 2013
Ivorian
Kolapo Lawson is the Chief Executive Officer
of a diversified industrial and trading group
with operations in the United Kingdom and
West Africa.
André Siaka is a Director on the Board of
SA Brasseries du Cameroun (SABC). He was
the Chief Executive Officer of SABC from 1988
to January 2014. He worked with SABC from
1977, rising from Production Engineer to
Plant Manager, Deputy Regional Manager,
Regional Manager and Deputy Managing
Director. Before joining SABC, André Siaka
worked with Société Générale in Paris from
1974 to 1976.
Thierry Tanoh joined the Ecobank Group as
CEO designate in July 2012. Mr. Tanoh was
Group CEO during the year 2013 and left the
Company in March, 2014.
He is the Chairman of Acorn Petroleum
Plc and Agbara Estates Limited, as well as
a Non-Executive Director of three publicly
quoted companies: Beta Glass Plc, PharmaDeko Plc and Sovereign Trust Insurance Plc.
He was a Director of Ecobank Nigeria from
1989 to 1997 and of Ecobank Togo from
1990 to 1993.
He stepped down as Chairman of the
Ecobank Group in October 2013 and resigned
from the board effective 31 December 2013.
Kolapo Lawson has a degree in Economics
from the London School of Economics and
Political Science and is a Fellow of both the
Institute of Chartered Accountants in England
and Wales and the Institute of Chartered
Accountants of Nigeria.
André was Vice-Chairman of the Board from
2009 until he was made interim Chairman in
October 2013.
André Siaka is a member of the Financial
Markets Commission and a Director of
Orange Cameroun and Chanas Assurances
SA. He holds an engineering degree from
École Polytechnique, Paris. André Siaka has
recently been appointed as the Honorary
Consul for the Monaco Principality in Douala.
Thierry Tanoh joined Ecobank from the IFC,
a member of the World Bank Group and
a global financial institution that supports
private sector development in developing
countries. During his 17-year career with
the IFC, Mr. Tanoh played a key role in
expanding the latter’s investment activity in
Sub-Saharan Africa from US$140 million in
2003 to more than US$3.5 billion in 2011.
During this time, his responsibilities included
business development, deal structuring
and processing of some of IFC’s largest
transactions, before taking on a broader
management role.
He joined IFC in 1994 through the young
professional program. He initially worked in
the Asia Department. He then specialized
in the chemicals and petrochemicals sector,
working on transactions in Asia, Latin
America and Eastern Europe. He became
Regional Director in 2006 and Vice President,
Latin America and the Caribbean, SubSaharan Africa and Western Europe in 2008.
An Ivorian national, he graduated from Ecole
Supérieure de Commerce d’Abidjan. He is
a certified public accountant in France and
holds a Masters in Business Administration
from the Harvard Business School.
19
Albert Essien (58)
Evelyne Tall (55)
Patrick Akinwuntan (51)
Group Chief Executive Officer since
March 2014
Head of Corporate and Investment Bank
Ghanaian
Deputy Group Chief Executive Officer
since 2012
Group Chief Operating Officer
Senegalese
Executive Director since 2012
Nigerian
Albert Essien was made Group CEO in March
2014, having been a Deputy Group CEO since
2012. He has been a Group Executive Director
since 2005. He is also the Head of Corporate
and Investment Bank.
Evelyne Tall is currently Deputy Group CEO
and Group Chief Operating Officer. She
oversees the banking subsidiaries and
affiliates of ETI across Africa and the Group’s
Internal Control, Customer Service and
Compliance functions. Prior to that, she was
the Head of Domestic Bank. She has been a
Group Executive Director since 2005.
Patrick Akinwuntan is the Head of Domestic
Bank, responsible for the retail, local
corporate, public sector and microfinance
businesses of the Group. Since joining
Ecobank in 1999, he has held various
Group management roles, including Group
Head, Domestic Bank Products, Group
Executive Director, Operations, Technology,
Transaction and Retail Banking and Managing
Director of eProcess International, where
he spearheaded the establishment of the
Ecobank Pan-African Technology and Shared
Services Centre in Accra, Ghana. Between
2001 and 2005, he was Executive Director,
Retail banking for Nigeria and from 1999
until 2001, Group Chief Financial Officer.
Patrick has also been Group Coordinator,
Commercial Banking and Zonal Head,
Western II at Ecobank Nigeria between 1996
and 1999. Before joining Ecobank, he worked
for Ernst and Young, Manufacturers Merchant
Bank and Springfountain Management
Consultants in Nigeria.
Prior to that, he was the Regional Head
for the Anglophone West Africa (excluding
Nigeria) and the Eastern and Southern Africa
(ESA) regions. As Regional Head for ESA, he
had responsibility for Ecobank’s expansion
into that region. He started his banking
career in 1986 with the National Investment
Bank in Accra, Ghana and joined the
Corporate Banking Department of Ecobank
Ghana in 1990. In 1997, he became Country
Risk Manager. He was appointed Deputy
Managing Director in 2001 and became
Managing Director in December 2002.
Albert Essien has a degree in Economics
from the University of Ghana (graduating in
1979) and is an alumnus of the Executive
Development Program of INSEAD (France/
Singapore). He is also an honorary fellow of
the Chartered Institute of Bankers, Ghana.
She started her banking career in 1981 with
Citibank in Dakar. She left Citibank to join
Ecobank Mali as Deputy Managing Director
in 1998, and was made Managing Director
in 2000. Evelyne Tall was later transferred
to Ecobank Senegal as Managing Director.
She was appointed Regional Head of the
Francophone West Africa Region in October
2005.
Evelyne Tall holds a Bachelor’s degree
in English (Dakar) and a diploma in
International Trade, Distribution and
Marketing from the Ecole d’Administration
et de Direction des Affaires (ex EAD), Paris.
He holds an MBA (Finance Option) from the
Obafemi Awolowo University, Ile Ife, Nigeria.
He is a Fellow of the Institute of Chartered
Accountants of Nigeria and an Associate
of the Chartered Institute of Taxation of
Nigeria. He is also an alumnus of the Harvard
Business School’s Senior Executive Program.
20
Laurence do Rego (49)
Eddy Ogbogu (52)
Sena Agbayissah (51)
Head of Finance
Beninese
Head of Operations and Technology
Nigerian
French
Laurence do Rego was appointed Group
Executive Director, Finance and Risk in
January 2010, having previously been
the Group Chief Financial Officer from
2005 to 2009. Following separation of the
Finance and Risk functions in April 2014,
she assumed the role of Group Executive
Director, Finance.
Eddy Ogbogu has been the Group Executive
responsible for Operations and Technology
since August 2010. A seasoned operations
professional, he has worked in senior banking
operations and technology management
roles for more than a decade in different
organizations covering multiple geographies
in Africa. Before his current appointment, he
worked with Bank PHB Plc in Nigeria where
he was an Executive Director, heading the
bank’s service organization, with responsibility
for Operations and Technology, including
administrative services.
Sena Agbayissah is a qualified French lawyer
and a partner at the law firm of Hughes
Hubbard & Reed LLP in Paris. He began his
career at Landwell (Pricewaterhouse), where
he became a partner in 1999. His experience
includes: project finance, securities issuance,
financial and banking transactions, structured
financing, derivatives, banking and financial
regulations and group restructurings. He
is also an expert in carbon trading. Sena
Agbayissah is a member of the Board of
Directors of the European Association for
Banking and Financial Law.
Prior to this, Eddy Ogbogu had an illustrious
19-year career at Citibank in different African
countries. He was appointed the Senior
Country Operations Officer for the Citibank
franchise in Nigeria in 2005 after similar roles
in Tanzania, Zambia and Kenya and also served
as a Board Director. Eddy was also responsible
for overseeing Citibank’s operations and
technology in the West Africa cluster.
He is a lecturer in financial law at Rennes
University for DJCE (Diplôme de Juriste
Conseil d’Entreprise) students, at Montpellier
University and at University of Paris XI.
She joined Ecobank in 2002 as Head of
Financial Control for Ecobank Benin. Prior to
this, Laurence do Rego had over 15 years
of experience in senior financial roles,
including being Financial Director at Binney
& Smith, France, a subsidiary of the Hallmark
Group (USA),and Group Thoer (France),
and Managing Director of SOCIEC (Societe
d’Expertise Comptable), an accountancy firm
in France.
Laurence do Rego holds a bachelor and postgraduate degrees in Finance and Accounting.
He is an Accountancy graduate and holds
a professional ACA qualification of ACA. He
is a member of the Institute of Chartered
Accountants of Nigeria (ICAN), the Nigeria
Institute of Management (NIM), an Honorary
Fellow of the Nigeria Institute of Bankers
(NIB) and active in charitable societies.
He holds a DEA (Diploma of advanced studies
in private law), University of Paris XI; a DJCE
and DESS (postgraduate degrees in business
law), University of Rennes and an advanced
diploma in taxation (‘Certificat d’Etudes
Supérieures’), University of Montpellier.
21
Babatunde A M Ajibade (46)
Kwasi A Boatin (52)
Paulo Gomes (49)
to February 2014
Nigeria
Ghanaian
to January 2014
Bissau Guinean
Babatunde Ajibade is engaged in private
commercial legal practice and is a Senior
Advocate of Nigeria. He has been the
Managing Partner of SPA Ajibade & Co, a
leading commercial legal practice in Nigeria,
since 1996.
Kwasi Boatin is an experienced investment
and asset management consultant and
asset management consultant and former
Director General of the Social Security and
National Insurance Trust (SSNIT), with US$2.1
billion of assets under management for a
defined benefit plan under the Social Security
Scheme for Ghana. He was the General
Manager in charge of Finance of SSNIT from
2003 to 2008.
Paulo Gomes was an Executive Director of
the World Bank Group in Washington DC
from 1998 to 2006. From 1995 to 1998, he
worked for the Ministry of Finance, Planning
and Trade of Guinea-Bissau, where he
was Principal Adviser, Director of Strategic
Planning, Public Investment and Debt.
He is the Chairman of the Capital Market
Solicitors Association, Nigeria; Vice-Chairman
of the Banking, Finance and Insolvency
Committee of the Nigerian Bar Association’s
Section on Business Law; Vice-Chairman of
the Rules and Regulations Sub-Committee
of the Nigerian Securities and Exchange
Commission’s Capital Market Committee; a
Fellow of the Institute of Advanced Legal
Studies (UK); and an International Practice
Fellow of the International Bar Association.
Babatunde Ajibade holds a PhD in Private
International Law and an LLM in Corporate
and Commercial Law, both from King’s
College, University of London, and an LLB
from the Obafemi Awolowo University,
Ile-Ife, Nigeria.
In February 2006 he was appointed
Reporter by the International Social Security
Association (ISSA), under the ILO, Geneva,
and was Vice-Chairperson of the Technical
Commission on Investments from 2007 to
2010. From 1989 to 2003 he held senior
finance positions in major UK companies
including Barratt London Plc, AT&T (UK)
and Winkworth. Kwasi Boatin holds an MBA
from Henley Business School, Oxfordshire,
England and is a Fellow of the Association
of Chartered Certified Accountants, UK.
Paulo Gomes is the Founder and Manager
of Constelor Holdings and Chairman of the
AFIG Fund. He holds a Certificate in Political
Studies (Institut d’Etudes Politiques de Paris),
a Bachelor in Economics and International
Trade (Institut d’Etudes Libres de Relations
Internationales,Paris) and Masters in
Economic Policy and Management from
the Kennedy School of Government at
Harvard (USA).
22
Bashir M Ifo (54)
Assaad J Jabre (61)
Dr. Daniel Matjila (51)
Nigerian
French
South African
Bashir Ifo is the current President of
the ECOWAS Bank for Investment and
Development (EBID), formerly known as the
ECOWAS Fund for Cooperation, Compensation
and Development in Togo.
Assaad Jabre is a Corporate Investment
Advisor. From 1980 to 2005, he worked with
the International Finance Corporation (IFC),
a member of the World Bank Group, where he
held a number of senior positions, including:
Acting Executive Vice-President and Chief
Executive Officer (2005); Vice-President,
Investments and Advisory Operations
(2000 – 2005) and Vice-President,
Portfolio Management (1997 – 2000).
Dr Daniel Matjila is a well-respected and
experienced finance, investment risk
management and investment specialist. He
is also an academic. Currently, he is the Chief
Investment Officer (CIO) and Executive Director
of the Public Investment Corporation (PIC).
PIC is the largest asset manager in South
Africa and the rest the African continent. He
manages an investment portfolio in excess of
R1.1 trillion (approx. US$150 billion) across
all asset classes. He is also spearheading
the offshore investment strategy and Africa
investment strategy for the PIC. He is also
currently a Non-Executive Director and Board
member at Afrisam Ltd, Entabeni Holdings
(Chairman) and Harith Partners.
He has 30 years of experience in both
the public and private sectors. Between
1995 and 2011 he held several senior
management positions at EBID.
These included Head of Financial Operations
Division, Director of Treasury Department,
Head of Finance and Administration
Department, Acting Managing Director of the
former ECOWAS Regional Investment Bank
(ERIB) and Vice President for Finance and
Corporate Services.
From 1982 to 1995, Bashir Ifo worked in
both the public and private sectors in Nigeria.
He holds a Bachelor’s degree in Business
Administration (Banking and Finance) and
an MBA (Finance), both obtained from the
Ahmadu Bello University, Zaria, Nigeria.
From 1997 to 2005 he was also a member of
the IFC Corporate Investment Committee and
its Finance and Risk Management Committee.
Mr Jabre currently sits on the advisory board
of ICD, the private sector affiliate of the Islamic
Development Bank; the strategic committee
of Agence France-Tresor, the French sovereign
debt management agency; and the board
of the GSMA foundation – a foundation
established by the association of worldwide
mobile telecom operators.
He is a Graduate of the ‘Institut d’Etudes
Politiques de Paris’ and holds a degree in
International Law from the University of
Paris and an MBA from the Wharton School
(University of Pennsylvania).
Prior to joining the PIC, he was the Senior
Manager Quantitative Research Analysis
for Stanlib, where he spearheaded the
application of quantitative techniques in
fund management and managed the Quant
Portfolio for over two years. Before this,
Dr Matjila worked for Anglo American, a
JSE-listed company, for five years where he
was the Senior Manager of Quantitative
Research Analysis, responsible for Derivatives
(Fixed Income, Equity and Currency) and the
application of quantitative techniques in
Fund Management.
Dr Matjila started his career as a Senior
Mathematics lecturer at the University of
the North working in academia for over
nine years. He holds a Ph.D. (Wits), a M.Sc.
(Rhodes) and a B.Sc. Hons (Fort Hare),
amongst other qualifications.
Sipho G Mseleku (47)
Isyaku Umar (66)
South African
to February 2014
Nigerian
Sipho Mseleku is the Chairman of the Global
Business Roundtable; he is the former
Chief Executive Officer of the Association
of SADC Chambers of Commerce and
Industry (ASCCI), a Non-Executive Chairman
of Sakhumnotho Group Holdings (Pty) Ltd
amongst numerous other executive roles.
He was the Chief Executive Officer of the
Chambers of Commerce and Industry of
South Africa (CHAMSA) from 2004 to 2005,
of the National African Federated Chamber
of Commerce and Industry (NAFCOC) and
Sakhumnotho Group Holdings (Pty) Ltd from
2002 to 2005.
Isyaku Umar started his career with UAC
of Nigeria. From 1972 to 1976, he worked
for Kano State Government and was at
various times Secretary of the Draught Relief
Committee and Principal Private Secretary
to the Military Governor. Following that, he
became the General Manager of Mai-Nasara
and Sons Limited from 1977 to 1979, and
Managing Director of Tofa General Enterprises
Ltd from 1979 to date.
Sipho Mseleku has a background in
investment banking, structured finance
and legal practice. He is an Attorney of the
High Court of South Africa and the current
President of the Pan-African Chamber of
Commerce and Industry.
He holds an LLM (Tax Law), an HDip Company
Law, an LLB and a BA (Hons) of the University
of Witwatersrand, Johannesburg.
Isyaku Umar holds a Bachelor’s degree in
Economics from Ahmadu Bello University,
Zaria, a Master of Public Administration
degree from Pittsburgh University (USA) and
an Honorary Doctorate Degree from Nnamdi
Azikiwe University Awka Anambra State,
Nigeria.
23
24
Group Chief Executive’s review
“Together with my
experienced executive
and senior management
team, the leadership
rhythm of the institution
has been re‑established.”
“Delivering value for our shareholders is critical – we
know that we have to improve our cost-to‑income
ratio and generate better returns from our
pan‑African network.”
To have the opportunity to lead Ecobank is
most humbling, and in taking on the role
I appreciate the support and trust of the
Board and our major shareholders. This
responsibility comes at a challenging time
given recent governance issues, but the
fundamentals of our business are strong
and I am excited about the huge potential
of our unique platform, built over the
past 25 years. I have already begun the
essential groundwork of reassuring our staff,
shareholders, regulators, depositors and
other customers of Ecobank’s organizational
and financial stability. Together with
my experienced executive and senior
management team, the leadership rhythm of
the institution has been re-established. This
is essential to ensure our staff work together
towards a common goal. Demonstrating
this stability and unity of purpose
amongst Ecobankers allows confidence to be
restored, and shows our stakeholders that
the Group is back to “business as usual”.
The resilience of our institution has been
tested during the governance crisis and
we have come out stronger.
Whilst 2013 was a particularly challenging
year, the underlying financial results are
testament to Ecobank’s strong franchises
across Africa and excellent products and
services. Robust organic growth of 16% took
net revenue to over US$2 billion for the first
time and we increased our balance sheet
during the year. The decision to make full
provision for legacy assets in Nigeria was a
prudent one. I recognize that the lack of a
dividend this year will be a disappointment
to our many shareholders, but the Board is
committed to paying a dividend for 2014.
Delivering value for our shareholders is
critical – we know that we have to improve
our cost-to-income ratio and generate better
returns from our pan-African network. We
are driving efficiencies within both our retail
and wholesale businesses and are seeing
the benefits of operational synergies from
our major acquisitions in Nigeria and Ghana.
Our return on equity is set to improve as
Nigeria delivers to its full potential, our
newer geographical clusters (notably East
and Southern Africa) gain appropriate scale
and our focus on operational efficiencies
across the Group feeds through to improved
profitability. We have made a very promising
start to 2014, which gives me confidence in
Ecobank’s ability to deliver a much-improved
performance for the current financial year.
Financial Performance
Overall, despite the regulatory headwinds in
Nigeria, we achieved most of the financial
targets that we set out at the start of 2013.
On the balance sheet side, we saw good
opportunities to grow risk assets, particularly
in the regional corporate business. Our net
customer loans increased by 21% during
the year to over US$11 billion, exceeding
our target of approximately 10% growth.
Customer deposits grew by 13% to US$16.5
billion and whilst we did not reach our
growth target of 20%, we ended the year
strongly and improved our cost of funds.
Clearly the legacy assets addressed at the
end of the year have had an adverse impact
on overall asset quality; we ended 2013 with
a non-performing loan ratio of 6.2% against
our target for the year of around 5.6%. This
ratio has subsequently improved to 5.8% at
the end of the first quarter of 2014 and our
conservative approach to provisioning has
increased the coverage ratio to 79% at yearend, above our guidance of 75%.
We have segmented our personal banking
business along customer-centric lines and
increased the partnership with our corporate
banking business to deliver banking services
right across the value chain of employees,
contractors and suppliers of our large
corporate customers. For 2014, we will
continue to focus on growing our customer
base by delivering exceptional customer
service. We expect to see growth in our
deposit base with lower cost of funds and
selectively to expand our loan book.
Group revenue growth was well balanced
by region and between interest income and
fees and commissions, exceeding our 15%
target. Our newer geographical clusters of
Central, East and Southern Africa registered
net revenue increases of around 30% or
more. Equally, our emphasis on efficiency
continues to produce results, with the costto-income ratio improving in all our African
clusters and pre-impairment profit rising by
21%. However, although the Group’s cost-toincome ratio fell by more than 1% year-onyear to 70%, there is still much more to be
achieved if we are to meet our medium term
objective of reducing this towards 60%.
As part of our efficiency drive, we are
encouraging our customers to migrate
their routine transactions to our electronic
platforms including ATMs, Internet and
Mobile Banking. Mobile financial services
have huge potential in Africa, where a mere
24% of the population has a bank account
but 75% have a mobile phone. To capture
this, we have formed multi-country alliances
with leading mobile operators such as Bharti
Airtel and MTN and are putting in place
differentiated value propositions to deliver
a distinctive customer experience.
Our profitability for 2013 has clearly been
impacted by increased impairment provisions
which, including the US$165 million provision
on legacy loans in Nigeria, took up more than
half of our pre-impairment profit. Combined
with a higher effective tax rate, this led to
the sharp (45%) fall in net profit for the year
from continuing operations. Diluted earnings
per share similarly declined by 57% to 0.55
US$ cents. We were unable to declare a cash
dividend for 2013 as ETI, the parent company
of the Group, made a loss of US$7.6m for
the year.
A return on equity of 6.9% for 2013 is clearly
well short of the performance expected, but
we are confident that with the sustained
growth seen so far in 2014 we are on our
way to achieving double digit return on
equity. Our unrelenting focus to bring the
Nigerian operations to deliver superior
performance is central to achieving
mid-teens and greater returns in the
medium-term.
Business Segments
Domestic Bank, which includes our retail,
SME, local corporate and public sector
businesses, has had another year of growth,
focused on developing alternative channels
and improving efficiency and service quality.
We continue to innovate to reduce
transaction costs and to reach out to the
wider unbanked community. For example,
to enhance customer convenience, we
have rolled out our retail internet banking
service and our Chip and Pin cards across 33
African countries, launched our MobileMoney
offering in 12 countries and streamlined the
approval process for personal loans.
Our Corporate and Investment Banking
division has also recorded very strong
year-on-year revenue growth, supported
by balance sheet expansion, deepening
customer relationships and an enhanced
sales culture. Within Corporate Banking,
our strategic focus is to grow our regional
business, leveraging Africa’s trade corridors,
to extend the reach of Omni, our corporate
Internet banking platform, and to deepen our
customer relationships to promote
cross selling.
International businesses and non-profit
organizations are expanding the range
of African countries they operate in,
increasing demand for our foreign exchange
and treasury products. Then, as African
companies expand further beyond national
boundaries, seeking larger amounts of capital
that a single lender might not be able to
provide, demand for syndicated loans is
also expected to increase. Ecobank is in the
25
“Although the Group’s
cost‑to-income ratio fell by
more than 1% year-on-year
to 70%, there is still much
more to be achieved if we
are to meet our medium
term objective of reducing
this towards 60%.”
26
vanguard of Middle African banks that are
progressively cooperating to finance major
regional transactions and infrastructure
projects. We have recently appointed a
new Group Head of Investment Banking to
oversee the development of our investment
banking business. We are also looking to
build up our asset management and wealth
management activities, which, although
currently at an embryonic stage, have great
longer-term potential.
Geographical Clusters
We divide our operations into seven
geographic regions; six clusters within Africa
and our network of four international offices
(Paris, London, Dubai and Beijing).
Despite the depreciation of the Cedi, Ghana
and the Rest of West Africa region has again
been the Group’s outstanding performer,
registering a 34% increase in net profits
overall, with Ghana achieving an impressive
return on equity of 37%. Francophone West
Africa, a consistently profitable business for
Ecobank, benefitted from the recovery in
economic activity in Mali and strong lending
activity in Côte d’Ivoire and Burkina Faso.
Nigeria’s 17% year-on-year growth in net
revenue was encouraging. An increase in
lending activity within the power, telecoms
and cement sectors led to an 18% growth in
net interest income. However, the increase
in the cash reserve ratio on public sector
deposits from 12% to 50% impeded our
ability to grow earning assets. Operating
expenses declined by 9% as a result of
our continued focus on cost control and
improving branch efficiency. Given the oneoff provision discussed earlier, as well as a
conservative review of our portfolio, loan
impairments increased significantly.
Revenues from Central Africa continue to
grow at strong double-digit rates and with
the cluster profit for the year up 150%, it
is now a material contributor to Ecobank’s
overall returns. We also are seeing increases
in market share in this region, led by
Cameroon, Chad and Congo Brazzaville.
Equatorial Guinea was profitable in its first
full year of operation.
Although East Africa managed to reduce its
operating loss marginally in 2013, strategic
challenges remain. To start addressing these,
we have strengthened management and
injected US$25 million of additional capital
into Ecobank Kenya. The Group intends
to further capitalize the Kenyan business
in 2014 so it can act as a strong hub for
our operations in the region. We will also
develop our investment banking operations,
having acquired Iroko Securities, the
investment advisory firm.
We expanded our presence in East Africa
in 2013, commencing banking operations
in South Sudan and opening a new
representative office in Ethiopia. Both South
Sudan and Ethiopia have expressed an
interest in joining the East African Community
(EAC), Africa’s fastest growing trading bloc.
This presents major trade finance and
banking opportunities for Ecobank in the
longer term, as well as the potential to
reach out to the unbanked population in
both countries with mobile banking and
microfinance services.
Southern Africa is now sustainably profitable
as a cluster, led by the strong performance of
DR Congo, which more than doubled profits.
We were awarded a banking license in
Mozambique in late 2013 and have recently
acquired a majority stake in ProCredit’s
subsidiary there, which specializes in SME
banking and finance, to accelerate our entry
into the country.
Lastly, we are continuing to build on our
international presence. Our Paris subsidiary,
EBI SA, has recently had its banking license
upgraded to that of a specialized credit
institution, thereby allowing it to take
deposits from corporate, institutional and
NGO clients with operations across Africa.
We are also working on the upgrade of our
London representative office to a full branch
of our Paris operation.
Strategy
Having largely established our pan-African
footprint, the focus now will be on boosting
efficiency in all areas of the business,
including at ETI, our parent company. The
Group’s cost-to-income ratio of around 70%
is still too high and we are focusing hard
on reducing this to the high 60s percent for
2014 and nearer to 60% in the mediumterm. To achieve this, we will need to grow
revenues as well as control costs, and we are
targeting 15% or more growth in revenues
as well as loans and deposits for 2014.
A Group Strategic Project Implementation
Office was established in early 2013 to track
the performance of a number of programs
that have been instigated in the areas of
customer service, developing our staff and
improving financial performance. We have
already seen tangible results from this, such
as improvements in ATM uptime, sales force
effectiveness and loan processing times.
However what is particularly important is
the development of our people. Our staff
are key to our success as a Group, and I echo
the Chairman’s thanks to all Ecobankers
for staying focused and delivering solid
results through the recent difficult times.
We have made significant process with our
people strategy in 2013, including a new
performance management system and
branch manager training programs and we
have more planned for 2014 to allow us to
attract, retain and develop the best.
However, there are still key areas that need
to be addressed, and I will not shy away
from tackling these directly. I also look
forward to working with the new Chairperson
as selected by shareholders at this June’s
AGM and welcoming other new Board
members to the Group.
To enhance existing efficiency initiatives,
we will re-examine more structural issues,
such as growth in back-office staff relative
to those facing customers, and how we
optimize this mix. Also, across our diverse
countries of operation, we must enhance
alignment of our subsidiary banks’ business
models with the local market opportunity so
we can optimize our return on equity in each
location. We have learnt from experience
that “one size does not fit all”.
On asset quality, much progress has been
made since the decision to centralize the
Group’s risk management in 2010, but we
will further embed our controls and risk
management framework to ensure more
rigorous monitoring. For 2014 we have
committed to more detailed targets in this
area, namely an NPL ratio of less than 5%
and a cost of risk of under 2%.
Above all, we need to ensure that the Group
is sufficiently capitalized and is optimizing
the allocation of that capital. We will
remain compliant with regulatory capital
requirements in all our subsidiaries, including
scope for growth in the business where the
returns are attractive. We will also continue
to make the case to shareholders for our
entry into Mozambique, which provides sea
access to other landlocked countries in the
SADC region and completes our presence
there. Similarly, planned investments in
Kenya and Angola are warranted: alongside
Nigeria and Ghana, they make up the big
four Middle African economies with deep
pools of banking revenue. We are convinced
of the strategic value to Ecobank of investing
in these businesses, which will help secure
the medium- to long-term sustainable
growth of the Group.
We are very conscious of per-share return
metrics and so as we plan our capital
strategy, we will look to raise non-dilutive
Tier II capital, both at the Group level and
for Ecobank Nigeria. Our capital mix will
also be influenced by whether our existing
convertible lenders become shareholders. In
this regard our alliance with Nedbank, who
have rights to take up to a 20% ownership,
is key and we would look forward to
welcoming them as a major shareholder
and board member in addition to our ever
growing business partnership.
Conclusion
The prospects for banking across Middle
Africa remain very buoyant, driven by
sustained high rates of economic growth,
increasing levels of intra-African trade,
and huge unmet needs for basic financial
services and the emergence of new mobile
technologies to provide them. Ecobank
remains uniquely positioned to take
advantage of these fundamental trends,
which will also provide specific opportunities
in corporate banking such as online cash
and treasury management and structured
commodity trade finance.
However regrettable 2013’s corporate
governance issues may have been, they have
provided us with a window of opportunity
to refresh and improve our processes
and systems, particularly at Board level.
Ultimately, strong corporate governance
enhances a company’s sustainable business
performance, which is in the interests of all
our stakeholders.
We do not underestimate the challenges
ahead but, in learning from the recent
past, Ecobank will undoubtedly emerge as
a stronger institution. I have a loyal and
talented team behind me who can now focus
on driving the business forward, providing
excellent customer service and improving
efficiency and returns. For Ecobank is so
much more than a bank – it is a symbol
of pan-African cooperation, with a unique
platform, strong fundamentals and boasting
the very best of Africa’s talent. Together,
and with the continued support of our loyal
customers, partners and shareholders, I am
sure we will take this great pan-African bank
from strength to strength.
Albert Essien
“We do not underestimate
the challenges ahead
but, in learning from the
recent past, Ecobank will
undoubtedly emerge as a
stronger institution. ”
27
28
Group Chief Operating Officer’s review
“In 2014 and beyond,
our central objective
is to increase our
ability to provide
superior customer
service in a multichannel environment.”
Within its 25 years of business operation,
Ecobank has grown hugely as a business,
developing a valuable brand and a more
balanced, diversified and resilient business
model that is well equipped to meet the
challenges of the future. We have updated
our operating strategy to better align
the business to the changing economic
landscape and customers’ evolving needs.
Our operating strategy is supported by four
key non-negotiables: continuous focus on
transforming the business, investment in
Ecobank’s people and training, focus on
risk and compliance, and strengthening
process control. The many initiatives
implemented over the past 25 years have
made us more customer-centric and we have
embarked on the next step in our journey
towards excellence.
At Ecobank, we are now reshaping our
distribution channels in response to evolving
customer preferences in order to provide
the access and convenience they expect
while being positioned to offer them timely
services regardless of the channel they
choose. Online and mobile banking are
growing and we are adapting our website,
branches, call centres and mobile platform
to offer the best service to our customers.
By being in tune with our customers, we are
gaining market share in middle Africa today
and building momentum for the future.
We want customers and other key
stakeholders to be at the heart of every
decision and action that we will take.
This will guide us towards offering the
best customer experience and will be a
competitive advantage. Technology remains
a key enabler. As outlined in the Operations
and Technology review, several technology
and process enhancements will be rolled out
in 2014 and subsequent years to support our
employees in their efforts.
Performance Management
Over the last twenty-five years, we have
been growing our pan-African footprint
in deliberate fashion and we continue to
implement targeted initiatives to drive
market penetration across the countries we
operate in. We continue to focus on operating
efficiency and other efforts to enhance the
financial performance of our subsidiaries in
order to achieve Group-wide financial targets
and efficiencies.
We monitor the performance of our countries
closely, given an environment that is
characterized by volatile exchange rates,
new regulatory constraints, and an economic
context that remains uncertain in some areas.
For countries with particular challenges, like
our newest subsidiary in South Sudan, we
work with key stakeholders to appraise the
business environment and provide additional
support where necessary.
As well as monitoring progress on a
country level, the individual performance
management of our staff is key. As described
in our People Report, we have designed
and rolled out a new Ecobank Performance
Management (EPM) system across the
Group in 2013 as well as implementing
several training programs. For the future,
we will maintain our focus on attracting,
retaining and developing the best talent. Key
initiatives include developing the leaders
who will shape strategy and drive future
performance, and continued efforts at driving
an open and inclusive culture.
Customer Service
Ecobank delivers world class banking services
to more than ten million customers in over
30 countries across Africa. We are known by
our customers as the “pan-African bank” that
provides convenient, reliable and accessible
financial service in a seamless and consistent
manner across its unique network like no
other bank in Africa.
Our customers are at the centre of everything
we do and we try to make our decisions from
their perspective. To enhance our customercentric approach, key service and feedback
initiatives have been institutionalized across
our network. These include customer forums,
mystery shopping, benchmarking, and loyalty
surveys across our network. In select sites,
our customers call toll free lines using easily
memorized short codes, a service that is
being rolled out to all subsidiaries. In addition,
the executive team across the countries
spend time at the branches each year as
guest tellers. During such visits, “executive
guest tellers” make a conscious and proactive
effort to engage staff and customers, elicit
feedback and understand needs from a
service improvement perspective.
In response to our commitment to customers,
our net promoter score, which is our key
loyalty metric, has improved significantly
in recent years. In the coming years, we
will continue to put our customers first and
deepen the culture of service excellence.
Compliance
In the last 25 years, Ecobank has successfully
embedded compliance thinking into its daily
activities and decisions. We have properly
resourced compliance teams supporting
business leaders across their respective
countries and divisions, with compliance
training promoted across the Group. Risk
accountabilities have been reinforced across
our three lines of defence: our dedicated
teams in the Compliance, Internal Control and
Internal Audit departments.
Ecobank faces challenges as a result
of significant regulatory changes both
within our countries and globally. These
challenges hold significant implications
for our operations especially in the face
of unrelenting competition. Nevertheless,
we ensure that regulatory reforms
and requirements do not create undue
bureaucracy or disruption to our service. We
have robust processes in place to ensure that
we effectively and consistently comply with
evolving laws and regulations. Our objective
is to ensure that the brand is preserved from
reputational risk and regulatory sanctions.
Ecobank closely collaborates with local
law enforcement authorities and financial
intelligence units in an open and efficient
manner. Our business is conducted in line
with local regulations and international
best practices.
Through our commitment to promoting
compliance, we have committed resources to
compliance monitoring tools, developed and
implemented the framework for adapting to
local regulations in all countries of operation,
and have strengthened the Ecobank
Compliance team.
In 2014 and onwards, Ecobank will continue
to focus on strengthening and implementing
its compliance and control strategy, an
initiative focussed on strengthening its risk
management framework, leadership, culture,
capabilities and effectiveness.
Internal Control
Ecobank’s Internal Control function is effective
and founded on international principles and
standards, including generally accepted
accounting principles and fair presentation.
This is governed by robust control policies,
standards, procedures and guidelines, for
pragmatic and consistent application, and
these form the foundation of successful risk
management.
The emphasis on risk governance is based
on a “three lines of defence” concept,
which is the backbone of the Group’s risk
management framework, with emphasis on
independence, accountability, transparency,
responsibility, communication and reporting,
both internally and to our key external
stakeholders. At Ecobank, internal control is
an independent assurance function.
Our internal control best practice ensures a
proactive control culture through the Board,
Executives and Senior Management being
active in risk recognition and assessment,
and through a strategic management
reporting system. This supports the
identification, prevention, correction, and
monitoring of weaknesses and breakdowns
of systems and controls across the Group.
Through its periodic reviews, our internal
control system is also subjected to regular
evaluation by relevant regulatory authorities
in all the countries in which we operate.
For the future, we are developing stronger
and more robust control mechanisms through
a proactive and preventive risk-based system
of control which will support the increase in
transaction volumes expected as we continue
to grow our business. Also, we will continue
to create an environment that develops the
capabilities of our internal controls team to
adapt to the ever evolving risk environment.
Evelyne Tall
Deputy Group CEO
29
30
Business report: Corporate and Investment Bank
The past year proved to be very testing,
with a combination of regulatory increases
in cash reserve requirements for public
sector deposits in Nigeria and intensified
competition across our markets, as well as
our own highly publicized issues.
“Our strategic focus is
to continue to grow
our regional business,
leveraging Africa’s trade
corridors, to extend
the reach of Omni,
our corporate internet
banking platform,
and to deepen our
customer relationships.”
Despite these challenges, Corporate and
Investment Bank (CIB) generated revenues
of US$1.0 billion, a year-on-year increase
of some 41%, supported by expansion
of the balance sheet, improved customer
relationship management and an enhanced
sales culture. The business benefitted from
significant growth in financing transactions,
with higher volumes registered across most
product lines, improved customer retention
and acquisition, and increased collaboration
between our local subsidiaries in Africa. This
resulted in strong growth in both customer
deposits (up 23% to US$5.6 billion) and net
customer loans (up 33% to US$6.3 billion).
For the year ahead, our strategic focus is
to continue to grow our regional business,
leveraging Africa’s trade corridors, to extend
the reach of Omni, our corporate internet
banking platform, and to deepen our
customer relationships to promote crossselling. Our unique pan-African footprint
will continue to be a key differentiator in
growing our client base. Indeed, Ecobank is
strategically positioned to take advantage
of the increasing regionalization and intraAfrican trade that underpins the continent’s
long-term growth prospects. We will make
further progress in facilitating and supporting
trade and banking transactions both within
Africa and with its international trade and
development partners.
We are relentless in our commitment
to deliver superior customer service.
We strive to deepen our client relationships
by listening to their needs and working
together to find solutions. We remain focused
on strengthening the effectiveness of our
sales process and business operations,
investing further in our technology platform
as well as on attracting and retaining
high-caliber, experienced professionals.
Finally, I should like to thank our customers
and partners for the faith they have placed
in Ecobank, the institution and its people,
during what has been a difficult year for
the Group. I must also pay tribute to the
dedication of each and every member of
staff, whose hard work, professionalism and
perseverance have contributed to sustaining
our business relationships in uncertain times.
We can all now focus on unleashing the
full potential of our unrivalled pan-African
corporate and investment banking platform.
Albert Essien
31
Business report: Domestic Bank
“Our aim is now to
significantly grow
cheaper deposits,
good quality assets
and revenues whilst
reducing the cost-toserve in order to deliver
improved efficiency
and profitability.”
With our pan-African network now extending
across 35 countries, over 1,250 branches,
2,300 ATMs and 10,000 POS terminals, we
are leveraging our unparalleled distribution
platform to deliver quality payment
services, collections, deposits and loans to
our expanding customer base. We have
established clear business verticals (public
sector, local corporates, SMEs, personal
banking and microfinance) to which we
offer a full range of convenient, reliable and
innovative products and services. Our aim is
now to significantly grow cheaper deposits,
good quality assets and revenues whilst
reducing the cost-to-serve in order to deliver
improved efficiency and profitability.
The Domestic Bank achieved two notable
milestones in 2013 despite regulatory
headwinds in our main markets during the
year; revenues surpassed the US$1 billion
mark and, for the first time, we exceeded
10 million customers. We grew our alternative
channels strongly, with over 600 more
ATMs deployed during 2013 and 29% more
cards issued, as well as increasing customer
deposits by over US$800 million, or 8%.
During 2013 we implemented a threepronged strategic approach designed to
position us as ‘best-in-class’ in our markets
through customer service excellence,
developing our people and improving
shareholder value. These included training and
certification of our ‘Top 100’ branch managers
and roll-out of the Sales Force Effectiveness
(SFE) program to embed best-in-class tools
and practices within our sales teams. We have
extended our network of ‘credit factories’ to
reduce the turnaround time for retail loan
origination, processing and disbursement,
as well as introduced standardized SME loan
products, bringing improved customer service
and asset quality. Additionally, we made our
key remittance products such as Rapidtransfer
and Western Union available via alternative
channels, rolled out Ecobank MobileMoney
and Mobile banking in ten more countries and
significantly improved the uptime of our ATMs
and electronic banking channels to better
serve our customers on a 24/7 basis.
At the end of 2013, we introduced Personal
Banking services targeted at our High Net
Worth, Mass Affluent, Mass Market and Youth
customer segments in order to benefit from
the rising profile of the middle class and
youth in Africa. We have designed specific
customer-centric offerings for each segment
in order to improve our wallet share, benefit
from cheaper deposits and expand our loan
book. Our Personal Banking strategy also
complements our existing focus on the
entire value chain of our corporate and public
sector client base, including their employees,
suppliers and distributors, to significantly
improve our cross-sell ratio. Our focus on this
value chain across our business verticals is also
yielding positive results in terms of improved
customer satisfaction. One way we track this
is via our Net Promoter Score, i.e. whether
customers would recommend our service,
which is beginning to show improvements
across our network.
In line with our commitment to financial
inclusion, we have also deepened
our collaboration with our partners in
microfinance, major telcos, international cards
associations and global remittance players as
we leverage electronic and mobile platforms
to reach the underbanked and unbanked
across the continent.
In 2014, we will deepen our customer-centric
approach whilst providing tailored products,
services and channels to enhance customer
loyalty and advocacy, thereby positioning
Ecobank as the pan-African retail bank of
choice. Our emphasis on people development
and training will also continue as we have
begun the second phase of our branch
management certification program, covering
the next 400 branch managers. We will also
continue to leverage technology to migrate
low-value transactions to electronic channels
to improve productivity and efficiency.
We assure our 10+ million customers of our
commitment to excellent banking services
and thank them all for their continued loyalty
and patronage. As the leading pan-African
retail banking network, we are positive about
the potential of our business. Our staff are
passionate about Africa and are set to serve
our customers better and deliver superior
shareholder returns. The future is truly panAfrican, and Ecobank is the pan-African bank.
Patrick Akinwuntan
Group Executive Director
32
Operations and Technology report
“Our improved systems
and infrastructure
will enable Ecobank
to operate reliably
and effectively across
its uniquely
diverse network.”
The year 2013 was a very exciting one
for Operations and Technology (O&T). We
experienced remarkable platform and
application stability across the Group.
This allowed us to focus more on driving
efficiency through systems and process
improvements. We also made significant
progress in key strategic initiatives covering
system roll-outs; system integrations;
information and physical security; staff
training and development; operational
controls and organizational changes.
Our efforts in process streamlining and
automation support the Group’s drive
to improve efficiency. For example, we
have deployed Omniflow, our workflow
management system, across the network.
Automation of incoming Swift transfers;
account opening; account maintenance and
outgoing funds transfers using Omniflow
is now implemented in 28 countries. We
continue to deploy improved business
applications and enhancing old ones with the
aim of impacting customers positively.
Key achievements of 2013 included the
successful completion of the IT integration
of all 364 former Oceanic Bank branches
in Nigeria, making us compliant with
regulatory requirements. This also represents
an important step in unlocking efficiency
improvements in Nigeria as it brings the
whole of our network onto the same core
banking application, Flexcube.
Gaining a 360 degree view of the customer
is key to improving their overall experience
and satisfaction. Deployment of our CRM
platform, which will enable this, has begun
and will continue into 2014.
A sustained focus on the improvement of our
electronic platform is also paying off. Overall
Group ATM uptime improved from 88%
in January 2013 to a peak level of around
93%. This has contributed to an increase in
alternate channel usage across the business.
Our focus for 2014 is to increase ATM uptime
to above 95%.
We have improved customer experience
through several process streamlining and
automation initiatives. Our Retail Internet
Banking platform continues to gain customer
acceptance; and following enhancements
to make it even more user friendly, usage
has increased. Significant work has also
been done on our Ecobank Mobile Banking
platform which has been successfully
piloted. In the area of cards, the Instant
Cards Issuing project and self-selection of
PIN through Teller POS (paperless pin) was
also successfully piloted in Ghana. Roll-out to
other countries will follow in 2014. Ecobank’s
corporate online banking platform, Omni,
went live in a further 8 countries, bringing
the number of countries covered to 32.
The enhanced loan processing system,
Kastle, has gone live in 2 countries and is set
for full roll-out in 2014.
Cost optimization is central to our ability to
deliver shareholder value. We have identified
and are driving some key initiatives that
should enable us to achieve substantial cost
savings and efficiency gains for the Group in
the coming years. These include areas like
travel, communications, contract reviews, real
estate and procurement, among others
Information security, which is critical given
the nature of our business, is of great
concern, as the criminal threat is becoming
increasingly sophisticated. Thus, a lot of focus
in 2013 was placed on securing our platforms
and systems, with commendable progress
made in safeguarding the interests of our
customers.
In the area of Business Continuity
Management (BCM), we witnessed
significant progress in 2013 with the rollout
of the updated BCM policies, standards and
procedures, BCM framework has now been
implemented in 25 countries with various
trainings conducted. With a robust foundation
in place, we have now started the process of
acquiring ISO certification for BCM.
An improved management process has seen
the introduction of initiatives like regular
country visits by senior managers from the
Group office, branch visits by country heads
of O&T and other management practices
that have helped us to drive standardization
in our operations and move O&T closer to
becoming ‘world class’. We will continue
to drive more of such initiatives in 2014
and beyond.
Operations and Technology is committed
to supporting the growth of the Group and
delivering service excellence. Our improved
systems and infrastructure will enable
Ecobank to operate reliably and effectively
across its uniquely diverse network. Our
commitment to the strategic intent of
providing world class customer service,
improved shareholder value and being
the employer of choice remains strong. In
2014, we will focus more on service and
operational excellence, people development,
technology and cost optimization.
Eddy Ogbogu
33
34
Business and Financial Review
Business and
Financial Review
Ecobank is proud to have been recognized
with several awards again in 2013.
They reflect achievements right across
our platform.
We will continue to innovate and develop
our business to serve our customers better
and stay ahead of the competition.
A campaign advert showcasing the awards won across the Ecobank
Group in the Financial Times in Dec 2013.
1. The Banker,
Bank of the Year,
Ecobank Burkina Faso 2. The Banker, Bank of the
Year, Ecobank Cameroon 3. The Banker, Bank of the Year,
Ecobank Liberia 4. The Banker, Bank of the Year, Ecobank Mali
5. The Banker, Bank of the Year, Ecobank Niger 6. Africa Investor,
Best African Research Team 7. African Banker, Innovation in Banking
8. Global Finance, Best Frontier Market Bank 9. Global Finance, Best
Regional Bank 10. Global Finance, Best Emerging Market Bank in
Burkina Faso 11. Global Finance, Best Emerging Market Bank in Côte d’Ivoire
12. Global Finance, Best Emerging Market Bank in Ghana 13. Global Finance,
Best Emerging Market Bank in Guinea 14. Global Finance, Best Emerging
Market Bank in Togo 15. Trade & Forfaiting Review, Best Trade Bank, Silver Award
16. The Banker, Loan Deal of the Year 17. Global Trade Review, Best Local Trade
Bank in Cameroon, Côte d’Ivoire, Niger, Senegal and
Sierra Leone 18. Trade Finance Award for
Excellence, Best Nigerian Trade Bank
19. Trade Finance Deal of the Year 20. EMEA
Finance African Banking Awards, Best
Bank, Benin 21. EMEA Finance
African Banking Awards, Best
Bank, Chad 22. EMEA Finance
African Banking Awards, Best
Bank, Côte d’Ivoire 23. EMEA
Finance African Banking Awards,
Best Bank, Senegal 24. EMEA
Finance African Banking
Awards, Best Bank,
Togo 25. EMEA Best
Investment Bank,
Cameroon, Côte
d’Ivoire, Gabon,
Senegal and
Togo
25 awards
for excellence
in 2013
What better way to celebrate 25
years of building prosperity in Africa?
35
36
Economic environment
The global economic environment was
shaped by a number of themes in 2013,
which had an impact in each of the 35
countries in Ecobank’s Middle African
footprint:
• Fiscal and debt overhangs in the US that
resulted in the shutdown of the Federal
government
• Sustained debt and fiscal pressures in the
eurozone that led to the European Central
Bank (ECB) cutting rates
• US economic recovery that led the Federal
Reserve advising that Quantitative Easing
would be slowed
• The ensuing sell-off of debt in Emerging
and Frontier Markets in May and the
flight to safe havens following that advice
destabilized domestic capital and FX
markets
• Significant volatility in major currencies
such as the Nigeria Naira and the Ghana
Cedi increased during the period
• Ongoing deleveraging and recapitalization
of globally active banks.
However, economic growth remained
strong across Ecobank’s footprint in 2013.
Real GDP in most countries where we
operate expanded over 5%, a good result
given ongoing weakness in developed
economies (particularly Europe that remains
an important trade partner). Growth was
supported by a combination of sustained
strong commodity prices, solid agricultural
production, high levels of government
spending (particularly in most oil producing
countries), and increased provision of
banking, telecoms and trade services.
However, perennial problems such as poor
infrastructure and insufficient power held
back activity in many countries.
Average inflation remained relatively high
across Middle Africa in 2013 at around
7%, somewhat lower than the year
before. However, inflationary expectations
remained high due to robust domestic
demand and high government spending
that pushed up prices, and strong global
commodity prices that strained current
accounts adding pressure onto African
currencies. Trade imbalances partly driven
by weak demand for Africa’s exports and
high global commodity prices resulted in
many Middle African currencies continuing
to depreciate against the USD last year.
In contrast, the CFA francs (XOF and XAF)
appreciated moderately reflecting the
strengthening of the EUR against the USD
through most of 2013. Currency weakness
increased imported inflation across Middle
Africa, which in turn led to a tightening
of monetary policy in some countries in
an effort to slow inflation, strengthen
currencies and reduce capital flight.
Average oil prices remained surprisingly
steady in 2013, with the annual average
Brent crude oil price up US$4 per barrel
compared to 2012. This benefited oil
producers such as Nigeria, Angola, Ghana,
Cameroon and Equatorial Guinea. However,
monthly price swings were more pronounced
due to large scale changes in supply and
demand growth and in the volume and
direction of trade flows. The single most
important price driver was the steady
increase in US oil production, which helped
offset the impact of falling supply elsewhere
(such as in Libya and Iran). This trend in US
production looks set to continue in 2014 and
beyond, providing once again one of the
largest changes in the market.
Real GDP (annual % change)
World
Sub-Saharan Africa
Europe
2008
2009
2010
2011
2012
2013e
2014f
2.8
5.6
0.6
-0.6
2.8
-4.2
5.1
5.3
2.1
3.9
5.5
1.5
3.2
5.1
-0.6
2.9
5.4
-0.4
3.6
5.7
1.0
2008
2009
2010
2011
2012
2013e
2014f
12.9
3.4
0.6
9.4
0.1
-4.2
7.4
1.5
2.1
9.3
2.7
1.5
9.0
2.0
-0.6
6.9
1.4
-0.4
6.3
1.8
1.0
e = estimate; f = forecast. Source: IMF
Inflation (annual % change)
Sub-Saharan Africa
Developed economies
Europe
e = estimate; f = forecast. Source: IMF
Income statement analysis
Net revenue
Net revenue (operating income), the sum of
net interest income and non-interest revenue
was US$2.0 billion, increasing by US$273
million or 16%, from the prior year. The
increase was driven by strong organic
growth delivered by both funded and
non-funded income despite the various
regulatory headwinds we faced in Nigeria,
our biggest market.
For 2013, the Group has classified certain
businesses as held for sale in line with IFRS
5 (non-current assets held for sale and
discontinued operations). We have therefore
re-stated our 2012 financials on the same
basis to facilitate year-on-year comparisons.
The re-statement of prior year financials did
not create any major impact on the annual
financial statements.
Net revenue
Year ended 31 December
In thousands of US$
Interest income
Interest expense
Net interest income (NII)
2013
2012
Change
1,599,756
(548,998)
1,050,758
1,348,086
(499,396)
848,690
19%
10%
24%
Fees and commissions on loans
Trade finance
Markets, Asset Management and Corporate Finance
ATM commissions
Cash management
Other fees and commissions
Fee and commission income
Fee and commission expense
133,386
117,790
40,085
64,056
241,489
29,742
626,548
(25,402)
90,142
85,732
28,509
47,957
249,727
13,160
515,228
(26,809)
48%
37%
41%
34%
-3%
126%
22%
-5%
Net fee and commission income
601,146
488,419
23%
FX income
Securities trading
228,999
79,961
189,767
65,939
21%
21%
Trading income
Net losses from investment securities
Other operating income
308,960
(1,581)
44,173
255,707
(4,279)
141,462
21%
-63%
-69%
Non-interest revenue (NIR)
952,698
881,308
8%
2,003,456
1,729,999
16%
Net revenue (NII + NIR)
37
2013 Net revenue split by
NII and NIR
Net interest income
52%
Non-interest revenue
48%
Net interest income
Net interest income increased US$202
million or 24% to US$1.1 billion compared
with the prior year, driven by strong loan
growth among regional corporates. Gross
interest income grew 19% to US$1.6 billion
reflecting strong growth in interest earning
assets and higher yields. Interest expense,
on the other hand, increased by only 10%
to US$549 million, because we managed
to progressively reduce our cost of funds,
ending the year at 3.1%. This reflects the
benefits of our extensive branch network in
helping to generate low-cost deposits and to
make us more accessible to our clients. These
factors led to a 70 basis point improvement
in our net interest margin to 7.2% in 2013.
38
b. Trading income
Non-interest revenue increased
US$71.4 million or 8% to US$953 million
compared with the prior year. The
increase was driven by growth in fees and
commissions income and trade finance.
The increase in non-interest revenue would
have been in excess of 20%, if adjusted for
the approximately US$106 million one-off
revenue gains reported in 2012 from the
refund we received from AMCON and the
fair value gains on real estate properties.
Trading income increased US$53 million or
21% from the prior year to US$309 million,
driven by growth in foreign exchange (FX)
and securities trading income. Client‑driven
FX income increased 21% to US$229 million
from the prior year, benefitting primarily
from our ability to quote and cross
simultaneously more than 25 functional
African currencies for clients across our
platform, from our Paris-based FX trading
hub. This ability echoes our competitive
advantage and the benefits of our
geographical footprint in Middle Africa in
delivering innovative service to our clients.
Securities trading income, which is primarily
derived from the trading of government
securities, increased 21% to US$80 million
from the prior year.
a. Net fee and commission income
Net fees and commission income was
US$601 million, increasing US$113 million
or 23% from the prior year. Fees and
commission on loans were up 48% to
US$133 million, reflecting the strong
growth in loans. Trade finance, which
continues to benefit from the growth in our
regional business due to our geographical
competitiveness, increased 37% to
US$118 million, driven by volume of letters
of credit established on imports and bills
negotiated. Fees and commissions from
our Capital Markets, Asset Management
and Corporate Finance activities increased
US$11.6 million or 41%, compared with
the prior year, driven by financial advisory
and portfolio management fees. We
were encouraged by the increased client
usage of our alternative channels, which
helped to drive the strong growth in ATM
commissions. Cash management, the
largest component of fees and commissions
income, declined 3% to US$242 million
from the prior year, largely because of the
impact of the regulatory changes introduced
in Nigeria, among them the reduction in
the commissions‑on-turnover (COT), client
charges paid on cash withdrawals from their
bank accounts, from NGN5.00 per NGN1000
withdrawals to NGN3.00. These COT fees
are being steadily withdrawn over the next
couple of years. Additionally, we recorded
reductions in cash management fees in Rest
of West Africa, partially offset by increases in
Francophone West Africa and Central Africa.
c. Other income
Other operating income fell US$97 million or
69% to US$44 million from the prior period.
The decrease was primarily driven by the fact
that 2012’s other operating income included
a one-off gain of roughly US$106 million
from refunds received from AMCON and fair
value gains on real estate properties.
Operating expenses
Operating expenses grew US$169 million
or 14% to US$1.4 billion compared with the
prior year, driven primarily by growth in other
operating expenses and staff costs. Other
operating expenses increased US$93 million
or 17% from the prior year because of the
impact of higher regulatory‑driven fees
in Nigeria, which saw the AMCON levy
on total assets (both on- and off-balance
sheet) increased, an increase in deposit
premiums and a change in the structure of
ATM fees. Other cost items that contributed
to the growth in other operating expenses
were communications and technology,
which increased US$46 million, professional
fees, which increased US$13 million, and
operational losses and fines, which increased
US$23 million, among others. Staff costs
were up US$72 million or 13% from the prior
year, driven by growth in headcount.
The cost-to-income ratio for the year
improved to 70.1% compared with 71.4%
in the prior year, demonstrating the
benefits of our focus on cost efficiency
and expense discipline. We are targeting
further improvements in the cost-toincome ratio in future years as we bring
our geographic expansion, both via
acquisitions or greenfield, to an end; and
our younger subsidiaries, mainly in our
East Africa and Southern Africa clusters and
branches become sustainably profitable.
The cost‑to‑income ratio would have been
approximately 76% in 2012 if income was
adjusted for approximately US$106 million
refund from AMCON and fair value gains on
investment properties.
Operating expenses
In thousands of US$
Staff expenses
Depreciation and amortisation
Communications and technology
Professional fees
Rent and utilities
Repairs and maintenance
Insurance
Others (1)
Other operating expenses
Total operating expenses
2013
2012
Change
639,459
134,898
567,464
131,032
13%
3%
110,531
79,729
70,376
55,121
48,981
265,870
630,607
1,404,964
64,060
66,812
62,398
44,928
41,188
258,124
537,510
1,236,007
73%
19%
13%
23%
19%
3%
17%
14%
Note 1: Others include operational losses and fines, advertising and promotion, business travels, supplies
and services, fuel, etc.
72.4%
2009
69.9%
69.6%
2010
2011
71.4%
2012
70.1%
2013
39
40
Impairment losses
Impairment losses on loans increased
US$215 million or 145% to US$363 million
compared to the prior year. The primary
driver of this significant increase was the
conservative one-off provision of US$165
million taken on certain legacy assets in
Nigeria in the fourth quarter of 2013.
On a cluster basis, Nigeria accounted for
74% of total impairment losses on loans
due to the significant provisions that were
taken for these legacy assets. Rest of West
Africa accounted for 10% of total provisions
largely due to higher impairments in
Domestic and Corporate Bank in Ghana.
East Africa, contributing 4% to impairments,
recorded higher impairment losses in Kenya
and Uganda.
The impact of the US$165 million provisions
taken on certain legacy assets in Nigeria
was within our Domestic Bank business (see
pie chart on impairment losses by business
segment). As a result, it constituted 84% of
total impairment losses on loans.
Excluding this one-off charge, the increase in
impairment losses on loans for 2013 would
have been 34%.
Also included in reported total impairments
on financial assets of US$377 million are
US$14.1 million of impairments on doubtful
receivables (2012: US$7.4 million). These
are largely from Nigeria and include some
long outstanding receivables related to
reconciliation differences where we felt it
prudent to take provisions.
Management continues to ensure that we
only accept risks we thoroughly understand
and are comfortable with. Our risk framework
continues to be strengthened with improved
credit underwriting standards and aggressive
remedial and recovery efforts. As a result we
are aiming to achieve a cost of risk below
200 basis points for 2014.
Our cost-of-risk deteriorated to 3.3% for 2013
compared with 1.7% in the prior year. See
historical 5-year chart of the cost-of-risk on
page 41. The US$165 million provision is a
one-off and not expected to recur.
2013 Impairment losses on
loans by cluster
Francophone West Africa
9%
Nigeria
74%
Rest of West Africa
10%
Central Africa
2%
East Africa
4%
Southern Africa
1%
2013 Impairment losses on
loans by business segment
Impairment losses on loans and advances
In thousands of US$
2013
2012
Change
411,963
187,713
119%
(13,352)
(67,317)
(31,136)
(62,500)
-57%
8%
331,294
94,077
252%
31,334
53,833
-42%
Impairment losses on losses and advances
Impairment losses on other financial assets
362,628
14,102
147,910
7,441
145%
Impairment losses on financial assets
376,730
155,351
Provision for loan impairment
Provision no longer required
Amounts recovered during the year
Specific impairment losses on loans and
advances
Collective impairment losses (net) on
loans and losses
Corporate and
Investment Bank
16%
Domestic Bank
84%
Profit
Taxation
Profit before tax decreased by US$116 million
or 34% from the prior year, largely due to
the significant increase in impairment losses
previously discussed. On a cluster basis, pretax profits grew solidly across most regions:
Central Africa increased 74%, driven by
non‑interest revenue growth and efficiency
gains; Rest of West Africa was up 35% as
Ghana continued to deliver excellent results
year-on-year; Francophone West Africa grew
19%, reflecting revenue and loan growth;
and Southern Africa reported a pre-tax profit
compared to a pre-tax loss in the prior year.
The effective tax rate for 2013 was 29.6%
compared with 16.6% in 2012, an outcome
which was driven by the fact that we
generated more profits in relatively higher
tax jurisdictions compared to lower tax
jurisdictions. For example the untaxed
exceptional income (AMCON refund) received
at the parent company (ETI) level in 2012 did
not recur in 2013.
Cost of risk
3.3%
1.9%
1.7%
1.3%
2010
The factors discussed above, in summary,
the significant increase in impairment
provisions and the higher effective tax rate,
combined to reduce profits in 2013. Overall,
profit for the year decreased US$139 million
or 48% to US$148 million. Profit for the
year from continuing operations declined
by a lesser amount, US$126 million or
45%, whereas results from discontinued
operations moved from an after-tax profit
in 2012 of US$4.9 million to an after-tax
loss of US$8.3 million in 2013. See Note 29
on pages 188-189 for further information
regarding discontinued operations.
Attributable profit to owners of the parent
company (ETI) decreased US$154 million or
62% to US$96 million. Attributable profit
from continuing operations was US$103
million, down 58%, whilst discontinued
operations recorded an attributable loss of
US$7.4 million.
Earnings per share (EPS) from continuing
operations were 0.60 US$ cents (basic) and
0.55 US$ cents (diluted) compared with
1.67 US$ cents (basic) and 1.28 US$ cents
(diluted) in the prior year, respectively. There
were no new shares issued during the year,
hence the share count used in the calculation
of basic EPS remains 17,212.2 million (2012:
14,705.3 million). No dividend is proposed
in respect of the 2013 financial year given
the lack of earnings at the parent company
(ETI) level.
Summary consolidated income statement
3.1%
2009
Profit for the year
41
2011
2012
2013
In thousands of US$, except ratios
Net revenue
Operating expenses
Pre-impairment income
Profit before income tax
Income tax expense
(Loss)/Profit for the year from discontinued operations
Profit for the year
Effective tax rate
Attributable to:
Owners of the parent (total)
Profit for the year from discontinued operations
Non-controlling interest (total)
Profit for the year from discontinued operations
Profit for the year
Return on average equity (ROAE)
2013
2,003,456
(1,404,964)
598,492
(376,730)
221,778
(65,728)
156,050
(8,277)
147,773
29.6%
95,541
102,932
(7,391)
52,232
53,118
(886)
147,773
6.9%
2012
1,729,999
(1,236,006)
493,993
(155,351)
338,029
(56,207)
281,822
4,910
286,732
16.6%
249,743
246,311
3,432
36,989
35,511
1,478
286,732
15.8%
Change
16%
14%
21%
143%
-34%
17%
-45%
n.m.
-48%
-62%
-58%
n.m.
41%
50%
n.m.
-48%
42
Balance Sheet Analysis
Cash and balances with central banks
Assets
As part of our normal course of business,
we place deposits with central banks to
meet bank reserve requirements and for
liquidity management purposes. At the end
of 2013 we had US$2.9 billion in cash and
balances with central banks, which increased
by US$896 million or 45% from the prior
year. Cash in hand and in branch vaults and
ATMs and other balances held with central
banks other than for mandatory reserve
requirements increased US$374 million or
39% from the prior year. Mandatory reserve
deposits with central banks stood at US$1.6
billion at 31 December 2013, which increased
US$522 million or 51%, from 2012, primarily
driven by the increase in the the Central Bank
of Nigeria’s cash reserve requirement to 50%
As at 31 December 2013, total assets stood
at US$22.5 billion, up US$2.6 billion or 13%
from 31 December 2012. The predominant
areas of asset growth were in loans and
advances to customers, which increased
US$2.0 billion and cash and balances with
central banks, which increased US$896
million, driven by regulatory reforms.
Customer deposits growth of US$1.9 billion
was the predominant source of funding for
our asset growth during 2013.
Consolidated balance sheet data
As at 31 December (In thousands of US$)
2013
2012
Change
1,127,927
114,917
1,312,150
11,421,605
1,893,489
1,135,434
825,883
92,854
2,175,156
9,440,945
2,331,748
700,054
37%
24%
-40%
21%
-19%
62%
17,005,522
15,566,640
9%
2,877,868
496,748
872,145
141,346
1,138,824
1,981,625
503,149
861,316
143,417
883,236
45%
-1%
1%
-1%
29%
5,526,931
4,372,743
26%
Total assets
22,532,453
19,939,383
13%
Liabilities
Deposits from other banks
Deposits from customers
Other deposits
Borrowed funds
Other liabilities
706,953
16,489,904
677,960
1,303,406
1,219,582
662,201
14,620,478
369,360
1,239,683
873,744
7%
13%
84%
5%
40%
Total liabilities
20,397,805
17,765,466
15%
Equity
Share capital
Retained earnings and reserves
1,409,001
527,435
1,409,001
597,187
0%
-12%
Total equity and reserves attributable
Non-controlling interest in equity
Total equity
1,936,436
198,212
2,134,648
2,006,188
167,729
2,173,917
-3%
18%
-2%
22,532,453
19,939,383
13%
Earning assets
Treasury bills and other eligible bills
Financial assets for trading
Loans and advances to banks
Loans and advances to customers
Investment securities: available-for-sale
Pleged assets
Non-earning assets
Cash and balance with central banks
Intangible assets
Property and equipment
Derivative financial instruments
Other non-earning assets
Total liabilities and equity
of public sector deposits from 12% during the
year. This resulted in a reduction in certain
earning assets, including available-for-sale
securities and placement with other banks to
meet the higher reserve requirements.
Loans and advances to banks largely
constitute deposits we hold with other
banks to facilitate correspondent banking
relationships and those we place in banks
on the interbank market to manage liquidity
and interest rate risks. As at 31 December
2013, loans and advances to banks were
US$1.3 billion, down US$863 million or
40% from the prior year. The decrease
was primarily driven by Nigeria, where the
central bank’s cash reserve ratio increase
triggered a redeployment of earning assets
into meeting the requirement. As a result,
Nigeria recorded a 50% decline in loans and
advances to banks.
The bank places deposits otherwise not
immediately loaned out to clients in treasury
bills and other eligible bills. Treasury bills and
other eligible bills increased US$302 million
or 37% to US$1.1 billion from the prior year.
The increase was driven by Nigeria, where
treasury bills increased US$130 million,
Francophone West Africa, which increased
US$84 million and an increase of US$46
million in the Rest of West Africa.
The Group provides loans to a range of
customers, from large global and regional
corporates to individuals, households and
small businesses. Total gross loans increased
US$2.2 billion or 22% to US$12.0 billion
from the prior year. The demand for credit
in 2013 was especially favourable within
global corporates and regional businesses, as
companies ventured more into cross-border
markets. As a result, Corporate Bank loans
grew US$1.6 billion or 34% to US$6.4 billion
Even though credit demand remained fairly
robust among Domestic Bank clients, we
were cautiously selective in lending, instead
focusing on low-cost deposits generation
and increasing our alternative channels. As
a result, loan growth in Domestic Bank was
modest, increasing US$549 million or 11%
to US$5.6 billion from the prior year with the
increase primarily driven by local corporates.
Our loan portfolio is fairly diversified
geographically, with Nigeria and Francophone
West Africa contributing 36% and 34% of
total loans respectively. Additionally, loan
growth within each cluster was strong,
averaging 22% growth over the prior year,
with Francophone West Africa growing by
US$792 million or 25% and Central Africa by
US$304 million or 27%.
A large portion of the loans and advances are
in term loans, constituting 76% of our total
loan portfolio and 22% in overdrafts.
The allowance account for loan losses
increased 45% to US$588 million. For
Domestic Bank, the allowance account
increased largely due to the US$165 million
provision taken on legacy assets in Nigeria,
which increased the gross provisions
significantly, partially offset by loan writeoffs. Corporate Bank reported an increase
in its allowance account for loan losses too,
driven by growth in the gross provisions,
partially offset by loan write-offs. For a
breakdown of 2013 allowances for loan
losses by geography see the pie chart on
page 44.
With the allowance account for loan losses
increasing, the ratio of reserves available to
cover non-performing loans, the coverage
ratio, increased to 79.0% from 74.2% from
the prior year. A chart of coverage ratio by
geographic cluster is shown on page 44.
As at 31 December
(In thousands of US$)
Group
Gross loans
Less: allowance for impairment
Non-performing loans
Non-performing loan ratio
Coverage ratio
Corporate Bank
Gross loans
Domestic Bank
Gross loans
2013 Gross customer loans
by geography
2013
2012
Change
12,009,770
(588,165)
11,421,605
744,572
6.2%
79.0%
9,847,418
(406,473)
9,440,945
548,053
5.6%
74.2%
22%
45%
21%
36%
6,385,035
(89,573)
6,295,462
4,772,018
(46,112)
4,725,906
34%
94%
33%
5,624,735
(498,592)
5,126,143
5,075,400
(360,361)
4,715,039
11%
38%
9%
34%
Nigeria
36%
Rest of West Africa
12%
Central Africa
12%
East Africa
4%
Southern Africa
4%
2013 Gross customer loans
by type
Overdraft
22%
Term loans
76%
Others
2%
43
44
Securities
Liabilities and equity
We hold trading and investment securities
in the normal course of business. We also
hold securities for the purposes of cash,
liquidity and asset-liability management.
Deposits from banks
Our securities held for trading purposes,
almost all in government bonds, increased
from the prior year. The increase in the
trading securities portfolio was driven
largely by Nigeria.
Our investment securities are all held as
available-for-sale (AFS) and constitute
mainly, listed and unlisted debt and equity
securities. As at 31 December 2013, the AFS
portfolio stood at US$1.9 billion, decreasing
US$438 million or 19% from US$2.3 billion
in 2012. The decrease was primarily driven
by Nigeria, where the AFS portfolio declined
US$745 million, partially offset by increases
in Francophone West Africa and Rest of
West Africa.
Similar to how we place funds with other
banks and engage in the interbank market to
facilitate correspondent banking relationships
and manage liquidity and interest rate risks,
other banks also place funds with us for such
purposes. These deposits from other banks
increased US$45 million or 7% to US$707
million from the prior year.
Customer deposits
Customer deposits, which is the predominant
source of funding for the Group, increased
by US$1.9 billion or 13% to US$16.5 billion
from the prior year period. Domestic Bank’s
deposits, which constitute largely of low-cost
and non-interest bearing current and savings
accounts (CASA), increased US$812 million
or 8% to US$10.9 billion from the prior year
period. The increase was driven by term
deposits, which increased US$1.5 billion or
66% from the prior year, partially offset by a
decrease in current account deposits by 17%
Corporate Bank customer deposits increased
US$1.1 billion or 23% to US$5.6 billion from
the prior year. The increase was due primarily
to growth in current account deposits, which
increased US$575 million and term deposits,
which increased US$482 million.
Our focus is to consistently generate low‑cost
CASA deposits, which are largely core and
stable. As at 31 December 2013, CASA
deposits constituted 66% of total customer
deposits and continue to provide a stable
source of funding for the Group.
The loans-to-deposits ratio stood at 72.8%
at the end of the year compared with 67.4%
at the end of 2012. The increase reflected
the strong loan growth achieved in 2013.
See historical 5-year chart of the loans-todeposits ratio on page 45.
Borrowed funds
Borrowed funds are an alternative source of
long-term funding and a critical component
of the Group’s liquidity and capital
management activities. ETI, the parent
company of the Group oversees capital
planning and funding strategy across
the Group.
As at 31 December 2013, total borrowed
funds stood at US$1.3 billion, increasing
US$64 million or 5% from the prior year. The
modest increase was driven by borrowings
from certain Development Financial
Institutions (DFIs) and other banks, partially
offset by repayments.
2013 Allowances for
loan losses
Coverage ratio
105.3%
92.3%
79.0%
77.8%
57.7%
57.0%
17%
Nigeria
59%
Rest of West Africa
12%
Central Africa
6%
East Africa
4%
Southern Africa
2%
Francophone
West Africa
Nigeria
Rest of
West Africa
Central
Africa
52.3%
East
Africa
Southern
Africa
Group
Total equity
Shareholders’ funds as at 31 December 2013
were US$1.9 billion, which decreased US$70
million or 3% from the prior year period.
Share capital (paid-in capital) and premiums
stayed unchanged at US$1.4 billion as we
did not issue any new shares during the
year. Retained earnings were the primary
reason for the decrease, declining US$55
million or 9%, impacted by the lower level of
profitability for 2013, the prior year dividend
payment and reductions in AFS reserves and
currency translation differences. The other
reserves line increased US$14 million or 43%
to US$47 million, driven by an increase in the
transfer to statutory reserve.
2013 Customer deposits
by geography
As a result, total equity, including noncontrolling interest, decreased US$39 million
or 2% to US$2.1 billion in 2013.
Customer deposits
27%
As at 31 December
In thousands of US$
Nigeria
43%
Domestic Bank deposits
Corporate Bank deposits
Total customer deposits
2013
2012
Change
10,893,535
5,596,369
16,489,904
10,081,227
4,539,251
14,620,478
8%
23%
13%
Loans-to-deposits ratio
Rest of West Africa
13%
Central Africa
11%
East Africa
4%
Southern Africa
2%
2013 Customer deposits
by type
78.8%
72.3%
62.9%
2009
2010
2011
67.4%
2012
72.8%
2013
Current accounts
50%
Savings accounts
16%
Term deposits
34%
45
46
Business segments
Ecobank’s activities are organized into
two customer-focused business segments,
namely Corporate and Investment Bank and
Domestic Bank
Domestic Bank
We provide financial solutions to global,
regional and public corporates, financial
institutions and international organisations.
Products and services include pan-African
lending, trade services, cash management,
internet banking and value-chain finance.
We also provide treasury, corporate finance,
investment banking and securities and asset
management services.
We provide a full range of convenient,
accessible, and reliable financial products and
services to more than 10 million individuals,
small businesses, local corporates and public
sector organisations, through our extensive
network of 1,284 branches and offices,
Internet and Mobile banking, 2,314 ATMs
and over 10,000 points of sale (POS).
47
Financial performance
Corporate and Investment Bank revenue
increased US$289 million or 41% to $1.0
billion compared to the prior year. The
increase was well balanced between funded
and non-funded income and continued to
benefit from new client acquisitions and
increasing trade flows.
Net interest income increased US$142 million
or 48% from the prior year primarily driven
by loan growth, particularly among regional
corporates and lower interdivisional funding
charges. The growth of US$147 million or
35% in non-interest revenue was due to
growth in trade finance, especially in the
volume of letters of credit established, higher
fees on loans on the back of strong loan
growth, and higher spreads in the foreign
exchange (FX) business.
Operating expenses increased US$81 million
or 22% to US$451 million mainly driven by
higher staff costs arising from an increase
in headcount required to support business
growth. The continued focus on expense
control and discipline in managing our
business reflected in a reduced cost-toincome ratio. The ratio improved to 45.1%
compared with 51.9% in the prior year.
Corporate and Investment Bank:
Key Lines of Businesses and Products
Corporate Bank
and Transaction
Services Group
• Lending
• Cash management
• Trade finance
• Electronic Banking
(Omni)
• Commodity finance
Treasury
Investment Bank
• Foreign exchange
• Fixed income
• African currency and
asset distribution
• Structured trade
finance
• Project finance
• Syndicated lending
• Capital markets
• Advisory (M&A)
Securities and
Asset Management
• Brokerage
• Asset management
Key Customer Segments
Global
corporates
Regional
corporates
Public
corporates
Financial
institutions
International
organisations
Customers with
operations in
several countries
headquartered
outside Middle
Africa and whose
operations are
coordinated
globally.
Customers with
headquarters
and operations in
Middle Africa and
whose operations
are regionally
coordinated.
Parastatal
companies, such as
airports, seaports,
oil refineries
and major
state insurance
companies,
operating
in one country.
Banks, pension
funds, insurance
companies,
development
finance institutions,
central banks, asset
managers, private
equity funds etc.
Multilaterals,
bi-laterals,
international
NGOs, embassies.
from the prior year, due primarily to
provisions on non-performing loans in Ghana
and Nigeria.
Strong revenue growth and efficiency
gains benefited earnings. Profit before tax
increased US$162 million or 49% to $490
million from the prior year.
Net interest income
Net revenues
Operating expenses
Impairment losses on loans
Profit before tax (1)
Loans (net), EOP
Deposits, EOP
Non-performing loans ratio
(1)
2013
2012
Change
435.9
565.1
1,001.0
(451.0)
(60.1)
489.9
294.2
417.6
711.8
(369.5)
(13.6)
328.2
48%
35%
41%
22%
343%
49%
6,295
5,596
4,726
4,539
33%
23%
45.1%
1.2%
51.9%
1.2%
Profit before tax is less share of profit/(loss) of $0.02m and $(0.51)m for FY13 and FY14 respectively.
48
Domestic Bank
Domestic Bank has four lines of business,
namely Personal Banking, Local Corporate/
SME, Public Sector and Cards and eBanking.
It also incorporates our microfinance
businesses.
Financial performance
Domestic Bank revenues increased US$85
million or 9% to $1.0 billion from the prior
year. Net interest income was US$664
million, up US$63 million or 10% from the
prior year. The increase in net interest income
was driven by higher yields and modest
loan growth in local corporates. Non-interest
revenue increased US$22 million or 6%
to US$379 million, driven by remittances,
particularly RapidTransfer, fees on loans
through our credit factories, and cards and
electronic banking.
Operating expenses decreased US$20 million
or 2% to US$859 million driven mainly
from lower staff costs due to the improved
headcount efficiency in Nigeria. As a result
of the cost discipline focus, the cost to
income ratio improved from 91.8% in the
prior year to 82.4% in 2013.
from the prior year, due primarily to
provisions on non‑performing loans in
Nigeria (including the US$165 million
one-off provisions discussed earlier).
The higher impairment losses on loans
impacted earnings negatively and as a result
Domestic Bank reported a pre-tax loss of
US$132 million for 2013.
Domestic Bank: Key Lines of Businesses, Customers and Products
Personal Banking
Local Corporate/SME
Public Sector
Cards and eBanking
The local Corporate
business caters to the
needs of the companies
with annual revenues
above US$5 million,
with formal structures
(typically with corporate
governance systems)
that operate only within
national boundaries.
Our SME business is
focused on entrepreneurs
with annual revenues of
less than US$5 million.
This is the engine room
for growth in Africa.
Public sector caters
for all arms of the
government at Federal,
National, State, Municipal,
County and Local levels
including non‑profit
Non-Governmental
Organizations (NGOs).
As part of our value chain
banking proposition,
we also provide banking
services to public sector
staff, contractors
and suppliers.
Cards and Electronic
Banking business covers
cards issuing, cards
acquiring (providing our
merchants with POS
terminals to enable
their customers to pay
using cards). Alternative
channels (deployment and
management of ATMs and
POS terminals), Internet
banking, Mobile banking
and MobileMoney. Cards
and eBanking business
enables customers to
carry out banking outside
the branch, anytime and
anywhere. We strive to
provide easy self-service
banking with minimal
assistance.
• Current and Domiciliary
accounts
• Letters of Credit and
Trade finance
• Bonds and Guarantees
• Payments and
Collections
• Corporate Internet
Banking (Omni)
• Remittances and
Transfers
• Asset, Inventory, Lease,
Contract, Import and
Receivable finance
• Bills Discounting
• Current and Domiciliary
accounts
• Bonds and Guarantees
• Tax and Utility
Collections
Banking (Omni)
• Salary credits
• Public Private
Partnership
• Ecobank Regional, Visa
and MasterCard debit
and Credit cards
• Prepaid Visa/MasterCard
• E-alert, e-statement
and SMS
• Mobile banking
• Retail Internet banking
Banking (Omni)
• ATMs and ATM galleries
• POS terminals
Customers served:
Our Personal banking
business caters to
the banking needs
of individuals
with emphasis on
professionals, civil
servants, teachers,
regular salary earners
and Africans in the
diaspora. It is further
segmented into
Classic and Direct
Banking, Advantage
Banking and Premier
Banking to enable
us deliver products
and services tailored
to the specific needs
of customers.
Products offered:
• Current, Savings and
Domiciliary accounts
• Western Union,
RapidTransfer,
Money Gram, Ria,
and Wari
• Ecobank Diaspora
Current, Savings and
Domiciliary Account
• Utility Payment/
Collection
• Retail credits (Asset
finance, auto loans,
personal loans etc)
• Ecobank Advance
Account
Domestic Bank
2012
Change
663.5
378.6
1,042.1
(858.7)
(316.1)
(132.7)
600.5
357.1
957.6
(879.5)
(134.5)
(56.5)
10%
6%
9%
-2%
135%
135%
Loans (net), EOP
Deposits, EOP
5,126
10,894
4,715
10,081
82.4%
11.9%
91.8%
9.7%
Net interest income
Net revenues
Operating expenses
Impairment losses on loans
Profit before tax
2013
9%
8%
49
Geographical clusters in Africa
Addis Ababa
(Rep. Office)
Lomé
(Headquarters)
Ecobank’s market ranking
by total assets
Rank
Luanda
(Rep. Office)
Number of countries
No. 1
7
Top 3
14
Top 10
27
Not yet Top 10
5
Johannesburg
(Rep. Office)
Market position by country ranked by total assets
Francophone
West Africa
Nigeria
Rest of
West Africa
Central Africa
East Africa
Southern Africa
1st: Burkina Faso
2nd:Togo
2nd:Benin
2nd: Côte d’Ivoire
1st:Guinea-Bissau
2nd: Mali
3rd:Niger
3rd:Senegal
7th: Cape Verde
6th: Nigeria
1st:
1st:
1st:
3rd:
4th:
1st:
Cen. Africa
Rep.
1st: Chad
4th: Congo Brazza
4th: Gabon
4th: Sao Tome
5th: Cameroon
5th: Eq. Guinea
4th: Rwanda
4th: Burundi
8th: South Sudan
15th:Uganda
20th:Kenya
21st: Tanzania
6th: DR Congo
7th: Malawi
11th:Zambia
12th:Zimbabwe
Ghana
Liberia
Guinea
Gambia
Sierra Leone
50
Francophone West Africa comprises the
eight countries of the Union Economique et
Monétaire Ouest Africaine (UEMOA), namely
Benin, Burkina Faso, Côte d’Ivoire, GuineaBissau, Mali, Niger, Senegal and Togo. Cape
Verde is also included for management
purposes although it is outside UEMOA. The
eight UEMOA countries have a common
currency, the CFA franc (XOF), and the same
regional central bank, the Central Bank of
West African States or BCEAO. These countries
have a common business law (OHADA) and
one stock exchange (BRVM).
Lomé
(Headquarters)
Date commenced ETI ownership GDP
Real GDP
operations
(%) US$ bn
Growth %
2013e 2013 2014f
Togo
Côte d’Ivoire
Benin
Burkina Faso
Mali
Niger
Senegal
Cape Verde
Guinea Bissau
Total Francophone West Africa
1988
1989
1990
1997
1998
1999
1999
2004
2007
81.8
94.3
78.7
85.0
92.8
99.96
80.5
94.0
100.0
4.3
28.5
7.9
12.2
11.4
7.3
15.1
1.9
1.0
58.7
5.6
2.0
5.6
6.8
1.7
3.6
4.0
0.5
0.3
6.0
3.0
5.5
6.0
6.5
6.6
4.6
3.0
3.0
Inflation %
2013 2014f
2.0
2.9
1.0
2.0
-0.6
2.3
0.8
1.5
0.6
3.0
3.0
2.0
2.5
4.0
2.5
1.4
2.0
2.5
Economic activity continued to pick up
in 2013 across the region of 100 million
people following the end of conflict in Côte
d’Ivoire in April 2011 and a return to a more
normal environment, and more recently
the end to unrest in Mali following French
military intervention. The euro-linked XOF
appreciated nearly 4% against the USD last
year reflecting the suppression of import
demand caused by the weak recovery,
although the exchange rate remained
volatile throughout the year reflecting
economic uncertainties in the eurozone.
Meanwhile, inflation remained low at less
than 3% for most countries in the region
due to fiscal stability afforded by the
exchange rate peg and despite sustained
high global commodity prices.
Francophone West Africa reported profit
after tax of US$105 million, up US$23
million or 28% from the prior year on
net revenue of US$434 million, up US$66
million or 18% from the prior year.
Net interest income growth of US$40
million or 21% was driven by strong lending
activity, both in our Domestic and Corporate
banking businesses particularly in Côte
d’Ivoire, Burkina Faso and Mali. Margins
improved, with better yields on earning
assets and a lower cost of funds. Noninterest revenue increased US$26 million
or 15% benefitting from higher fees and
commissions and trading income.
Operating expenses were up US$39 million
or 17% reflecting higher staff costs. The
cost-to-income ratio improved to 63.3%
with a seasonally strong finish to the year
and a fourth quarter cost-to-income ratio
of 57%.
Francophone West Africa (UEMOA)
In millions of US$, except ratios
Net interest income
Net revenue
Operating expenses
Profit before tax
Tax expense
Profit after tax
Attributable profit
Loans (net), EOP
Total assets, EOP
Deposits, EOP
Loans-to-deposit ratio
Coverage ratio
2013
2012
Change
234.7
199.3
434.0
(274.6)
(33.1)
126.2
(20.9)
105.4
92.9
194.4
173.1
367.5
(235.6)
(25.7)
106.2
(24.0)
82.2
21%
15%
18%
17%
29%
19%
-13%
28%
3,870
6,501
4,398
3,114
5,440
3,652
24%
19%
20%
63.3%
88.0%
4.1%
57.0%
64.1%
86.8%
4.3%
41.4%
NB: selected income statement lines only so totals may not add up; EOP, end-of-period.
Reported PBT after accounting for share of profit of associate of US$(0.1)m and US$(0.1)m for 2013 and
2012 respectively
51
The US$7.1 million or 28% increase in
impairments on financial assets were
driven by Côte d’Ivoire, Senegal, and
Niger following portfolio reviews, partially
offset by a 63% decline in impairments in
Mali, where the credit environment has
continued to normalise. The effective tax
rate was lower for 2013 due to the full
recognition during the year of a significant
amount of deferred tax asset from a tax
credit resulting from the construction of a
Head Office building in Côte d’Ivoire.
52
Nigeria
Nigeria constitutes a cluster in itself by virtue
of its size.
Real GDP growth slowed slightly in 2013 to
just above 6% from 6.6% in 2012 due to a
fall in oil production (caused by theft and
vandalism) and despite robust non-oil activity
stemming mainly from increased agriculture
and services output, along with high levels
of government spending. Oil GDP contracted
around 7% although this was offset
somewhat by the indirect effect of slightly
higher oil prices. Average annual inflation
slowed by 4 percentage points to 8.5%, a
good result given robust liquidity fuelled
by government spending. Nonetheless, the
Central Bank of Nigeria maintained a tight
monetary policy throughout the year in an
effort to support the exchange rate (the
NGN weakened 2.7% in 2013). The strong
demand for imported goods and weaker than
expected oil export revenue (which accounts
for around 95% of total exports) halved the
current account surplus to 3.5% of GDP.
Nigeria
Real GDP
operations
(%) US$ bn
Growth %
2013e 2013 2014f
Nigeria
1989
100.0
288.0
6.3
5.2*
Inflation %
2013 2014f
8.5
8.5
*Growth and size of the economy are slower and larger, respectively, following Q1 2014 recalculation of
national accounts.
Nigeria reported profit after tax of US$33
million, down US$19 million or 36% on
net revenue of US$819 million, up US$120
Revenue growth in 2013 was robust. Interest
income was driven by strong lending activity
within the power, telecoms and cement
sectors. However, the increase in the cash
reserve ratio (CRR) on public sector deposits
from 12% to 50% impacted our ability to
grow earning assets. The net interest margin
was helped by a steady improvement in the
cost of funds during 2013 to below 4%.
Non-interest revenue increased US$48
million or 16% primarily driven by fees
and commissions despite regulatory
reductions in commissions-on-turnover
(CoT) and other fees.
Operating expenses declined US$55 million
or 9% benefitting from the continued focus
on expense management and branch
efficiency. Staff costs remained flat, and
some reductions in headcount were made
in the fourth quarter. Also, the fourth quarter
saw a sharp decline in expenses due to the
release of some accruals made earlier in the
year, and also the reversal of approximately
US$60 million of Group shared services costs
(of which, approximately half related to
costs from 2011 and 2012). These factors
combined to improve the cost-to-income
ratio by 19 percentage points to 65.7%
Impairment on financial assets, however,
increased significantly. The fourth quarter
provision of US$217 million included a
US$165 million charge to address certain
legacy non-performing assets. These loans
have now been brought on to the Group’s
balance sheet and fully provided for. We
benefitted from a positive tax rebate during
the year and continue to have significant tax
assets in Nigeria.
Nigeria
Net interest income
Net revenue
Operating expenses
Profit before tax
Tax expense
Profit after tax
Attributable profit
Loans (net), EOP
Total assets, EOP
Deposits, EOP
Coverage ratio
2013
2012
Change
469.8
349.4
819.3
(538.1)
(271.7)
9.4
23.3
32.8
32.8
397.8
301.8
699.6
(592.8)
(71.5)
35.2
16.3
51.5
18%
16%
17%
-9%
280%
-73%
44%
-36%
3,918
9,232
7,001
3,501
7,845
6,608
12%
18%
6%
65.7%
60.6%
8.3%
92.3%
84.7%
55.2%
3.6%
108.6%
Note: Total impairment losses of $271.7m includes $13.5m of impairment
losses on other assets.
Note: Totals may not sum due to rounding. EOP end-of-period.
53
54
Rest of West Africa
Ecobank’s Rest of West Africa cluster
comprises five countries in the West African
Monetary Zone (WAMZ) namely,
Ghana, Guinea, Liberia, Sierra Leone
and The Gambia.
Rest of West Africa
Real GDP
operations
(%) US$ bn
Growth %
2013e 2013 2014f
Ghana
Guinea
Liberia
Sierra Leone
The Gambia
Total Rest of West Africa
Source: IMF and World Bank
1990
1999
1999
2006
2007
68.9
83.1
96.5
100.0
96.9
45.2
6.2
2.0
4.2
1.1
58.7
5.4
2.5
8.0
16.3
6.3
4.8
4.0
7.0
13.9
7.4
Inflation %
2013 2014f
11.7
2.5
7.6
9.8
5.2
13.5
4.0
9.0
7.8
6.0
Growth in the Rest of West Africa region
picked up in 2013, to 6.4% in real terms.
With a population of 46 million people,
domestic demand for consumer goods
remained robust, which was boosted by
recent mining projects coming on stream
in Sierra Leone, and a further increase in
Ghana’s oil production. However, fiscal policy
remained weak in the region, reflecting high
levels of government spending and weak
tax and non-tax revenue performance, which
resulted in annual inflation accelerating to
high single digits. As most countries are oil
importers, sustained high oil prices in 2013
led to external sector underperformance,
which in conjunction with weak demand
for exports in Europe led to current account
deficits widening. In addition, strong import
demand in combination with high import
prices led to currency depreciation (which
was particularly intense in Ghana and The
Gambia once more).
Rest of West Africa reported profit after tax of
US$110 million, an increase of US$28 million
or 34% from the prior year on net revenue
of US$384 million, up US$77 million or 25%
The net interest income increase of US$50
million or 27% was primarily driven by
strong lending activity in Corporate Bank,
with Ghana accounting for 75% of the
growth. The higher interest rate environment
in Ghana supported higher yields on
earning assets particularly on the short end
of the yield curve while the cost of funds
benefited from a significant increase in
current account deposits. The US$27 million
or 22% increase in non-interest revenue to
US$148 million reflected higher FX sales and
credit-related fees.
Net interest income
Net revenue
Operating expenses
Profit before tax
Tax expense
Profit after tax
Attributable profit
Loans (net), EOP
Total assets, EOP
Deposits, EOP
Coverage ratio
Operating expenses grew US$26 million or
15% and were much lower than the net
revenue growth of 25%. The increase in
operating expenses was driven primarily by
higher staff costs, particularly in Ghana. The
cost-to-income ratio improved over 400 basis
points plus to 50.6%, with improvements
seen in all the constituent subsidiaries.
Impairment losses increased US$10 million
or 44%, reflecting higher impairment
losses in both our Domestic and Corporate
Bank businesses. Having taken significant
impairment provisions on The Trust Bank
(TTB) loan portfolio up to end of the third
quarter, the fourth quarter saw a net
provision release in Ghana. Also encouraging
were NPL ratio improvements in Guinea and
Sierra Leone, together helping to improve
asset quality in the cluster.
Our business in Ghana delivered strong
growth rates in US Dollar terms despite the
continued depreciation of the Ghana Cedi
during 2013. However, the tax rate in Ghana
increased in the second half of the year
with the introduction of the National Fiscal
Stabilization Levy.
Rest of West Africa (WAMZ)
55
2013
2012
Change
235.3
148.2
383.5
(194.0)
(33.6)
156.1
(45.9)
110.2
78.9
185.2
121.7
306.9
(168.3)
(23.3)
115.4
(33.1)
82.3
27%
22%
25%
15%
44%
35%
39%
34%
1,326
3,026
2,126
977
2,549
1,872
36%
19%
14%
50.6%
65.4%
6.0%
77.8%
54.8%
54.9%
6.7%
72.5%
Note: totals may not sum due to rounding. EOP end-of-period.
Reported PBT arrived after accounting for share of profit of associate of US$0.3m and US$0.2m for 2013
and 2012 respectively.
56
Central Africa
Central Africa comprises the six countries of
the Communauté Economique et Monétaire
de l’Afrique Centrale (CEMAC) and Sao
Tome & Principe. Ecobank is present in all
the countries in the region. The six CEMAC
countries have a common currency, the CFA
franc (XAF), one regional central bank – the
Banque des Etats de l’Afrique Centrale
(BEAC), a common commercial law code
(OHADA) and two stock exchanges: the
Douala Stock Exchange (DSX) and the Gabon
Stock Exchange.
Central Africa
Real GDP
operations
(%) US$ bn
Growth %
2013e 2013 2014f
Cameroon
Chad
Central African Republic
Sao Tome & Principe
Congo – Brazzaville
Gabon
Equatorial Guinea
Total Central Africa
2001
2006
2007
2007
2008
2009
2012
79.7
73.6
75.0
99.3
89.2
75.0
60.2
27.7
13.4
1.9
0.3
14.2
20.3
17.6
95.4
4.8
3.6
-36.0
4.0
4.5
5.9
-4.9
5.0
10.8
1.5
5.0
8.0
5.0
-2.4
Inflation %
2013 2014f
2.1
0.2
6.6
8.1
4.6
0.5
3.2
2.7
2.4
4.5
7.0
2.5
5.6
3.9
Real GDP growth in the CEMAC region also
improved in 2013. As most countries are
oil producers, despite output generally
stagnating or contracting due to maturing
fields, high oil prices indirectly boosted
growth via robust levels of government
spending. However, ongoing unrest in
Central African Republic led to the economy
contracting by nearly 20%. The XAF peg to
the euro helped contain inflation at around
3% although inflationary pressures increased
from the previous year owing to high
levels of government spending. Apart from
Congo and Gabon, current account deficits
mostly widened, due to strong demand
for consumer and capital goods from a
population of 41 million people in the region
along with high global commodity prices.
Central Africa reported profit after tax of
US$39 million, up US$24 million or 150%
from the prior year on net revenue of US$185
million, up US$41 million or 29% from the
prior year.
Net interest income grew US$11 million
or 15% due to strong retail and SME loan
growth in Cameroon and Gabon. Noninterest revenue increased US$30 million
or 42% reflecting higher FX sales and to a
lower extent fees and commissions income.
The ongoing political unrest in Central
African Republic impacted negatively on
performance.
The US$24 million or 25% increase in
operating expenses reflected continued
investments to grow the business, which
has helped to increase market share in the
region. The increase also reflected growth in
wages and salaries in Cameroon and Gabon.
Central Africa (CEMAC)
Net interest income
Net revenue
Operating expenses
Profit before tax
Tax expense
Profit after tax
Attributable profit
Loans (net), EOP
Total assets, EOP
Deposits, EOP
Coverage ratio
2013
2012
Change
83.7
101.6
185.3
(122.5)
(7.5)
55.3
(16.1)
39.2
31.7
72.8
71.4
144.2
(98.0)
(9.4)
31.7
(16.0)
15.7
15%
42%
29%
25%
-20%
74%
0%
150%
1,410
2,260
1,850
1,110
1,835
1,463
27%
23%
27%
66.1%
77.9%
3.8%
57.7%
68.0%
77.7%
3.7%
65.9%
Selected income statement lines only and hence may not add up. EOP is end-of-period.
Reported PBT arrived after accounting for share of profit of associate of US$(0.2)m and US$(0.5)m for
2013 and 2012 respectively.
57
Initiatives to proactively engage clients with
non-performing loans helped significantly
increase recoveries and coupled with lower
gross impairment provisions, the period’s
impairment provisions fell 47% to
US$7.4 million.
Equatorial Guinea was profitable in its first
full year of operation.
The Cluster’s effective tax rate (ETR) reduced
compared to 2012 due mainly to the
significant increase in pre-tax profits in Congo
Brazzaville and Equatorial Guinea where we
enjoy corporate tax exemptions. In addition,
pre-tax profit growth compared to 2012 in
Cameroon and Chad coupled with effective
management of our tax position contributed
to the decrease in ETR.
58
East Africa
Our East Africa region comprises the member
countries of the East African Community
(EAC), namely Burundi, Kenya, Rwanda,
Uganda and Tanzania. During 2013, we
commenced banking operations in South
Sudan and opened a representative office
in Ethiopia.
Addis Ababa
(Rep. Office)
East Africa
Real GDP
operations
(%) US$ bn
Growth %
2013e 2013 2014f
Rwanda
Kenya
Burundi
Uganda
Tanzania
South Sudan
Ethiopia
Total East Africa
2007
2008
2008
2009
2010
2013
2013
91.3
95.7
75.0
99.9
100.0
94.0
Rep. office
7.6
43.6
2.7
21.5
34.4
13.5
48.9
172.2
5.0
5.6
4.5
6.0
7.0
24.4
9.7
7.5
6.0
4.7
6.4
7.2
7.1
7.5
Inflation %
2013 2014f
4.2
5.7
8.8
5.4
7.9
0.0
8.0
6.0
8.0
7.0
6.5
7.5
12.0
6.2
Growth in the EAC region in 2013 was led
by South Sudan; however it was from a
low base and reflected a rebound in oil
production. The more sustained growth in
Ethiopia, which expanded nearly 10%, was
driven by higher agricultural output and
increased construction and other services
activities, in part reflecting government
investment, global commodity demand,
and incentives for specific export sectors.
Growth in the other economies in the region
accelerated between 5-7%, largely reflecting
robust domestic demand from a population
of 140 million and strong output across
agriculture, manufacturing, industry and
services. However, infrastructure bottlenecks
continued to hold growth back. As inflation
slowed, monetary policy was loosened from
early 2013, a decision supported by relative
currency stability in the remainder of the
year. Although there was a slowdown in
demand from the eurozone particularly for
horticulture goods and flowers (supplied
mainly by Kenya, the dominant economy in
the region) and for tourism services, most
EAC economies remained relatively insulated
from the eurozone debt crisis, and focussed
on diversifying exports toward Asia. However,
import pressures remained elevated across
the region, reflected in large current account
deficits ranging from 8 to 16% of GDP.
East Africa reported an after-tax loss of
US$19.7 million compared with an after-tax
loss of US$19.1 million in the prior year on
net revenue of US$68.0 million, up US$16
Kenya’s after-tax net loss for 2013 improved
to US$10.2 million from US$12.5 million in
the prior year, driven by revenue growth
and expense management, partially offset
by higher impairment provisions. Uganda
reported an after-tax loss, which was driven
by higher impairment losses and operating
expenses, partially offset by moderate
revenue growth. Tanzania, reported strong
revenue growth helping to significantly
reduce after-tax losses. The US$12 million or
57% increase in net interest income reflected
net interest margin expansion and strong
loan growth among regional corporates.
Kenya contributed about 80% of the growth
in net interest income. Fee and commission
income recorded good growth in Burundi
and Tanzania and this helped drive the
US$3.8 million or 13% in non-interest
revenue growth.
Operating expenses increased US$11 million
or 16% driven by staff costs in Tanzania
and communications and technology costs
in Kenya and Tanzania. The cost-to-income
East Africa (EAC)
2013
2012
Net interest income
Net revenues
Operating expenses
Profit before tax
Tax expense
Profit after tax
Attributable profit
34.4
33.6
68.0
(77.3)
(14.4)
(23.6)
3.9
(19.7)
(19.6)
21.9
29.8
51.7
(66.7)
(9.1)
(24.1)
5.0
(19.1)
57%
13%
32%
16%
58%
-2%
-22%
3%
Loans (net), EOP
Total assets, EOP
Deposits, EOP
461.9
953.9
640.7
370.1
764.7
524.7
25%
25%
22%
113.6%
75.4%
8.4%
52.3%
128.9%
74.0%
6.1%
75.6%
Coverage ratio
Change
Note: totals may not sum due to rounding and selected income statement lines only. EOP end-of-period
59
ratio in EAC improved substantially but still
remained above 100%.
Increases in impairment losses in Kenya and
Uganda contributed to the US$5 million or
58% increase in EAC’s impairment losses on
loans. As a result, the non-performing loan
ratio deteriorated to 8.4% from 6.1% in the
prior year driven by retail and SME loans
in Kenya.
We opened a new subsidiary in South Sudan
in 2013, which has performed well in spite
of ongoing challenges in that country, and a
representative office in Ethiopia.
60
Southern Africa
The Southern African Development
Community (SADC) comprises Angola,
Democratic Republic of Congo, Malawi,
Mozambique, Zambia and Zimbabwe. After
the year end, Ecobank commenced business
in Mozambique in May 2014, completing our
presence in SADC. In Angola we currently
only have a representative office, but are
pursuing full banking operations.
Luanda
(Rep. Office)
Southern Africa
Real GDP
operations
(%) US$ bn
Growth %
2013e 2013 2014f
Democratic Republic of the
Congo
Malawi
Zambia
Angola
Zimbabwe
Total Southern Africa
Inflation %
2013 2014f
2008
99.7
20.6
8.5
8.0
0.8
3.0
2008
2009
2010
2011
90.3
100.0
Rep. office
81.5
3.9
22.6
122.0
13.0
5.0
6.0
4.1
3.4
6.1
7.3
5.0
5.7
27.7
7.0
7.5
1.6
15.1
8.8
8.0
-0.5
182.1
With a population of 114 million in the
Southern Africa cluster, strong domestic
demand played a key role in sustaining
growth at 5% in 2013. Given trade links
with Europe, the region was similarly
affected by the eurozone slowdown and
to a lesser extent the adverse fiscal and
debt developments in the US. Nonetheless,
diversification of exports toward fast-growing
Emerging Markets along with growing trade
and capital flows with Asia particularly
helped propel the region forward. Inflationary
pressures remained pronounced owing to
high global commodity prices and strong
import demand. Sustained high commodity
prices, particularly cereal prices, affected all
countries (most of which are landlocked),
which along with high oil prices, sustained
large current account deficits, leading to
currency depreciation most notably in
Malawi (but excluding Zimbabwe, which is
largely dollarized).
Southern Africa reported profit after tax of
US$8.2 million compared with an after-tax
loss of US$8.2 million in the prior year on net
revenue of US$75.9 million, up US$31 million
or 71% from the prior year. The turnaround
in profitability was driven primarily by a
reduction in net losses in Zambia by US$14.3
million to US$0.9 million in 2013 and growth
in the other subsidiaries.
Net interest income increased US$15 million
or 84%, benefitting from higher gross yields
on earning assets and growth in interbank
and customer loans. Overall our net interest
margin improved, driven by lower cost of
funds. The US$17 million or 62% increase in
non-interest revenue was primarily driven by
higher fees and commissions and FX sales in
DR Congo and Zambia respectively.
Operating expenses grew US$14 million or
31%, significantly lower than the revenue
growth of 71%, as we invested to grow
the business further. Impairment provision
releases in Zambia helped drive the
US$3.5 million or 43% reduction in SADC’s
impairment losses. The NPL ratio improved
significantly to 4.4% from 8.0% in the
prior year.
Southern Africa (SADC)
2013
2012
Net interest income
Net revenues
Operating expenses
Profit before tax
Tax expense
Profit after tax
Attributable profit
32.6
43.3
75.9
(58.7)
(4.8)
12.5
(4.2)
8.2
7.8
17.8
26.7
44.5
(44.7)
(8.6)
(8.8)
0.6
(8.2)
84%
62%
71%
31%
-45%
n.m.
n.m.
n.m.
Loans (net), EOP
Total assets, EOP
Deposits, EOP
266.6
570.4
402.2
224.9
423.5
280.2
19%
35%
44%
77.3%
69.5%
4.4%
105.3%
100.4%
85.7%
8.0%
79.8%
Coverage ratio
Change
EOP is end-of-period. Note: totals may not sum due to rounding and selected income statement lines only
61
62
International
The International cluster incorporates our
business outside of Africa. In 2009 EBI SA, a
non-banking financial institution was opened
in Paris, France. Representative offices were
opened in Dubai, UAE in 2010, London,
United Kingdom in 2011, and Beijing, China
in 2012. The focus is on serving global
corporations and international institutions
that do business with and in Middle Africa.
The international business reported net
income of US$6.2 million, up US$2.3 million
or 60% from the prior year on revenue of
US$30.1 million, up US$9.8 million or 48%.
As at January 2014, EBI SA in Paris has
become a specialized credit institution
under Basel III, allowing it to take a wider
range of customer deposits. We also aim to
upgrade the London representative office to
a branch status.
Our international offices:
• Paris
• London
• Dubai
• Beijing
Revenue growth was predominately
driven by fees and commissions related
to foreign exchange and trade support
activities for clients.
The increase of US$6.2 million or 43%
in operating expenses was driven by
higher staff costs, IT and regulatory
compliance costs.
International
2013
2012
Total revenue, net of interest expense
Operating expenses
Net income
30.1
(20.7)
6.2
20.3
(14.5)
3.9
48%
43%
60%
199
208
360
71.5
202
258
346
89.0
-1%
-19%
4%
68.8%
71.2%
Loans (net), EOP
Loans to banks, EOP
Deposits from banks, EOP
Deposits from customers, EOP
EOP is end-of-period
Change
Conclusion
In concluding, I would reiterate that the
opportunities available to Ecobank in the
markets in which we operate are enormous.
For example, GDP for most of these
economies is expected to see continued
structural growth. Innovation in technology
is creating vast opportunities for financial
institutions to serve their clients better and
to reach the large numbers of un-banked or
under-banked African people. Ecobank is well
placed to benefit from these trends, given
our uniquely diversified business model and
top three market position in nearly half of
our countries.
Going forward, our primary focus will be on
delivering efficiencies and improving further
our cost-to-income ratio. We expect revenues
to grow in the region of 15% in 2014 and
this, coupled with improved efficiency and
lower cost of risk, should drive a better
performance for our stakeholders.
Laurence do Rego
Group Executive Director, Finance and Risk
63
64
Corporate Governance
The Ecobank Group is committed to ensuring
good corporate governance.
Ecobank has been a pioneer in
institutionalizing corporate governance
principles in Africa as part of the Group’s
corporate culture.
65
66
Commitment to corporate
governance
The Ecobank Group is committed to ensuring
good corporate governance. The Group
believes that good corporate governance
enhances shareholder value. Ecobank has
been a pioneer in institutionalizing corporate
governance principles in Africa as part of the
Group’s corporate culture.
To this end, Ecobank aims to comply
with international practices in corporate
governance. Adherence to corporate
governance principles is articulated in a
number of corporate documents. The Articles
of Association of the Company and those of
its subsidiaries define the respective roles of
the Management, the Board of Directors and
the shareholders (including the protection
of minority rights) in the administration of
the Group.
The Group Corporate Governance Charter,
adopted by the Board of Directors to guide
the Group’s corporate governance framework,
is predicated on the International Finance
Corporation (IFC) principles and methodology.
The Group’s governance practices are also
guided by the Basel Committee standards
on corporate governance. There are standard
written rules for the internal operation of
the Boards of Directors, a code of conduct
for Directors and rules on business ethics
for staff, all of which are aimed at ensuring
transparency and accountability.
In the last year, we have experienced
several events that have led to a series of
publications in the local and international
media from July 2013 regarding alleged
breaches of corporate governance and
allegations against the Board of Directors
and certain principal officers of the Company.
The Securities and Exchange Commission of
Nigeria undertook an independent review of
these allegations through the professional
services firm KPMG.
As shareholders are aware, the Company’s
shares are currently listed on the Nigerian
Stock Exchange, the Ghana Stock Exchange
and the Bourse Régionale des Valeurs
Mobilières (BRVM), the UEMOA Regional
Stock Exchange in Abidjan and is therefore
subject to their rules. The purpose of the
review was to ascertain the Company’s
compliance with the SEC’s Corporate
Governance Code as well as best practice
and also to determine the veracity of the
various allegations against principal officers
of the Company.
The report identified certain gaps in the
Company’s Corporate Governance policies
and practices and made recommendations
for improvement. The Board also appointed
IMD, an international business school that
specializes in Corporate Governance, to
undertake a detailed review of governance
within the Company. In light of these findings
we have undertaken a comprehensive
review of our Corporate Governance values
and practices with a view to improving
them based on the lessons learnt. The
Board has also resolved to amend the
Corporate Governance charter with a view to
governance improvement in the company.
An Extraordinary General Meeting of
shareholders was held on 3 March 2014 to
approve a 51-point Governance Action Plan
designed to address the areas highlighted
by the SEC/KPMG. The board believes that
the implementation of this plan, which is
available on the Company’s website, will
further improve our governance culture
and position us as a leader in corporate
governance in Africa.
The composition of the Board
includes executive, non-executive and
Independent Directors.
Non-executive Directors always constitute
a majority of the Board. Guided by the IFC’s
suggested definition of an Independent
Director, the Board has formally adopted
the following definition for application
throughout the Group.
‘Independent Director’ means a Director who:
• Has not been employed by Ecobank
Transnational Incorporated (ETI) or any of
its subsidiaries and affiliates in the past
five years.
• Is not affiliated with a company that is an
advisor or consultant to ETI or any of its
subsidiaries and affiliates.
• Is not affiliated with a significant customer
or supplier of the Group or any of its
• Has no personal service contracts with the
Group, any of its subsidiaries and affiliates,
or its senior management.
• Is not affiliated with a non-profit
organization that receives significant
funding from the Group or any of its
• Is not employed as an executive of
another company where any of the
Group’s executives serve on that
company’s Board of Directors.
• Is not a member of the immediate family
of an individual who is, or has been
during the past five years, employed by
the Group or any of its subsidiaries and
affiliates as an executive officer.
• Is not, nor in the past five years has been,
affiliated with or employed by a present
or former auditor of the Group or of its
subsidiaries and affiliates; or
• Is not a controlling person of the Group (or
member of a group of individuals and/or
entities that collectively exercise effective
control over the Group) or such person’s
brother, sister, parent, grandparent, child,
cousin, aunt, uncle, nephew or niece or
a spouse, widow, in-law, heir, legatee or
successor of any of the foregoing (or any
trust or similar arrangement of which any
such persons or a combination thereof are
the sole beneficiaries) or the executor,
administrator or personal representative of
any person described in this sub-paragraph
who is deceased or legally incompetent.
For the purposes of this definition, a person
shall be deemed to be ‘affiliated’ with a
party if such person (i) has a direct or indirect
ownership interest in or (ii) is employed by
such party.
By this definition, the Board of Directors
considers most of the Company’s
non‑executive Directors are Independent
Directors. However the SEC/KPMG
report considered only one member as
independent. The Board has initiated a
process to identify new Board members to
address the situation.
The Board also applies the following criteria
for the appointment of non-executive
Directors:
Independence
Although not all non-executive Directors
need to meet the Independent Director
definition above, all Directors should be
capable of exercising independent judgment
and decision-making.
Demonstrated business acumen
Strong business experience, a proven
understanding of corporate and business
processes through a successful track
record and a strong reputation in the
business community.
Leadership and board experience
A recognized ability to add value and display
leadership at board level, and an ability to
assert balanced and constructive views at
board level.
Special technical skills or expertise
Experience in banking (particularly retail
banking but also commercial and/or
investment banking), accounting, and/
or law and expertise not readily available
to the executive team would be valuable,
especially if this professional experience is
in emerging markets.
Integrity
High level of integrity, and professional and
personal ethics and values consistent with
those of the Ecobank Group.
Character
Strength of character and ability and
willingness to challenge and probe; sound
business judgment; strong interpersonal
skills, and the ability to listen carefully
and communicate with clarity, objectivity
and brevity.
Time commitment
Sufficient time to carry out effectively the
duties of a non-executive Director.
Additional considerations
Importance of increasing the diversity of the
Board in terms of age, gender, demographics.
With the assistance of IMD, the Board will
develop and adopt a radical and novel
process for introducing new members to
the Board that will cater for induction and
continuous training of Board members. The
Board has agreed in principle to a mix of the
Directors to ensure adequate representation
of major shareholders, minority shareholders,
geographical coverage of the Group,
independent Directors, as well as executive
and non-executive Directors. These details
will be incorporated in the Group Corporate
Governance Charter which is currently
being reviewed.
67
68
The Board has also adopted standard
evaluation tools to help assess the
performance of the Board as a whole, as well
as that of individual Directors.
Governance structures within
the Ecobank Group
The Ecobank Group corporate governance
documents outline corporate governance
policies and clarify governance structures
throughout the Group. They cover essentially
the following areas:
• Role of the parent company.
• Relationships and interface between the
parent company and subsidiaries.
• Standard of conduct and procedures
for Directors.
The key principles underlying the Group’s
governance structures are as follows:
• The parent company acts as a ‘strategic
architect’ with appropriate input
in operational management and
decision‑making at the subsidiaries’ level.
It sets the overall strategy and direction
of the Group, develops policies and
procedures and monitors them through
reviews and audits to ensure compliance,
not only with Group strategy, policies
and procedures, but also with local laws
and regulations.
• Operational decision-making is
individualized and maintained at an
appropriate level, as close as possible to
required action and customers.
• Individual accountability and responsibility
are institutionalized and embedded
through empowerment and the granting
of relevant levels of authority.
• Coordination at the corporate centre and
Group level is achieved through high
levels of interaction between the parent
company and its subsidiaries, as well
as amongst subsidiaries at Board and
executive management levels.
• Clear terms of reference and accountability
are laid out for committees at Board
and executive levels. There is effective
communication and information-sharing
outside of meetings.
The Group operates an ‘open-door’ policy.
• Application of Group decisions and policies
by all Ecobank Group member companies
is subject to applicable local laws and
regulations. Where there is a conflict
between Group Policy and local laws and
regulations, local laws and regulations
shall prevail.
The following are the governance units
within the Group:
• The parent company Board of Directors
• Country Board of Directors
• Group Executive Committee
• Country Executive Management
Committee
• Business Leaders’ Conference
Appropriate sub-committees are also set up,
either on a permanent or ad hoc basis, to
handle issues as they arise. A brief overview
of the roles and responsibilities of each of the
governance units is provided below.
Parent Company Board of Directors
The Board of Directors of ETI is elected
by, and accountable to, the company’s
shareholders for the appropriate and
effective administration of the Ecobank
Group. Their primary responsibility is to
foster the long-term success of the company,
consistent with its fiduciary responsibility to
the shareholders.
The Group’s governance charter requires
the Board of Directors to be guided by the
following principles:
• Ensure clear delineation and segregation
of responsibilities between executive
management and Board to ensure
non-interference of the Board in the
operational management of the Group.
• Exercise objective judgment on corporate
affairs, independent of executive
management.
• Take actions on a fully informed basis, in
good faith, with due diligence and care
and in the best interest of the Group and
its shareholders.
• Comply with applicable laws and
regulations in line with Group strategy and
direction.
• Respect that local legislation is to prevail
in the event of any conflict between Group
policies and local laws.
• Operate in transparency to avoid conflict
of interest between Directors and the
business of the Ecobank Group.
• Ensure full disclosure of accurate, adequate
and timely information regarding personal
interests of Directors.
The Group Corporate Governance Charter
requires that there are more non-executive
Directors than executives on the Board.
As at the end of 2013, the membership
of the Board was seventeen, comprising
six executive and eleven non-executive
Directors. On 29 October 2013, Mr. Kolapo
Lawson stepped down as Chairman, with the
Vice-Chairman, Mr. André Siaka, taking over
as interim Chairman of the Board of Directors
on the same date. Mr. Lawson retired from
the Board on 31 December 2013.
Subsequently, Mr. Paulo Gomes resigned
from the Board on 22 January 2014. Messrs.
Isyaku Umar and Babatunde Ajibade also
resigned from the board on 6 February 2014.
Mrs. Laurence Do Rego was suspended from
her position as Group Executive Director,
Finance and Risk, in August 2013 but was
subsequently reinstated.
69
The Board has three committees, namely,
the Governance Committee, the Audit
and Compliance Committee and the Risk
Committee. The Board of Directors met
eight times during the year, while each of
the three committees met four times to
deliberate on issues under their respective
responsibilities.
Governance Committee
Composition and attendance
Mr. Kolapo Lawson resigned from the
committee in October 2013 and was replaced
as Chairman by Mr. André Siaka.
The Group General Counsel and Company
Secretary is the Secretary to the Committee.
Responsibilities
• Formulates, reviews and generally ensures
implementation of policies applicable to
all units of the Group and ensures good
governance throughout the Group.
Board Composition and Attendance
Name
Kolapo Lawson
André Siaka
Sena Agbayissah
Babatunde Ajibade
Kwasi Boatin
Paulo Gomes
Bashir Ifo
Assaad Jabre
Sipho G. Mseleku
Isyaku Umar
Daniel M. Matjila
Thiery Tanoh
Albert Essien
Evelyne Tall
Laurence do Rego
Patrick Akinwuntan
Eddy Ogbogu
Role
Chairman
Vice Chairman
Non-Executive
Non-Executive
Non-Executive
Non-Executive
Non-Executive
Non-Executive
Non-Executive
Non-Executive
Non-Executive
Executive
Executive
Executive
Executive
Executive
Executive
Year appointed to Board
1993
2006
2011
2010
2009
2006
2011
2010
2009
2006
2012
2012
2005
2005
2010
2012
2012
Number of Meetings held
8
8
8
8
8
8
8
8
8
8
8
8
8
8
8
8
8
Number of Meetings attended
4
7
8
8
8
4
8
8
6
7
4
8
6
6
2
8
8
Governance Committee Composition and Attendance
Name
Kolapo Lawson
André Siaka
Bashir Ifo
Sipho G. Mseleku
Thierry Tanoh
Role
Chairman
Member
Member
Member
Member
4
4
4
4
4
3
3
4
4
4
70
• Manages the relationship between
the company and its shareholders and
subsidiaries, including relationships with
the Boards of subsidiaries.
• Formulates new, and reviews existing,
Group-wide policies including
organizational structure.
• Handles relationships with regulators and
third parties.
• Manages Board affairs in between the
meetings of the Board or when the Board
is not sitting.
• Recommends the appointment of
executive and non-executive Directors.
• Reviews the human resources strategy and
policies of the Group and the remuneration
of senior executives.
Audit and Compliance
All members have relevant business
knowledge and skills and familiarity with
accounting practices and concepts. On
the recommendation of the SEC/KPMG,
a decision has been made not to include
executives as members of the Audit and
Compliance Committee going forward.
The Group Head of Audit serves as the
Secretary to the Committee.
Responsibilities
• Reviews internal controls including
financial and business controls.
• Reviews internal audit function and audit
activities.
• Facilitates dialogue between auditors
and management regarding outcomes of
audit reviews
• Makes proposals with regard to external
auditors and their remuneration.
• Works with external auditors to review
annual financial statements before full
Board approval.
• Ensures compliance with all applicable
laws, regulations and operating standards
Risk Committee
Members have good knowledge of business,
finance, banking, general management and
credit. On the recommendation of the SEC/
KPMG, a decision has been made not to
include executives as members of the Risk
Committee going forward.
The Group Head of Risk Management serves
as Secretary to the Committee.
Responsibilities
• Initiates the determination and definition of
policies and procedures for the approval of
credit, operational, market/price and other
Name
Kwasi Boatin
Sena Agbayissah
Paulo Gomes
Evelyne Tall
Assaad Jabre
Patrick Akinwuntan
Role
Chairman
Member
Member
Member
Member
Member
4
4
4
4
4
4
4
4
3
3
4
4
Role
Chairman
Member
Member
Member
Member
4
4
4
4
4
3
4
3
4
3
Member
Member
4
4
4
1
Risk Committee
Name
André Siaka
Babatunde Ajibade
Isyaku Umar
Thierry Tanoh
Albert Essien
Eddy Ogbogu
Laurence do Rego
risks within the Group; defining acceptable
risks and risk acceptance criteria.
• Sets and reviews credit approval limits
for management.
• Reviews and ratifies operational and credit
policy changes initiated by management.
• Ensures compliance with the
Bank’s credit policies and statutory
requirements prescribed by the regulatory
or supervisory authorities.
• Reviews periodic credit portfolio reports
and assesses portfolio performance.
• Reviews all other risks, i.e. technology,
market, insurance, reputation,
regulations, etc.
Subsidiary Boards of Directors
Ecobank subsidiaries operate as separate
legal entities in their respective countries.
ETI is the majority shareholder in all the
subsidiaries but host country citizens and
institutions are typically investors in the local
subsidiaries. Each subsidiary has a Board of
Directors, the majority of whom are nonexecutive Directors.
The Group Governance Charter requires
that country Boards be guided by the same
governance principles as the parent company.
As a rule, but subject to local regulations and
the size of the Board, the Boards of Directors
of subsidiaries have the same number of
committees as the parent company. However
this may differ from time to time depending
on local regulatory requirements.
The Boards of Directors of the subsidiaries
are accountable to the subsidiaries’
shareholders for the proper and effective
administration of the subsidiaries in line
with overall Group direction and strategy.
These Boards also have statutory obligations
based on company and banking laws in the
respective countries. In the event of any
conflict between the Group policies and local
laws, the local laws prevail.
Group Executive Committee
In 2013, the Group Executive Committee
(GEC) comprised the Chief Executive Officer
and five other Executive Directors. Four other
Group executives participate in the meetings
of the GEC as attendees. The Group General
Counsel and Company Secretary served as
secretary to the GEC. The GEC meets monthly
and is responsible for the day-to-day
operational management of the Group and
its subsidiaries.
The GEC is responsible to the Board and plays
an important role in the Group’s corporate
governance structure. The GEC manages
the broad strategic and policy direction of
the Group, submits them to the Board for
approval where necessary, and oversees
their implementation.
The GEC has decision-making powers in
specific areas of Group management. In
particular, the GEC works with, and assists,
the Chief Executive Officer to:
• Define and develop Group strategy.
• Confirm alignment of individual
subsidiaries’ plans with overall
Group strategy.
• Track and manage strategic and business
performance against plan.
• Implement Group policy and decisions.
• Make recommendations on various issues
relating to staff.
• Track and monitor progress and
accomplishments on major Group
initiatives and projects at subsidiary level.
• Recommend opening or closing
of subsidiaries.
• Articulate appropriate response to
environmental factors, regulations,
government policies, competition and
other such issues across the Group.
• Articulate policies for advancing
Group objectives.
• Make important decisions in areas
where delegation of authority is granted
to the GEC.
Business Leaders’ Conference
The Business Leaders’ Conference is a
collegial meeting of all subsidiaries’
Managing Directors and Group Functional
Heads for reviewing and embedding Group
strategy and policies.
The Business Leaders’ Conference is the
primary coordinating body for Group cohesion
and integration and the actualization of
Group strategy.
The Conference is a consultative body – not a
decision-making body. Its role includes:
• Sharing and disseminating information,
experiences and best practice across
the Group.
• Initiating policies that encourage integration
and promote the ‘One Bank’ concept.
71
72
• Promoting integration and standardization
of Group policies and procedures.
• Promoting and monitoring compliance
with Group operational standards.
• Contributing to the formulation of
Group policies.
Country Executive Management
Committee
The Country Executive Management
Committee consists of the Country Head and
other senior executive members of each
subsidiary. In addition to the day-to-day
management of the subsidiary’s operations,
the role of a Country Executive Management
Committee includes the following:
• Managing the strategic objectives of
the country’s operation in line with
Group strategy.
• Defining overall business goals and
objectives for the country’s operation.
• Ensuring alignment of operating plans
with overall Group strategy.
• Approving business unit direction
and strategies.
• Making decisions on operating plans
and budgets.
• Reviewing the financial reporting and
control framework.
• Tracking and managing country strategy
and business performance against plan.
• Tracking and monitoring progress and
accomplishments on major initiatives and
projects at country level.
• Articulating appropriate response to
environmental factors, regulation,
government policies, competition and
other such issues in the country.
• Articulating policies for advancing business
objectives in the country.
• Advising the parent company on
adaptation of overall strategy to the
specifics of the local environment.
• Advising on local laws and regulation
impacting on Group policies.
Board and Executive remuneration
The Remuneration of senior executives is
one of the responsibilities of the Corporate
Governance Committee. Consistent with our
objective of being an employer of choice
in our markets and attracting the best
talent, senior executives are compensated
with a mix of both fixed compensation
(salary, benefits and pension) and variable
compensation (bonus and share options
scheme). The total remuneration paid to
Group Executive Directors during the year
amounted to US$5.935 million.
Non-Executive Directors’
remuneration
Non-executive Directors receive fixed fees
of US$100,000 per annum for services
on the Board of ETI. The Vice-Chairman
receives US$120,000 and the Chairman
receives US$150,000. In addition, Directors
receive sitting allowance as follows for
each meeting: Chairman – US$1,000;
Vice Chairman – US$900 and other
members – US$75O.
Non-executive Directors do not receive
any short-term or long-term performance
incentives.
Subject to shareholders’ approval, the Board
may propose a final discretionary payment to
retiring Directors.
73
Directors’ interests in ETI ordinary
and preference shares
The Directors’ interests in the issued ordinary
and preference shares of the Company as
at the date of the statement of financial
position are disclosed in the tables below.
Directors’ interests in ETI ordinary shares
Name
Direct
2013
2012
Indirect
2013
2012
Total
2013
2012
Kolapo Lawson
André Siaka
Sena Agbayissah
Babatunde A M Ajibade
Kwasi A Boatin
Paulo Gomes
Bashir M Ifo
Assaad J Jabre
Sipho G Mseleku
Isyaku Umar
Albert Essien
Evelyne Tall
Laurence do Rego
Thierry Tanoh
Daniel Matjila
Patrick Akinwuntan
Eddy Ogbogu
–
1,183,500
–
–
21,026
–
5,000
–
–
608,235
932,600
1,023,400
1,591,987
–
–
1,703,656
–
–
1,146,000
–
–
21,026
–
–
–
–
608,235
932,600
1,023,400
1,591,987
–
–
1,683,660
–
48,754,802
–
–
–
–
–
225,196,010
–
–
–
–
–
–
–
–
18,482
–
49,520,334
–
–
–
–
–
225,196,010
–
–
–
–
–
–
–
–
–
–
48,754,802
1,183,500
–
–
21,026
–
225,201,010
–
–
608,235
932,600
1,023,400
1,591,987
–
–
1,722,138
–
49,520,334
1,146,000
–
–
21,026
–
225,196,010
–
–
608,235
932,600
1,023,400
1,591,987
–
–
1,683,660
–
Total
7,069,404
7,006,908
273,969,294
274,716,344
281,038,698
281,723,252
Directors’ interests in ETI preference shares
Name
Direct
2013
2012
Indirect
2013
Isyaku Umar
Bashir M Ifo
2,675
2,140
2,675
2,140
–
–
Total
4,815
4,815
–
Total
2013
2012
–
–
2,675
2,140
2,675
2,140
–
4,815
4,815
2012
74
Executive share options
Shareholders’ Rights
The group awards share options to key staff
as a means of retaining staff. Under the
scheme 10% of the issued capital of the
company at any point in time may be issued
to employees. As at the end of 2013 a total
of 422 million outstanding option shares,
representing only 2.5% of the total issued
shares, had been granted to a total of 153
employees group wide under the options
scheme, of which 74.3% have vested and
could be exercised at any point in time; the
remainder is due to vest in 2015.
The Board has always placed considerable
importance on effective communication
with its shareholders. It ensures that the
rights of shareholders are protected at all
times. Notice of meetings and all statutory
notices and information are communicated to
shareholders regularly.
Shareholders are encouraged to
communicate their opinions and
recommendations whenever they see
the need to do so, to either the Investor
Relations team and/or the Company
Secretary. Their contact details are available
on the Bank’s website.
75
Executive share options
Opening balance at 1 January 2013
Number of options
(thousands)
Date of issue
Exercise price
Exercisable from
Expiry date
2010 tranche executive options
122,999
1 Jan 2007
US$0.08
1 Jan 2010
31 Dec 2016
2012 incoming CEO options
57,372
49,199
100,000
112,500
1 Jan 2007
1 Jan 2007
16 Jul 2012
1 Jan 2012
US$0.08
US$0.08
US$0.063
US$0.08
1 Jan 2011
1 Jan 2012
16 Jul 2012
1 Jan 2015
31 Dec 2016
31 Dec 2016
16 Jul 2017
31 Dec 2016
Total
442,070
Closing balance at
31 December 2013
(thousands)
Tranche of options
Exercised or cancelled during 2013
Number of options
(thousands)
Date of exercise/
cancellation
Exercise price
Exercisable from
2012 incoming CEO options
15,950
–
–
–
4,000
31 Dec 2013
n/a
n/a
31 Dec 2013
n/a
n/a
Total
19,950
Tranche of options
107,049
57,372
49,199
100,000
108,500
422,120
76
1. Managing Sustainability
Development
Sustainable development is about
‘meeting the needs of current generations
without compromising the needs of future
generations to meet those needs ’. Ecobank
started operations in 1988 and ever since
has acted as a development stakeholder to
transform and positively impact the lives of
its customers, shareholders and employees.
In its 25 years of existence, Ecobank has
endeavored to bring about positive change
and promote environmental sustainability
through banking and finance, its core
competency.
The Bank is currently present in 35 countries
in sub-Saharan Africa and four global
business capitals (Paris, Dubai, London and
Beijing). This geographical spread asserts
its credentials as a truly pan-African and
increasingly global bank which remains
committed to the sustainability of its
business activities, clients and communities
where it operates.
At Ecobank, we believe that our business can
only thrive over the long term if we pursue
sustainable and responsible banking, as a
balance between financial, socio-economic
and environmental issues. We provide
common strategic direction and standards on
sustainability by setting the tone at the top
through our governance structure comprising
Group Board of Directors, Country Board of
Directors, Group Executive Committee, the
Group Management Committee and Country
Executive Management Committee. We
ensure the buy-in of all stakeholders, while
specific sustainability issues are addressed
by country subsidiaries, business units, and
relevant staff.
2. Sustainability Framework
We continue to ensure that our human ,
natural, economic and social capitals are
being utilized effectively, efficiently and in a
sustainable manner. We remain committed
to driving economic transformation in Africa,
protecting our environment, and being a
socially responsible financial institution. We
reaffirm our Sustainability Framework with
focus on:
• Our stakeholder’s approach to sustainable
development
• Our need to balance profitability with the
fight against poverty and protection of
our planet
• Our taking seriously the welfare and
development of the communities in which
we operate
• Our consistent factoring of social and
environmental concerns into our business
operations.
Ecobank Sustainability Framework
Driving economic transformation
Social responsible Finance
•
•
•
•
•
•
•
Creating economic value
Fostering integration
Partnership for development
Microfinance and microbanking
Women in business
Ecobank Foundation
Community engagement
Protecting natural resources:
environmental sustainability
Human Capital: attracting and
retaining employees
•
•
•
•
•
•
•
Risk management
Green business
Global initiatives
Internal carbon footprint
management
Diversity and culture
Training and development
Pan-African spirit
Sustainability Performance
3. Driving Economic Transformation
Over the years, we have undertaken
development activities through collaborative
engagement. We have adapted several
platforms to create and deliver socioeconomic values through our financial
products, models and markets for long term
sustainability as well as contributed through
diverse ways, to the economic and financial
development in countries where we are
present, as reflected below:
3.1 Creating Economic Value
We generated revenues of over US$2 billion
in 2013. We have provided loans and other
financial assistance of over US$11 billion to
support private sector companies, enterprises,
individuals as well as the public sector in
Africa. These economic benefits have been
distributed and applied in the form of taxes,
salaries, operating expenses, dividends and
retentions to support our future growth.
We contributed to governments’ finances
through tax remittances and duties payments
to the tune of US$333 million. This Total Tax
Contribution (TTC) consists of four types of
taxes, namely the consumption taxes, the
corporate taxes, people taxes and Stamp
duties.
Consumption taxes at 36% represent the
highest amount of contributions made by
Ecobank Group in 2013. This is a testament
to the spread of Ecobank’s banking activities
in Middle Africa and beyond. They include
value added tax, customs duties, tax on
banking activities, tax on money transfers,
withholding taxes on imported services and
vehicle taxes among others.
People taxes at 34% are the evidence
of Ecobank investment in human capital
development, especially in the African
Continent. They include employment
income tax, employees’ social security
contribution (SSC), payroll taxes and other
related contributions.
During the year 2013, the Ecobank Group
contributed a total ‘value added’ amount of
over US$1.5 billion to various stakeholders,
as detailed in the table below.
Breakdown of Value Added
Value Added
(US$ thousands)
Stakeholder
Suppliers of Funds
Shareholders/Reinvestment
Employees
Government
Government
Financing Interest
Profit After Tax
Wages and Salaries less
Employment Taxes
Tax Borne
Tax Collected
548,998
147,773
525,861
122,487
210,747
Total
1,555,866
Total tax contribution by cluster 2013 (in US$ thousands)
121,728
65,817
63,241
48,609
14,484
14,823
4,533
Nigeria
WAMZ
UEMOA
CEMAC
SADC
EAC
International
77
Value added by Ecobank Group
as at Dec 2013
Financing Interest
Profit After Tax
Wages and Salaries
Tax Borne
Tax Collected
35%
9%
34%
8%
14%
78
Corporate taxes represent 28% of total
Total Tax Contribution in 2013. In total,
Ecobank affiliates paid over US$55 million, in
compliance with country tax requirements.
Property taxes and other levies derive
from compliance of Ecobank entities and
their partners, to the tax imposition on the
ownership, sale, transfer or occupation of
property. They include business taxes, bank
levies, stamp duties and other duties.
Additionally, Ecobank has also created
value in the energy sector. In Ghana and
Côte d’Ivoire, Ecobank has structured trade
facilities for the importation of crude oil and
other raw materials to boost the generation
of electricity. In Ghana, we also funded the
country’s national electricity company’s
pre-paid meter project. This effectively
positioned Ecobank as a financial partner of
the Electricity company.
Similarly, in Chad and Burkina Faso, Ecobank
is funding diverse stakeholders in the
cotton industry to increase the region’s
current modest contribution to global
cotton production. Our support to the cotton
stakeholders has contributed to the growth
of agribusiness value-chain financing, which
has reduced post-harvest losses as well as
improved the price paid to cotton producers
in both countries.
In Africa’s most populous country, Nigeria,
which has over 177 million inhabitants ,
Ecobank has provided a term loan facility to
the Federal Mortgage Bank of Nigeria for the
construction of real estate, mostly in Lagos,
the biggest city in Africa.
In addition, we ensure that all Public
Corporate transactions that involve a
significant economic expansion are reviewed
against the Ecobank Environmental and
Social Management System (ESMS) as well
as the International Finance Corporation’s
performance standards for Environment
Social and Governance framework.
3.2 Fostering financial and economic
integration
Africa’s challenges often require a panAfrican solution—harmonized policies,
free cross-border trade, free movement of
capital, people and goods. With our panAfrican approach to banking and finance, we
have been contributing to the financial and
economic integration of African countries.
Our integrated competencies are unique in
Middle Africa. We have built economies of
scale with extensive coverage across Africa
in 35 countries. We have 1,284 branches and
offices and enable access to cash 24/7 at
2,314 ATMs and over 10,000 points of sale
(POS) in Africa. No other bank in Africa has
such breadth of coverage. We are making
cross-border transactional banking more
convenient, accessible, and efficient. The
countries in which we operate have large
numbers of migrant workers. Recognizing
this, we created our unique Rapid Transfer
product which is increasingly gaining market
share amongst money transfer services in
the region. This product enables clients to
receive or remit funds between countries in
our footprint.
Our transformational banking solution is
premised on the need to support Africa’s
trade and infrastructure development
through private-public partnership and
regional integration. This offers us the
opportunity to finance projects of larger scale
at lower unit costs. We leverage African trade
corridors across the various sub-regions by
providing integrated trade solutions using
various payment methods to facilitate intraAfrican trade. The continent is witnessing the
rise of businesses that are often considered
emerging regional champions. Our unique
‘One Bank’ platform enables us to serve
these regional corporates seamlessly. This
regional approach is further cemented by
our Ecobank-Nedbank Alliance. We have also
become the gateway for international banks
seeking to provide services to their clients
operating in Africa.
In the bid to support African businesses,
the Bank has continued to work on an
agri-business initiative with the support of
OPIC, the US Government’s Development
Finance Institution. The aim of the initiative
is to enable Processors to support contracted
out-growers with finance to cover inputs such
as fertilizer, pesticides and seeds. The US$60
million initiative will lend US$3 – 5 million to
individuals in up to eight countries, that may
include Nigeria, Burkina Faso, Benin, Côte
d’Ivoire, Tanzania, Rwanda and Niger to assist
in the production of nuts and ingredients for
beverages. The project will provide technical
assistance to support the farming groups and
at least 25% of their crop sales will be to
the United States. The Bank is also working
with Technoserve, a highly reputable US
non-governmental organisation (NGO), to
come up with a business plan based on field
studies in two of the target countries.
In the Healthcare sector in 2013 the Bank
worked with Pledge Guarantee for Health,
a ‘Not for Profit’ that has been spun out
of the UN Foundation and is based in
Washington DC. It has been working on
a structure whereby local banks in Africa
will provide bridging loans, most often
to Ministries of Health, against donor
pledges from respected entities such as
The World Bank or the Global Fund. The
initiative is supported by the US Agency for
International Development (USAID) and the
Swedish International Development Agency
(SIDA). EBI SA (Paris) is at the heart of this
initiative as the arranger with local Ecobank
subsidiaries providing the bridging loans.
3.3 Partnership for Development
The Global Fund
In December 2013, Ecobank Transnational
Incorporated (‘Ecobank’) and the Ecobank
Foundation (‘the Foundation’) announced
a joint 3-year partnership, with the option
for a 2-year extension, with the world’s
largest health donor organization of its kind,
the Global Fund to Fight AIDS, Tuberculosis
and Malaria (‘the Global Fund’). Ecobank
committed a minimum contribution of US$3
million over the period, comprising both
direct financial support and in-kind service
contributions.
As part of this project Ecobank and the
Foundation will be partnering with the
Global Fund in innovative regional and
country specific financing programs that will
help strengthen the financial management
capabilities of grant recipients. This will
include the provision of pro bono training and
mentoring in financial management skills,
accounting and reporting to facilitate grant
applications, as well as the implementation
and evaluation processes.
In the press release issued at the end of
2013, Mark Dybul, Executive Director of the
Global Fund, observed: “Ecobank is a natural
partner for us with our work supporting
programs in sub-Saharan Africa. Ecobank’s
commitment to offer services to strengthen
the financial management capabilities of
grant recipients will help to facilitate the
Global Fund’s local outreach to the most
vulnerable in Africa.”
One Family Health/GlaxoSmithKline
2013 saw the further development of the
partnership between One Family Health
(OFH) Foundation, GlaxoSmithKline, Ecobank/
Ecobank Foundation and the Rwandan
Ministry of Health, in a coordinated effort
to establish 240 healthcare dispensaries
across Rwanda over the next three years.
With support from the Ministry of Health,
this innovative private/public partnership
was set up with the aim to increase access
to high quality essential medicines and basic
healthcare for around two million people per
year in rural communities in Rwanda.
The dispensaries will operate under a
business-format franchise network run by
experienced nurses. The franchisor (OFH)
will provide nurses joining the franchise with
access to financing and training in finance
management, enabling them to earn a living
whilst also increasing access to high quality
essential medicines and basic healthcare for
their local communities.
Ecobank Rwanda is supporting OFH with a
loan that, in turn, it will use for supporting up
to 180 franchisees. In addition, the Ecobank
Foundation has agreed to provide an interest
rate subsidy over 5 years that will make the
loans affordable for the nurse franchisees.
3.3.1 Banking for the public sector
Ecobank’s goal is to be the preferred bank for
the public sector business in Africa. In 2013,
we redefined and re-focused our strategy
for the sector taking into consideration
the evolving dynamics of the public sector
business which now includes all tiers of
government: central, states, and local; the
education sector; and public projects financed
by bilateral and multilateral donors.
We have placed emphasis on delivering value
chain services to public sector clients and
their various stakeholders, i.e. civil servants,
teachers, health workers, contractors, and
suppliers. We provide customized products
and services for public sector deposits,
collections, payments, cash management
solutions, payroll administration, and
project accounts. We provide advanced
payment guarantees to contractors, supplier
payments and credits, and services for civil
servants. In the education sector, we provide
banking services for school fees collections,
salaries, and bursary payments. The Ecobank
Foundation also supports corporate social
responsibility causes in education and health.
79
80
In Nigeria, Ecobank participated as an
issuing and receiving bank for bond issuance
to finance socio-economic infrastructure
projects in Lagos, Osun and Ekiti States.
Ecobank also won the mandate for the salary
administration of Abia State with expected
salary payments of about US$10 million;
while it approved a loan of about US$100
million to the Bayelsa State Government for
airport infrastructure financing.
In Ghana, Ecobank is a major banking partner
to various government entities including:
the Ministry of Local Government, Ministry
of Roads and Highways, in particular in
respect of the Abidjan-Accra-Lagos Trade
and Transport Project; the oil and gas project
of the Ministry of Energy, Ghana Road Fund
Secretariat, and the Export Development and
Agricultural Fund.
In Liberia Ecobank remains the bank of
choice for public sector. The Monrovia City
Corporation is in partnership with Ecobank
for daily collection of municipal taxes, fines,
and fees in the City. Negotiations have also
been concluded with the Ministry of Finance
for Ecobank to carry out collection of customs
taxes and internal revenue on behalf of the
Ministry. Ecobank signed a Memorandum of
Understanding with the Ministry of Transport
to carry out collection of revenue from sales
of motor vehicle license plates and stickers.
Ecobank Liberia is also now the main banker
to the Small Holder Tree Crop Revitalization
Support Project in the Ministry of Agriculture
funded by IFAD.
Ecobank Benin is the bank of choice to
provide support to the government: for
example, we participated in the organization
of the 2013 Hajj and offered financial
products to the pilgrims. As a leading bank,
we financed the 2013-2014 cotton ginning
campaign for US$85 million. Ecobank Benin
also financed the construction of Tourou
airport for US$30 million.
Ecobank Côte d’Ivoire participated in a
fundraising of US$310 million for Road
Maintenance Fund, underwriting more than
a third of the required funding. We tendered
for the scholarships payment of US$20
million annually to over 20,000 students.
Ecobank Senegal signed an agreement with
the Tax department to collect electronically
taxes, duties and levies starting in 2014. An
agreement has also been reached to enable
traders to pay duties electronically to the
Customs department. Ecobank Togo has
presented to the government an electronic
platform, Omni to collect Customs duties and
to facilitate treasury management. Ecobank
Guinea-Bissau is the bank of choice to collect
all taxes and duties for the government.
Sustainable finance products
Financial
Inclusion
SME
Banking
Innovative
Financial
products
Green
Business
Finance
Microfinance
SME Banking
Mobile Banking
Sustainable
Energy Finance
Micro Banking
Agribusiness Finance
Diaspora Banking
Climate Change
Adaptation
Women
in Business
Trade Finance
Rapid Transfer
Environmental
and Social
Assessments
In Cameroon, Ecobank Cameroon provided
over 3,000 prepaid cards to pensioners to
facilitate their banking transactions. We also
signed a Memorandum of Understanding
with the University of Buea that includes
collection of fees, sale of prepaid cards
and various other products to their staff
and students. Ecobank Chad granted a
US$70 million loan to the government for
infrastructure development. We have also
financed the acquisition of 400 vehicles for
the various ministries for a total amount
of US$20 million. Ecobank Gabon financed
the set up of the Economic Zone (GSEZ) in
combination with Olam International Group
for US$38 million. In DR Congo, Ecobank is the
preferred bank for civil servants for opening
an account to receive their salaries, with over
100,000 such accounts opened in 2013.
4. Socially Responsible Finance
In 2013, we further strengthened our
position as a socially responsible bank
through our sustainable banking solutions
comprising inclusive financing, SMEs banking,
innovative financial products, and green
business finance.
4.1 Microfinance and SMEs
Ecobank Group remains committed to playing
a key role in empowering low income
but active micro and small entrepreneurs
in Africa through wholesale and retail
microfinance activities.
The prime objective of Ecobank microfinance
is to provide financial services to the
low income, unbanked or under-banked
population. As illustrated in the figure below,
the millions of people in sub-Saharan Africa
who live at or below the poverty line need
tailor-made financial products and services,
access to capital and financial education for
smoothing consumption, to create wealth
and generate employment.
Microfinance
Ecobank now has microfinance banking
subsidiary and associated companies
in 5 countries reaching over 300,000 clients;
• Burkina Faso – SOFIPE Limited
• Cameroon –
EB-Accion Microfinance Limited
• Ghana – EB-Accion Microfinance Limited
• Nigeria – Accion Microfinance Bank Limited
• Sierra Leone –
Ecobank Microfinance Limited.
Ecobank as Banker of Choice for
Microfinance entities
In addition to its own microfinance
operations, Ecobank is the main banker and
partner to most of the leading microfinance
institutions and cooperatives in many of the
countries where Ecobank is present; with an
indirect reach to over 10 million microfinance
clients. Ecobank’s wholesale microfinance
program is probably the largest linkage
program with microfinance operators in
Middle Africa
Ecobank is striving to serve the
approximately 47 million people who
constitute the bottom 40% of the 116 million
bankable population in SSA (Source: Ecobank
Group Research)
Unbanked and under-banked population in sub-Saharan Africa
The ‘Bottom 40%’ have very limited access (million people)
Bankable SSA population (million people)
Banked population
69.8
Access to formal financial services 6.5
‘Bottom 40%’ (under-banked)
46.6
Limited access
No access to financial services 368.6
40.0
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RapidTransfer customer at Ecobank branch.
Ecobank Group’s microfinance operations
show a strong growth trajectory across all
key metrics.
Ecobank’s success story is in building
successful financial inclusion distribution
networks/partnerships, and in
creating opportunities by employing
technology‑enabled delivery models such
as mobile banking as well as innovative
approaches to risk management. All the key
performance indicators (revenue, deposits,
loans, number of savers and borrowers) of
Ecobank Group’s microfinance operations
from 2011 to 2013 showed positive growth.
The graphs below depict revenue growth
of 19% or US$1.6m in 2012 and 33% or
US$3.3m in 2013. Deposits increased by 19%
in 2012, with slower growth of 4% in 2013;
and outstanding loans recorded growth of
44% and 21% in 2012 and 2013 respectively.
Outreach showed significant improvement in
2012 and 2013. Savers increased by 24% in
2012 and 19% in 2013, with borrowers also
increasing by 52% in 2012 and 29% in 2013.
Revenue
Deposits
(US$’000)
(US$’000)
24,537
13,385
25,622
20,656
10,078
8,413
2011
2012
2013
Outstanding Loans
2011
2012
4.2. Ecobank RapidTransfer enabling
Diaspora Banking Experience
There are about 13 million African
migrants living in African countries where
Ecobank has a presence (Group Ecobank
Research). These migrants often find it
difficult to remit money back home to cater
for loved ones. Where remittance services
exist, they can be expensive.
Ecobank RapidTransfer is a proprietary
money transfer product that has crossborder functionality and capability as well
as handling domestic transfers. It can be
used in any of our branches and is easy to
use, fast and convenient. It offers traditional
over-the-counter collections but much
more importantly, it enables a migrant
worker to maintain savings in his home
country through the direct credit of funds
into accounts maintained at Ecobank. We
achieve this through tailor-made Diaspora
accounts which we offer to Africans who are
migrant workers.
The specific focus on the migrant worker
has always influenced the pricing of
Rapid Transfers at Ecobank and we are
pleased to say that there has been a
general price reduction for remittances
in sub-Saharan Africa. The World Bank in
its recent ‘Worldwide Remittances Price’
review indicates that the average rate
for remittances in sub-Saharan Africa in
the last quarter of 2013 is 12.55% as
compared to rates in the region of 18% –
20% in prior years.
2013
Number of Borrowers
Number of Savers
(US$’000)
193,396
24,948
29,991
162,714
23,893
20,559
131,562
14,306
2011
15,765
2012
2013
2011
2012
2013
2011
2012
2013
Furthermore, with RapidTransfer, an African
in the Diaspora does not suffer double
foreign exchange impact. Funds are remitted
in the currency of a country where a migrant
resides and payment done in the currency of
a beneficiary’s country. This unique attribute
from Ecobank’s products and services is
really helping to bridge the gap in financial
intermediation in Africa.
Today, we have nearly one million Africans
using our RapidTransfer service and we plan
to expand this base to allow more migrants
access and at affordable pricing.
Ecobank has also undertaken an extensive
program of initiatives to promote financial
inclusion and to bring African migrants into
mainstream banking. These initiatives on the
ground allow them to open bank accounts
and securely mobilize much of their savings
to their home country.
5. Social Responsibility
At Ecobank, we believe we have a role to
play in building a better world for future
generations. We measure our success not
only by financial criteria, but also by focusing
on customer satisfaction and employee
engagement as well as supporting the
communities in which we operate. We strive
to make a real difference in the communities
where we operate. So every year, we spend
more time and resources of our workforce to
serve our communities.
In 2013, we continued to grow the impact
of our charitable programs by creating real
opportunities for our employees to get
involved and make the link with the people
and communities we support through
positive and inspiring projects.
5.1 The Ecobank Foundation
Founded in 2005, The Ecobank Foundation
is a response to the desire of the Ecobank
Group to include the individual at the heart
of its business plan.
In accordance with the mission and vision
of the Group, the Foundation works for
wellness and a better future for communities
in which the Group operates, focusing on
innovative projects that promote creativity,
excellence and regional integration in the
following main areas:
• Entrepreneurship (especially in rural areas)
• Education
• Health
• Community development.
Each year ETI commits up to 1% of its profit
after tax to the Foundation.
In 2013, ETI provided the Foundation with
US$1.1 million, with 70% of interventions
devoted to projects in the field of health,
25% in education and 5% for cultural and
scientific research.
5.2 Community Engagement
As a responsible employer, we encourage our
employees to give some of their time and to
use their professional skills to communities in
order to create positive change. Whether it is
across the Group, or in the subsidiaries or at a
personal level we are very active in Africa in
the field of community engagement.
5.2.1 Special Community Event:
Ecobank Day
In 2013, our staff dedicated a day of their
time to community engagement projects for
the inaugural ‘Ecobank Day’ on 5 October.
The event, which will be held annually, has
been set aside to celebrate Ecobank’s vision
of contributing to the economic development
and financial integration of Africa. Africa is
the heart of Ecobank and we are absolutely
committed to its future. We conduct
business, develop ourselves and make profits
based on our daily interactions with our
communities. It is therefore right for us to
give back by contributing both financially
and through our own energy to improve the
communities that have welcomed us and
in whose territories we work.
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Projects funded by Ecobank Foundation in 2013
Building a brighter future for school children
Area of intervention:
Amount:
Beneficiary:
Purpose:
Ecobank Foundation project at a school in
Dominase in Ghana.
Education
US$70,495
The SABRE Charitable Trust in partnership with Ghana Education Service
Construction of a sustainable kindergarten complex in the village of Dominase
in Cape Coast, Ghana.
The Ecobank Cancer Caravan in Kenya
Amount:
Beneficiary:
Purpose:
Health
US$13,647
The Kenya Medical Women Association and The Kenyatta National Hospital (KNH)
Awareness creation of cancer as a growing lifestyle disease in Kenya, a disease
that is claiming lives of citizens at an alarming rate with emphasis on prostate
and cervical cancer.
Young Scientists Tanzania
Renovation of the admission ward in Adjido
Hospital in Aneho, Togo.
Amount:
Beneficiary:
Purpose:
Education
US$25,000
Young Scientist Tanzania
Promotion of science and technology among the Tanzanian youth through
an annual science exhibition and competition. Students from over 60 schools
from 16 regions in the country participated in the competition by showcasing
innovative technologies taking advantage of locally available materials to
develop useful products that can be sold in the global market.
Purchase of a 15-seater bus for an orphanage in Lagos, Nigeria
Amount:
Beneficiary:
Purpose:
Education
US$35,000
Vigilant Heart Charitable Society Orphanage
Purchase of a 15-seater bus to solve the problem of transportation faced by the
orphanage when sending the children to schools in various locations in Lagos and
back to the orphanage.
Construction and equipment of a computer room with internet access in Mali
Amount:
Beneficiary:
Purpose:
Education
US$35,000
Ecole de Dio Gare in Bamako, Mali
Financial support for the construction and equipment of a center to facilitate
the access to the New Information Technologies for the School Improvement
by students.
Wall fencing round the premises Shehu Malami Primary and Secondary School in Sokoto, Nigeria
Amount:
Beneficiary:
Purpose:
Education
US$90,000
Shehu Malami Primary and Secondary School
Wall fencing round the premises of the school to guard against encroachment
and trespass.
Renovation of the admission ward in Adjido Hospital in Aneho, Togo
Amount:
Beneficiary:
Purpose:
Health
US$18,000
Aquereburu and Partners Foundation
Improvement of admission conditions in the hospital and making it a health
center of reference as regards to quality care in the district of Aneho.
US$2.5 million was budgeted for the 2013
Ecobank Day, with bulk of this amount spent
on school renovation, provision of school
supplies and sports equipment, construction
of fences and walls and various activities to
improve existing school infrastructures in
all countries across the Ecobank network.
Ecobank believes that by helping to ensure
that young people have access to the
best possible education, we contribute to
harnessing the enthusiasm, creativity and
talent of the youth thus giving them a better
chance to succeed as individuals and advance
the future of Africa as well.
Ecobank Day in Nigeria: In Nigeria, staff
and executives of Ecobank Nigeria on the
day engaged in various forms of community
services as part of activities to mark the
maiden ‘Ecobank Day’. The activities
included the renovation/construction of
classroom blocks in select schools across the
country, donation of educational materials
and assisting with cleaning immediate
environment of the select schools and
communities. Schools that benefited from the
Bank’s gesture included C&S Primary School,
Ikorodu, Lagos; Government Secondary
School, Kubwa Abuja (FCT) and Eastern
Academy, Onitsha, Anambra State.
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Speaking at C&S Primary School Mr. Jibril
Aku, Managing Director of Ecobank Nigeria,
said the community-inspired day is part of
Ecobank Group’s initiative to dedicate a day
of every year for staff across the Group to
devote the whole day to community-related
services as a way of impacting immediate
host communities.
Ecobank Day in Ghana: On 5 October
corporate donations ceremonies were held
simultaneously in 25 locations throughout
the country. Ecobank Ghana identified 25
projects to celebrate the Silver Jubilee of
the Group. Staff from across our operations
in Ghana devoted the day to community
related activities including renovation works,
cleaning and painting of selected institutions.
The beneficiary institutions received
donations of textbooks for their libraries as
well as Ecobank branded exercise books,
teaching aids, white boards, school dual
desks, teachers’ tables and chairs
and computers.
Managing Director, Ecobank Nigeria, Jibril Aku (right); Group Executive Director, Domestic Bank,
Ecobank Transnational Incorporated (ETI), Patrick Akinwuntan (left) and Executive Director
Domestic Bank, Ecobank Nigeria, Kingsley Aigbokhaevbo (behind), taking part
in the renovation of class room block at the C and S Primary School in Ikorodu.
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Speaking at Prampram Senior High School in
the Ningo Prampram District of the Greater
Accra Region, one of the beneficiary schools,
Mr Eddy Ogbogu, the Group Executive
Director of Operations and Technology stated:
“We are by these donations, making a
strong commitment for Ecobank to continue
behaving as a good corporate citizen. We will
continue to conduct our business activities in
an ethically acceptable manner towards all
stakeholders whilst contributing our quota
towards the socio-economic development
of our local communities and the country at
large”. He added, “We are mindful of the
fact that society, and in our case, the African
society, has been kind to us and as a Group,
we deem it most appropriate to reciprocate
this kindness and love of Africa by giving
back something in return every year,
starting from today.”
Ecobank Day in Benin: On 5 October the
Ecobank Benin team visited primary and
secondary schools in the major centres across
the country where Ecobank is present, to
help celebrate this special day. Five primary
schools, one agricultural high school and
one general secondary school were selected
by Ecobank Benin. Five teams of Ecobank
staff, wearing the Ecobank Day T-shirt were
constituted to carry the message of hope
of the pan-African bank to the students and
teachers. The first team, led by Roger DahAchinanon, the Managing Director of Ecobank
Benin, visited a primary school in Toyoyomè
on the outskirts of Cotonou. The school is in
an area with difficult access and the team
was only able to reach it by canoe. Here the
team distributed 300 scholar kits, which cost
XOF3 million (US$ 6,000), to all the students.
Thereafter, the team went to the General
Secondary school of Tohouè, situated in
Ouémé department, 60 km from Cotonou.
Ecobank Day in Central African Republic:
The local Ecobank team, unperturbed by
a heavy downpour of rain, mobilized for
the commemoration of the Ecobank Day
at the University of Bangui. The ceremony
started at 10 am with a football match
between Ecobank staff and the students
of the University. The final score 9-0 was
a big victory for the Ecobank team. The
next part of the ceremony was held in the
Faculty of Economic and Social Sciences
where the management, the Rector of the
University and their teams participated in
the renovation of the faculty building which
had deteriorating walls and whose roof had
been blown off by a rain storm. It was the
first time the building had been renovated
since its construction in 1963. At this event
Ecobank also donated 120 tables to equip
the dilapidated tutorial rooms. The ceremony
closed at 3.30pm with an Ecobank sponsored
cocktail event in the Rectory hall, in a warm
and friendly atmosphere.
5.2.2 Community Corporate Activity
Uganda (the Ecobank Africa Debate):
the Ecobank Africa Debate, which was
organised in partnership with Mt. St. Mary’s
College Namagunga, attracted over 900
students from 20 secondary schools to
discuss the topic: “Africa’s Education does
not need any substantial changes; it is
on track to place young people at the
forefront of development both on the
continent and globally.”
On 28 September, young people were able
to discuss and share ideas on their role
in developing Uganda and the continent
at large and how Africa’s education can
facilitate this dynamism. The Minister for
Education and Sports, Hon. Jessica Rose
Epel Alupo attended the function as the
Chief Guest and in her remarks, she urged
Ecobank not to relent in its efforts to
empower young people, influence progress
and transform lives.
On 3 October, Ecobank Uganda joined the
rest of the Ecobank family to celebrate
the 25th anniversary of the operations
of the Group and also to commemorate
five years of business growth in Uganda.
Focusing on education for young people, the
Bank engaged in various Corporate Social
Investment initiatives while communicating
the Ecobank story to Ugandans. These
initiatives included a Customer Service
Week, a debate about Africa’s education in
relation to development opportunities for
young people, a newspaper supplement
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with editorial content about the Bank and
various Corporate Social Investment Projects
like visiting an orphanage and providing
scholastic materials and basic items to
disadvantaged children.
Zambia: Ecobank Zambia commemorated
World AIDS Day by organizing a talk with
two HIV/AIDS activists. The activists were
Ms Bridget Michelo Chisenga and Ms Mary
Mweemba. Ms Chisenga is an advocate/
counselor on HIV and AIDS and also a
Provincial Community Health Coordinator
working with the Zambia Integrated Systems
Strengthening Program, an organization
under USAID that deals with managing the
delivery of high-impact health care. Ms Mary
Mweemba is the Country Director of Orange
Babies, an organization funded by the
Netherlands Government.
The talk, held at the Ecobank Zambia Head
Office provided employees an opportunity to
learn about how the HIV Virus is transmitted,
how it could be prevented, and most
importantly the reality of living with HIV.
Employees were advised on how to take
care of their health and the health of others
and ensure they treated everyone living
with HIV with respect and understanding as
the stigma of HIV/AIDS is still very alive in
Zambia.
Furthermore, Ecobank Zambia signed a
memorandum of understanding with
Conservation Farming Unit (CFU) and
Musika Development Initiative Limited. The
The Ecobank Africa debate organized by Ecobank Uganda.
Ecobank staff in Central African Republic
renovating a faculty building at the University
of Bangui.
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agreement is to finance emerging farmers
under the tutelage of CFU to obtain asset
finance facilities. This will enable the farmers
to procure tractors and related farming
implements used in the promotion of
conservation farming in Zambia.
Staff in Ecobank Mali participating in the
inaugural Ecobank Day, 5 October 2013.
Under this arrangement Ecobank will
provide finance with a tenor of 36 months
(2013-2015) to farmers under its Asset
Finance Product Program, which offers
enhanced security. In its first year, 14 farmers
benefitted from an aggregate loan amount
of US$550,000.
Ecobank Tanzania: On 20 September,
Ecobank Tanzania set the tone in social
entrepreneurship in Tanzania from a
technological standpoint. Underscoring the
Bank’s commitment to promoting positive
social and behavioral change among the
Tanzanian youth through technology, the
Ecobank Foundation was a major sponsor at
the 2013 Young Scientist Tanzania Exhibition
which was held at the Diamond Jubilee Hall
in Dar es Salaam. The exhibition attracted
students from over 60 schools from 16
regions in the country who came to see
exhibitions showing various technologies
which highlighted the innovative capabilities
of the Tanzanian youth. The Guest of Honor
for the occasion was the Deputy Minister of
Communication, Science and Technology Hon.
January Makamba.
Ecobank Tanzania also held the first ever
media training workshop on financial
inclusion at end of the first quarter 2013.
The workshop titled ‘Bank Financial
Statements: What do they mean and why
does it matter?’ was in line with Ecobank’s
efforts at promoting financial inclusion and
helping the public understand the banking
sector therefore creating financial literacy
and opening new markets for the expanding
banking industry in Tanzania.
Ecobank Mali cleans hospitals in Bamako,
Sikasso and Kayes: Ecobank Mali organized
a clean-up campaign day on May 25 at
the public health centres at the University
Hospital Gabriel Touré in Bamako, Sikasso
Hospital and Fousseyni Daou Hospital of
Kayes. The Bank seized this opportunity to
donate cleaning products and equipment, in
addition to hiring professional teams to clean
these hospitals. Sidibé Aïssata Koné, Deputy
Managing Director of Ecobank Mali, explained
that this gesture of goodwill is an example
of what the Bank has been doing within the
scope of the Group CSR since its inception in
Mali: “To mark our presence as a citizen and
socially responsible bank, it is very important
for us to implement this action with the
active participation of all our staff”.
Ecobank Benin signs the ILO charter to
fight against AIDS: On 16 April Ecobank
Benin signed the charter for AIDS control
and prevention with the local representative
of the International Labour Office (ILO),
during a solemn ceremony under the theme
‘Stop AIDS, keep our promises! Ecobank is
committed. What about you?’.
The purpose of one of the ILO/AIDS
program in Benin is to support companies
to develop and implement policies and
programs to prevent the spread of AIDS,
protect the rights of workers infected and
affected, and to mitigate the impact of
the epidemic on their lives, on those of
their families and on business productivity.
According to the workers’ representative,
Mr. Augustin Agbayazon, “Our commitment
goes beyond a regulatory requirement. It
is our awareness of the existence of this
pandemic and our desire to partner with all
stakeholders, such as Ecobank Benin who
understand the need to fight against this
scourge, that we intend to express through
the signature of this charter”.
Ecobank Nigeria Receives Delta Football
Association Platinum Award for Excellence:
Ecobank Nigeria Limited was awarded the
Delta State Football Association’s Platinum
Award for Excellence. The award is in
recognition of the bank’s constant support
of and contribution to the development of
grassroots football in the state. The award
was presented at an event which was graced
by notable personalities that included the
Speaker of the Delta State House of Assembly
Honourable Victor Ochei and renowned
sports enthusiast and Chairman of the Delta
Football Association, Pinnick Amaju.
Ecobank Kenya signs Peace Pledge in
Nairobi, 28 February 2013: Four days before
Kenyans voted for their fourth President
elected under a new constitution, members
of the public and corporate citizens were
promoting the message of peace all over
the country. Staff of Ecobank Kenya across
the nation met in their offices and sang the
National Anthem together. This was followed
by the signing of the Peace Pledges by
everyone. The project was spearheaded by
the Kenya Bankers Association, the umbrella
body that brings together Kenya’s 43 banks.
The signing of the Peace Pledge came on
the eve of historic general elections which
were held on March 4 and ushered in new
constitutional office holders including the
President, Governors, Senators, Members
of Parliament, Women Representatives and
County Ward Assembly Representatives.
6. Protecting Natural Resources:
Environmental Sustainability
6.1 Environmental and social risk
management
We recognize that businesses we finance can
have an impact on environment and social
standards. In 2013 we intensified our efforts
to develop, implement and refine our internal
operations to work with our customers in
the environmental and social risk sectors to
understand and manage these risk issues.
We continued to assess transactions in
the environmentally and socially sensitive
sectors (e.g. mining, oil and gas and other
soft commodities) using our policies and, in
a few instances of project financing, using
the Equator Principles criteria. Through the
implementation of the Environmental and
Social Management Policy and Procedures
Manual (ESPPM), a total of 2,814 transactions
with exposure of US$25.1 billion to sectors
with significant Environmental and Social
(E&S) risks have been screened, including
soft and hard commodities, e.g. oil and gas.
Ecobank continues to review its
environmental sustainability policy to ensure
it reflects the latest risks and sector specific
realities and issues. Ecobank implements
and monitors the Environmental and Social
Management System (ESMS) through a
collective and collaborative approach of staff
in the businesses, country risk management
and Group risk management. While the
business relationship managers have the
proactive task of ensuring that transactions
are properly screened and classified for E&S
risks, the country risk managers have the
oversight responsibility over the E&S Due
Diligence assessment and the formulation
of corrective action plans for compliance
monitoring. The Group E&S manager helps
formulate policy and has general oversight
in ensuring compliance and adherence
with E&S standards, as stipulated in the
Ecobank E&S policy.
Furthermore, the Bank continues to invest in
capacity building for effective environmental
sustainability. In 2013, over 500 staff from
key internal stakeholder units, including the
country risk management, internal control,
compliance, internal audit and relationship
managers from the businesses were trained
on enhanced Environmental and Social
Management Systems.
Major E&S activities in 2013.
Responsible lending
protects reputation
and makes client
business sustainable
2,814 Credit
applications in the
E&S impactful sectors
were screened
No breach of
Environmental and
Social Risk issues
in 2013
Additional 500
staff trained on
Environmental and
Social Management
System (ESMS)
Additional staff
assigned to the
Environmental &
Sustainability unit
Media recognition –
Jeune Afrique
21 September
2013 edition
89
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Ecobank’s environmental sustainability
practice is acknowledged by third parties.
For example, we were recognized for our
work on environmental sustainability
and featured in the Africa Sustainability
Barometer: gauging the state of sustainable
business practice in Africa, a special report
published by Financial Times for the United
Nations Global Compact, which was released
in September 2013. Similar recognition also
featured in the Jeune Afrique edition of
21 September 2013.
ETI has a contractual obligation to submit an
Annual Environmental Performance Report
(AEPR) every year to its lenders, mainly
the development financial institutions,
including IFC, FMO (Dutch development
financial institution) and AFD/Proparco
(French development financial institution),
for compliance monitoring review of
environmental sustainability. Following
a recent review session of the Group’s
E&S portfolio with IFC, Ecobank’s ESMS
was deemed to be compliant with major
international standards.
6.2. Green business
Ecobank sustainable finance continues to
bring socio-economic and environmental
value through financial models, products and
markets to assist long term development in
countries in which we operate. In 2013, our
lending has contributed to the promotion
of environmental resource efficiency. For
instance, solar powered street lighting and
indoor appliances, which were financed by
Ecobank in Ghana and Nigeria, gave the
opportunity to reduce the use of wood as
a fuel as well as reducing health-related
problems associated with its use, which
affects the immune system of women
exposed to indoor smoke or fumes while
cooking.
With national governments across Middle
Africa cutting subsidies to public utilities like
water and electricity, Ecobank is doing its
part to lessen the burden on affected rural
and peri-urban communities by working
with clients to finance renewable energy and
energy efficient technologies to complement
power generation for lightening and supply
to hydraulic water pumping machines.
Solar powered ATM at an Ecobank branch
in Accra, Ghana.
This project involved harnessing solar
technology to power streetlights and water
pumps. It is environmentally friendly and
complementary to developmental needs.
This is because low electricity access,
coupled with erratic supply and blackouts,
impacts on productivity, especially in more
remote communities. Africa’s climate makes
it a suitable region for harnessing solar
power and therefore Ecobank is creating
financial models and products to make
the deployment of solar PV systems for
street lighting, water pumps and other
rural electrification activities accessible
and affordable, as a complement to gridconnected energy.
In Ghana, Ecobank is financing installation
of 18,000 units of solar streetlights across
the rural communities. Similarly, in Nigeria,
Ecobank is financing solar powered devices
to power water pumps in the rural areas.
This sustainable financing supports the
development of rural communities, who are
mostly primary commodity producers, such
as agriculture and fishing communities. This
enhances the quality of life of underserved
communities, while encouraging social
productivity, including entertainment,
after sunset. In some of the rural locations,
streetlights have been used to facilitate
evening learning classes for adult education
and contributed in increasing the enrolment
in evening studies.
Policy advocacy: Ecobank has made strides
in policy engagement towards enhanced
environmental sustainability impact and
reputation, and has become a leading voice
of the banking industry in some countries,
particularly on the issue of systemic
sustainability. This progress has been
achieved as a result of the contributions
to the environmental sustainability policy
discussions at the national, regional and
global levels, which enables the Bank
to continue to monitor the emerging
environmental policies and regulations in a
proactive manner for compliance. Currently,
Ecobank is serving on the National Climate
Change Committee in Ghana and it is also
a member of the Peer Review Team for the
National Climate Change Investment Plan
in Malawi. In several countries, the Bank
is actively engaging with governments
and other stakeholders, including the
United Nations to ensure effective balance
between addressing environmental
sustainability and the impacts of related
policies and regulations.
Leading by example, Ecobank has embarked
on the application of solar power for its
ATMs. Starting with remote locations in
Ghana, 3D solar powered LED ATMs have
been deployed across the country and also
in the ATMs gallery locations across Ecobank
Nigeria. This initiative will be replicated
across the countries in Middle Africa in which
the Bank operates.
6.3. Green initiatives
As a demonstration of its commitment to
environmental sustainability, the Bank has
integrated its environmental sustainability
practice to reflect the emerging banking
realities in its operations. For instance, in
2013, the Bank mainstreamed environmental
sustainability in its travel policy, which
highlights the need to reduce carbon
emissions. As a result, alternative means of
business engagement are being explored
and where it is necessary to travel, staff are
encouraged to use the most direct means.
The Bank has also integrated environmental
sustainability considerations in its merger
and acquisition due diligence procedures.
Meanwhile, the Bank is actively participating
in the Environment Social and Governance
(ESG) frameworks it has either subscribed or
adopted. These include:
6.3.1. Nigerian Sustainable
Banking Principles
In September 2012, the Central Bank of
Nigeria (CBN) issued a circular directing
banks, discount houses and development
finance institutions to implement the
Nigeria Sustainable Banking Principles, a
non-prescriptive set of E&S tools aimed at
mitigating potential negative E&S impacts
of credit transactions. As required by the
CBN, Ecobank Nigeria had developed and
submitted an overarching Sustainable
Banking Commitment, which articulates
how Ecobank is applying the Principles and
Guidelines as well as integration of the
E&S risk management into the Enterprise
Risk management framework and their
implementation targets and milestones.
6.3.2. IFC Initiatives
The Bank continues to align its environmental
and sustainability activities with the
international best practices through exchange
of ideas and participation in knowledge
management events. As a leader in the
implementation of the sustainable banking
practices in Africa, Ecobank made a
presentation and led in the discussion on the
Sustainable Banking in Africa at the launch of
the 2013 IFC/FT Sustainability Conference
and Awards (Africa), held in Johannesburg,
South Africa. Ecobank also participated in the
IFC Community of Learning (COL) held in
Tokyo, Japan and aimed at facilitating new
information and practical realities in the
implementation of environmental and social
management system.
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6.3.3 Equator Principles
Since its formation Ecobank has been
transforming lives and remains committed to
the environmental sustainability practice. Our
adoption of the Equator Principles (EP) in
2012 has further enhanced our
environmental and social risk management,
in line with the international best practice.
The Bank continues to apply the Equator
Principles to project finance transactions with
a face value greater than US$10 million.
As an Equator Principles financial institution
(EPFI), Ecobank is playing an active role in
the Africa and Middle East outreach group
in the NGOs and Civil Society stakeholder
engagement and Social Risks and Biodiversity
thematic areas. The Bank also participated
in the Equator Principles workshop on Cross
Sector Biodiversity Initiative (CSBI) in London,
UK as well as the EPFI Annual General
Meeting held in Tokyo, Japan.
Ecobank has integrated the Equator Principles
with its internal Environment and Social
Risk Management Systems, which were
developed on the basis of our engagement
with the IFC performance standards as
well as our association with other Financial
Institutions on their interpretation of
environmental and social management as
related to the credit review process.
EP guidelines were taken into consideration
in financing a total of 21 project and
project corporate related transactions
in the EP environmental and social risk
categories C and B in 2013. In line with the
EP classifications, a total of 7 projects in 4
qualifying sectors in the Environment and
Social Risks category B were financed. These
sectors are:
a. Oil and gas exploration
b. Mining
c. Plantation agriculture
d. Telecom infrastructure
Also in line with the Principles’ guidelines,
Ecobank funded a total of 14 transactions in
5 eligible sectors in the EP category C. These
are transactions that have potentially low to
medium impacts for the environment and
social risks. These sectors are:
a. Manufacturing
b. Real Estate
c. Telecommunication downstream
d. Thermal power transmission
e. Oil and Gas
6.3.4 United Nations Environment
Programme Finance Initiative (UNEPFI)
The Bank is a member of the United Nations
Environment Programme Finance Initiative
(UNEPFI) and contributes in the discussions of
the Africa Task Force and the Banking
Commission group. In November 2013 senior
executive managers of the Bank participated
in the UNEPFI Global Roundtable and the
Annual General Meeting held in Beijing,
China. Ecobank also participated in the IFC
Community of Learning for knowledge
exchanges on the industry best practices in
tackling operational challenges of the
environmental sustainability in banks.
Operationally, Ecobank is organizing banks
to integrate environmental sustainability
process in the banking operational
procedures, through bankers’ associations
and wider industry stakeholders, including
the environmental and financial regulators.
Across many countries where Ecobank is
present, there is a need to mainstream the
Environmental and Social Risk Management
Systems in the risk management procedures
and the general banking operations. This
is aimed at creating a level playing field
in the implementation of environmental
sustainability and Ecobank has already
made progress in drawing on the expertise
of institutions such as the International
Finance Corporation (IFC) and UNEPFI towards
achieving this objective.
Ecobank is engaging with other banks and
regulators alike, through meetings and
facilitation of knowledge exchange as well
as sponsorship of events leading to the
creation of enabling platforms. Notably,
in April 2013, Ecobank collaborated with
the Ghana Association of Bankers (GAB)
and UNEPFI to organize a workshop of
Environmental and Social Risk Analysis
(ESRA) in Ghana. Representatives from the
24 commercial banks that attended the
workshop resolved to establish a network
of banks to champion the development
of guidelines on the environment and
sustainability mainstreaming in the industry,
through the GAB.
6.3.5 United Nations Global Compact
THE G
CT
PA
BAL COM
LO
Ecobank is a signatory to the United Nations
Global Compact (UNGC) and continues to
abide with the Principles and tenets of the
Compact and is fully implementing all its
thematic areas of Human Right, Labour,
Environment and Anti-Corruption. Over the
years, Ecobank has undertaken development
activities as well as worked with both local
and international development institutions,
including the UN agencies in promoting
development initiatives, from our core
competency, banking and finance; and these
have invariably contributed towards the
achievements of the Millennium
Development Goals (MDGs) in Middle Africa.
We have also committed to share our Annual
Communication on Progress with our
stakeholders and will continue to work with
other stakeholders, including the United
Nations in realizing our vision, while
promoting private sector participation
towards achieving genuine sustainability
transformation in Africa.
6.4 Internal Carbon Footprint
Management
Internal Carbon Footprint Management:
Ecobank is working towards cost savings and
conservation of the natural environment for
sustainability. In 2013, we strengthened the
Group’s environmental sustainability
credentials by reducing consumption of fuel,
energy, water, paper, and natural resources,
while minimizing office waste generation. As
the bank is committed to its pan-African
strategy, continuous progress on
sustainability will remain a measure of its
success and therefore the carbon footprint
management is refocused on sustainable
travel, procurement and energy, as key
sustainability performance indicators.
In our internal operations, the number
of ATMs and signposts, being powered
by solar technology has increased. This
further demonstrates our commitment to
environmental sustainability, as we aim at
continuously improving the environmental
performance of the bank.
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People report
Strengthening our employee value proposition
Our highlights in 2013
Employees data
• Designed and rolled out a new Ecobank
Performance Management (EPM) system
(as at December 31st 2013)
• Revised the Rewards and Recognition
systems to strengthen Performance link
to Pay
Number of employees
Female representation
19,546
42%
Nationalities
Attrition rate
46
7.9%
Employee by geographic
segments/clusters
Employee by Business/
Functions
(% as at December 31st 2013)
(% as at December 31st 2013)
• Continued implementation of the
Human Resources Information System /
Management Information System
• Developed and rolled out competency and
curriculum frameworks for the Domestic
Bank and Corporate and Investment Bank
businesses
Our priorities for 2014
• Fully embed the Ecobank Performance
Management system across our countries
• Develop and roll out core leadership and
functional curricula across the Group to
build a motivated and high-performing
workforce, and drive attainment of
corporate strategic goals
• Build a holistic view of overall bench
strength to inform targeted decisions to
drive corporate strategy
• Continued implementation of a strategic
approach to strengthen Performance
link to Pay through revisions of current
job grading evaluation system (and
harmonised salary structures)
Central Africa
7%
Nigeria
48%
22%
Rest of West Africa
11%
East Africa
Corporate and
Investment Bank
Domestic Bank
3%
35%
Support units/Functions
62%
5%
Southern Africa
2%
Others
5%
With 19,546 employees representing over 46 nationalities, the diversity of
our workforce is a core strength and an important part of what makes the
Ecobank culture distinctive.
At Ecobank, we focus on global financial
trends and their impact on human capital.
We recognize that to continuously execute,
we must position human capital at the
centre of our business strategy. Our human
resource strategy provides clear direction on
overall talent acquisition, development and
retention. It emphasizes the significance of
having the appropriate skills mix to meet
business requirements. Our culture, reward
and recognition programs are designed
to create the right environment for our
customers, staff and business.
The year 2013 has seen Group Human
Resources (HR) executing its People Strategy,
to further embed and drive the execution
of the Ecobank employee value proposition
through the successful implementation of a
number of critical HR processes and systems
to support the three-pillar corporate strategy:
enhancing shareholder value, customer
excellence, and people.
The focus for 2014 is to continue building
on this platform by further streamlining
processes and implementing initiatives that
focus on the execution of the seven pillars of
the Group HR’s People Strategy, namely:
1.Linking Business strategy to Human
Capital needs
2.Attracting and Retaining the right people
3.Motivating, Recognizing and
Rewarding performance
4.Growing Leaders
5.Improving the infrastructure supporting
Human Capital
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through our executive, graduate and referral
hiring programs across Africa. We have also
been able to attract talented Africans from
the diaspora to return to the continent.
In 2014 we will further focus on graduate
programs as an important source of talent for
the bank as well as on continually refining
our Employer Brand Proposition to attract
and retain the talented employees so crucial
to Ecobank’s success. We plan to expand
and enrich awareness of available career
opportunities at Ecobank using social media,
including LinkedIn and Facebook.
Staff of Ecobank Zimbabwe during Ecobank
Performance Management training in 2013.
Growing Leaders
We identified and groomed future leaders for
the Group and subsidiaries through various
internal processes, management training
programs and forums such as:
• Group Executive Committee
• CIB Management Committee
• DB Management Committee
• Business Leaders Conference
• Affiliate Management Committee
• Branch Manager Certification.
In 2013, within Domestic Bank, initiatives
such as the Branch Manager Certification
Program (BMCP), targeting the development
of capabilities for all branch managers across
the Group and delivered in partnership with
the International Academy of Retail Banking
(a member of the Lafferty Group), have
contributed to the measurable development
of critical competencies and a direct
improvement in business performance.
6.Creating and embedding a Talent culture
7.Developing the organisation.
Attracting and retaining talent
In line with our objective of attracting and
retaining the right people, while creating
and embedding a talent culture, we continue
to streamline our recruitment process, build
and enhance our specialist recruitment team
with the aim of creating better in‑house
recruitment capabilities and more effective
hiring processes.
In 2013 we implemented a group-wide
Applicant Tracking System and candidate
database which is being rolled out to all
countries in 2014. Our unique pan‑African
footprint and our efforts to become Africa’s
employer of choice have contributed to the
hiring of over 1,640 individuals in 2013
Staff of Ecobank Gabon engaging in a problem solving session.
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People report
Work has already started to replicate these
initiatives across all businesses and functions
within Ecobank, with the intention of aligning
Learning and Development initiatives to a
benchmarked capability framework by the
end of 2014.
In order to proactively engage our employees
on regulatory requirements, Anti-Money
Laundering and Counter Financing of
Terrorism training programs were rolled out
in 2013, with a specific focus on geographical
requirements. All employees were required
to complete this training by early 2014,
with more than 80% having successfully
completed this training as well as a series of
assessments by end 2013.
Staff of Ecobank Rwanda engaged in a performance discussion.
Building Functional Capabilities
Our Learning and Development programs are
firmly anchored on linking business strategy
with human capital needs and development,
while developing the organization. The
Ecobank Academy, launched in 2012, is
at the center of realizing this objective. In
2013, we intensified the use of the Academy
in building the capacity of employees to
execute our strategy.
In 2013, we developed comprehensive
competency frameworks for all job roles in
Domestic Bank (DB) as well as the Corporate
and Investment Bank (CIB), linking targeted
training to business imperatives across these
areas. This has allowed for the development
and execution of programs within the
Corporate and Investment Bank such as
Trade Finance (leveraging the expertise of
the International Finance Corporation as
an academic partner), and Asset & Liability
Management (ALM) program.
Initiatives such as the Sales Force
Effectiveness program, and the Relationship
Management Sales Effectiveness program,
illustrate the value of identifying critical
capabilities required to drive organisational
strategy, aligning these across business
functions, and leveraging economies of scale
to deliver measurable, high-impact solutions,
resulting in increased sales revenue and
improved identification, and management
of risks.
In order to support the Group Customer
Service strategy, the Service Behaviors
Change programme was rolled out to all
subsidiaries across the Ecobank network.
This highly engaging instructor-led training
critically examines obstacles to delivering
world-class customer service, and seeks to
collectively find solutions to those obstacles
whilst aligning employee mindsets to
deliver on our service promise. This was
further supported by the Complaints
Management training, rolled out to all
employees as an online program with
a mandatory assessment, supported
by instructor-led training for complaints
resolution specific functions.
Since its launch, the Ecobank Learning
Centre at the Pan-African Centre (Lomé)
has maintained its prominent position
in delivering Group training, hosting on
average, more than 170 employees a
month for training and conferences.
In 2014, Group Learning and Development
will continue to leverage synergies and
economies of scale, to deliver relevant,
targeted, and cost-effective training solutions
across the Ecobank network, utilizing
multiple platforms and methodologies to
guide self-empowered career management
and targeted capability building
opportunities, from a functional as well as
leadership and management perspective.
Strengthening performance
link to rewards
Our Ecobank Performance Management
system (EPM) represents a best-in-class
approach to performance management.
The Group’s performance and reward
approach is designed to harness a strong
performance culture within Ecobank and to
drive sustainability, by ensuring exceptional
performance is identified, maintained and
adequately rewarded. This aligns to our
overall aim to be the ‘Employer of Choice’.
The success of Ecobank depends upon the
performance, behaviours and commitment
of our employees. With EPM, we have
developed a structured, objective and
transparent approach to managing employee
performance. From defining the overall
business strategy and financial targets at the
Business Leader level, every employee
has a clear set of objectives and targets
which are cascaded from their line managers.
These objectives include financial and
non-financial indicators in line with our five
Performance Areas.
Performance reviews and subsequent
reward decisions are based not only on
what employees have achieved, but
on performance relative to their peers.
Employees are awarded a rating (on a scale
of 1 to 5) based on their achievement of
the stipulated objectives and subsequently
a calibration review of ratings within their
peer group. The rating has an impact on the
level of reward an employee receives. Bestpractice performance discussions are held
both at mid-year and year-end to ensure
ongoing coaching and feedback is given to
employees, and to ensure transparency and
objectivity in the process.
Diversity and inclusion
At Ecobank, we continue to operate in an
environment that values and integrates
each person’s differences and provides the
opportunity for everyone to participate in
achieving our business goals. We strongly
believe that an inclusive business culture
will help create a global community in
which people can be themselves, give their
best and grow professionally. In line with
previous years, our workforce is spread
across 46 nationalities, gender mix consist
of 42% female employees and 35% female
representation at management level.
Meeting of the Domestic Bank team
at Ecobank Benin.
The company has advanced significantly in its
Diversity Program during this period through
direct engagement with the communities in
which it operates.
On 5 October 2013, Ecobank staff across
the entire country network were invited
to participate in, and devote a whole
day to, community related activities. This
community-inspired day, officially established
as an annual corporate activity, is officially
titled “Ecobank Day”. The philosophy of this
day is to give back to our communities. We
conduct business, develop ourselves and
make profits based on our daily interactions
with our communities, our communities,
and we therefore see it as our duty to give
back to improve the communities that have
welcomed us and in whose territories we
operate. The objective is to exchange, inspire,
motivate and equip members of these
communities and by so doing improve their
social conditions.
Individual reward and incentives are thus
linked directly to the performance of the
employee, the performance of the business
and the interests of shareholders. In 2013,
we strengthened our focus on a consistent
approach to evaluating performance by
training all countries on the new EPM system
and process guidelines. This in turn translates
into a consistent approach to identifying and
rewarding high performance.
Ecobank Group Staff, citizens of different countries at the Ecobank day Event supporting a
school in Togo.
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People report
The theme for the first Ecobank Day was
“Education for Young People in Africa”.
Several Education-related initiatives were
carried out in multiple countries across
the continent. Examples of such initiatives
included renovating school buildings and
canteens, libraries, painting school interiors
and exteriors, distributing sports equipment,
books and stationery. The Ecobank Day was
a great success with all employees looking
forward to next year’s event.
Employee welfare
Ecobank policies on employee welfare
have remained consistent with previous
years. Ecobank continues to care for its
employees and their families by providing
various benefits to cater for their well‑being,
including full medical cover that includes
medical examinations, repatriation and
rescue in times of critical illness, as well
as retirement schemes based on local
regulations and practices, home leave
benefits, year-end gifts and activities.
Various types of loans are provided to
staff (mortgage, equipment, vehicle, etc.),
irrespective of career level or job grade, at
preferential rates, which afford employees
the opportunity to invest in their own home
and purchase other essential assets.
We are engaged in workplace programs
and activities that offer employees increased
opportunities to be physically active such
as sports and social activities and club
house activities.
Ecobank also provides assistance with various
medical and quality-of-life initiatives across
the Group, such as HIV/AIDS programs, Fight
against Malaria and other types of infectious
diseases. At the Pan African Centre, Lome,
an infirmary has been established to take
care of emergencies. The infirmary operates
regular operational hours, with the presence
of a full time nurse and bi-weekly doctor
visits. Similar facilities are provided in most
countries and in the countries where an
infirmary does not exist, arrangements have
been made with local medical practitioners,
through which employees immediate needs
are addressed.
Ecobank has also adopted Group policies
around Health and Safety, Violence in the
workplace, Stress Management, Bullying and
Harassment, etc.
Summary
In 2013, focused efforts have enabled us
to achieve tremendous progress in rolling
out and embedding a performance culture
group-wide. Furthermore, we have revamped
and strengthened our Performance link
to Pay to drive transparency around our
rewards structure.
We believe that our focus on building our
bench strength will remain relevant given
the global challenge in attracting and
retaining top talent. We recognize the role
our people play in building strong customer
experiences and are committed to further
strengthening our people capabilities and
building a strong leadership pipeline to
take the Bank to a leadership position in
Middle Africa.
In 2014, we will continue to execute our
People strategy to further reinforce the
Ecobank Value Proposition by focusing
on further strengthening performance
link to pay, employee development and
streamlining processes.
Ecobank Equatorial Guinea staff engaged in addressing a customer issue.
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Risk Management
Risk Management
Managing risk is core to our business.
Since 2010 our centralized approach to risk
management has delivered improvements.
We continue to embed our controls and
risk management framework throughout
the organization.
Image taken from Ecobank’s “The future is pan-African” advertising
brand campaign, Dec 2013.
Risk Management
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Risk Management
Risk Management
1. Risk Management
Framework
Risk is an inherent part of the business
activities of the Ecobank Group. Accordingly,
Ecobank has designed a risk management
framework and governance structure to
achieve an appropriate balance between risk
and reward.
The risk management framework consists of
a comprehensive set of policies, standards,
procedures and processes designed to
identify, measure, monitor, mitigate and
report significant risk exposures in a
consistent and effective manner across
the Group.
1.1 Risk Identification
The Group identifies risks by evaluating the
potential impact of internal and external
factors on business transactions and
positions. Risk managers then develop
strategies for mitigation of identified risks.
Such strategies include setting of appropriate
risk limits by customer, product and business,
and obtaining sufficient collateral coverage.
However, the usage of exotic derivatives to
hedge against any identified risk is prohibited
by policy.
1.2 Risk Measurement
The Group uses a variety of methodologies
to measure risk. These include calculating
probable loss (both expected and
unexpected), assessing risk rating,
conducting stress tests and benchmarking.
1.3 Risk Monitoring and Control
The Group reviews risk management policies
and systems regularly to reflect changes
in markets, products and emerging best
practice. Risk monitoring is based on the
following central risk areas: credit risk,
including counterparty risk; market risk;
liquidity risk; and operational risk. Risk
professionals and internal auditors monitor
risk exposures and adherence to approved
risk limits on a daily, weekly and monthly
basis, by means of reliable and up-to-date
information systems.
1.4 Risk Reporting
The Group allocates considerable resources
to ensure on-going compliance with the
approved risk limits. It has set guidelines
for reporting to relevant management
bodies, including the Board of Directors and
the Group Executive Committee.
Significant changes in the credit portfolio,
non-performing loans and other risk
measures are reported on a daily, weekly
and monthly basis.
2. Major Risk Types
The Group is exposed to the following major
risk types:
Credit risk is the probability of financial loss
arising from the default or the credit risk
migration of a customer or counterparty. It
can arise either because the borrower, or
the counterparty is unwilling to perform,
or because its ability to perform has been
impaired. Credit risk is said to be direct credit
risk when it arises in connection with credit
facilities such as loans and advances and
indirect or contingent credit risk when the
Group has guaranteed contractual obligations
of a client by issuing letters of credit and
guarantees. Credit risk also exists when the
Group and its client have mutual obligations
to exchange (deliver) financial instruments
at a future date. The risk of default before
settlement, also called pre-settlement risk,
arises when the counterparty defaults before
the contract matures, and the Group suffers
a financial loss in the process of replacing
the unexecuted contract. The settlement risk
becomes direct credit risk at the time
of default.
Market risk is the risk of loss arising from
adverse changes in market risk factors during
the period required by the Group to close out
its on- and off-balance sheet positions; losses
may be driven by changes in interest rates,
exchange rates, equity prices, commodity
prices, etc. Positions that expose the Group
to market risk can be trading or non-trading
related. Trading risk comprises positions
that the Group holds as part of its trading or
market-making activities, whereas nontrading risk includes discretionary positions
that the Group undertakes for liquidity, or
capital hedging purposes. Sources of market
risk include:
• Interest rate risk is the exposure of current
and future earnings and capital to adverse
changes in the level of interest rates.
Exposure to interest rate risk can result
from a variety of factors:
• Repricing risk arises from timing
differences in the maturity or repricing
of assets, liabilities and off-balance
sheet instruments.
• Yield curve risk is the risk that changes
in market interest rates may have
different effects on prices of similar
instruments with different maturities.
Risk Management
• Basis risk is the risk that changes
in market interest rates may have
different effects on rates received
or paid on instruments with similar
repricing characteristics (e.g. funding an
adjustable rate loan that is indexed to
the 3-month Treasury bill with deposits
that are indexed to the 3-month LIBOR).
Interest rates for various assets and
liabilities change at the same time, but
not necessarily by the same amount.
• Options risk is inherent in embedded
options in assets and liabilities. An
example is provisions in agreements
that give borrowers the right (and not
the obligation) to prepay their loans, or
give depositors the right (and not the
obligation) to withdraw funds at any
time, often with little or no penalty.
These options, if exercised, can affect
net interest income and underlying
economic value.
• Liquidity risk arises from the general
funding needs of the Group, and in the
management of its assets and liabilities.
The Group is exposed to the risk that
depositors’ demands for withdrawals
outstrip its ability to realise longer-term
assets in cash. The Group, therefore,
strikes a balance between its liquidity
requirements and funding costs by
capturing stable, reliable and low-cost
sources of funding in all of its markets.
There are two types of liquidity risk:
• Funding liquidity risk is the risk
that funds will not be available
when needed to meet our financial
commitments.
• Trading liquidity risk is the risk that
assets cannot be liquidated quickly
enough. This can happen when the
liquidity of a market disappears making
it difficult, or costly to close, or modify
positions.
Interest rate risk and liquidity risk are
interconnected given that management
of either side of the balance sheet has an
impact on interest rate risk exposure.
• Foreign exchange risk is the risk to
earnings and capital arising from
sudden changes in the relative prices of
different currencies. It can arise directly
through trading in foreign currencies,
making loans in a currency other than
the local currency of the obligor, buying
foreign-issued securities, or issuing
foreign currency-denominated debt as
a source of funds. It can also arise when
assets and liabilities are denominated in
foreign (as well as domestic) currencies.
The Group is also exposed to foreign
exchange risk arising from adverse
changes in currency exchange rates used
to translate carrying values and income
streams in foreign currencies to the US
Dollar, Ecobank’s reporting currency.
• Equity price risk is the risk of loss from
adverse changes in the value of equity
portfolios due to changes in the level of
equity prices.
• Commodity price risk is the risk of loss
from adverse changes in the value of
commodity portfolios due to changes in
the level of commodity prices.
Operational risk is the risk of loss resulting
from inadequate or failed internal processes,
people and systems or external events. It
is inherent in every product and service
that Ecobank provides. It manifests itself in
a variety of ways, including internal fraud,
external fraud, transaction processing errors,
business interruption, and disputes with
employees, clients and vendors. Operational
risk also includes legal risk, the risk of
loss resulting from the failure to comply
with laws, prudent ethical standards and
contractual obligations. These events can
potentially result in reputational harm to the
Group (reputational risk).
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Sovereign risk includes political, convertibility
and cross-border risks. Such risks can arise
from actions of a sovereign state or from
unforeseen circumstances such as wars and
uprisings. They affect the ability of residents
to meet their obligations to a lender who
is domiciled in another country. In as much
as the West African Economic and Monetary
Union (UEMOA) and the Central African
Economic and Monetary Union (CEMAC) share
a ‘common’ currency with the support of
the Banque de France, risk exposures taken
by Group subsidiaries registered within
either economic union on residents of any
country within either economic union are not
considered cross-border risk.
Strategic and franchise risks arise whenever
the Group launches a new product or a new
service, or when it implements a strategy.
The risk is that the strategy may fail, causing
damage to the Group’s image, which may
impair the Group’s ability to generate or
retain business. However, the Group always
carefully assesses both the impact of external
factors on its strategic choices (strategic risk)
and the feed-back from clients, shareholders
and regulators on its results and capital
(franchise risk).
Compliance risk is related to violations of
rules and regulations in force in countries
where the Group operates. Compliance risk
also arises when the rules or regulations
applicable to the products and activities
of subsidiary banks are ambiguous. Such
a risk could result in sanctions, penalties,
damages and even the voiding of existing
contracts. Legal and regulatory risks are part
of compliance risk.
Disclosure risk is the risk of loss due to
the presentation of incomplete or false
information to the general public, or
shareholders, or regulatory bodies. Noncompliance with accounting rules and
requirements for rendition of reports
to regulatory and supervisory or fiscal
authorities could also give rise to strategic
and franchise risks.
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Risk Management
Risk Management
3. Governance Structure
The Board of Directors exercises its oversight
of risk management through the Risk
Committee and the Audit and Compliance
Committee of the Board. The Board
articulates the amount of risk that Ecobank
is willing to accept in the normal course of
business (risk appetite) and sets the overall
risk profile for the Group. The Risk Committee
proposes risk policies and the overall
approach to risk management, and monitors
the adequacy of controls, compliance with
risk policies and the Group’s risk profile. The
Audit and Compliance Committee ensures
that the financial activities of the business
are subject to independent review and
external audit.
Group Risk Management, under the
oversight of the Risk Committee and
the supervision of the Group Head,
Risk Management, develops the risk
management strategy, principles, framework
and policies, and implements appropriate
risk management processes, methodologies
and tools for managing risk. For 2013, the
was responsible for all the finance and risk
activities, and reporting to the Group Chief
Executive Officer.
The Finance and Risk functions were
separated in April 2014.
The Group Head, Risk Management is the
most senior risk management officer in
the organisation, and reports to the Risk
Committee of the Board. The Group Head,
Risk Management advises and coaches
management and business units on risk
management; monitors the application and
effectiveness of risk management processes;
and co-ordinates appropriate and timely
delivery of risk management information
to the Group Chief Executive Officer, the
Group Executive Committee (GEC), the
Risk Committee and the Board. The Group
Head, Risk Management provides overall
supervision of a Corporate Credit Centre, a
Domestic Credit Centre, an Early Warning,
Remedial and Recovery Centre (EWRR), an
Enterprise Risk Management (ERM) group,
a Group Credit Administration unit and a
Group Insurance unit. ERM is comprised
of five departments in charge of Portfolio
and Capital Management, Operational Risk
Management, Market Risk Management,
Risk Analytics and Environmental and
Sustainability.
Within each subsidiary bank, Group
Risk Management is represented by a
risk management department, which
is completely independent from all the
operating and risk-taking units. The risk
management department is managed by a
Country Risk Manager, who reports to the
Group Head, Risk Management.
Risk management governance structure*
Board of Directors
Committee
Risk Committee
Non-Executive Directors
(4)
GED Operations and Technology
Group CEO
Deputy Group CEO and GED
(GED) Finance and Risk
Internal Audit, Internal Control,
Treasury, Legal, Operations and
Technology functions
Group Head, Risk Management
Reporting structure of Ecobank Group Risk
Finance and Risk
Group Head, Finance
Corporate
Credit Centre
Early Warning,
Remedial and
Recovery
Cluster Risk
Heads
* Finance and Risk functions were separated in April 2014.
Group Head, Risk Management
Domestic
Credit Centre
Enterprise Risk
Management
Group Credit
Administration
Group
Insurance
Risk Management
Within each business cluster, Group Risk
Management is represented by a Cluster Risk
Manager, who reports administratively to a
Cluster Business Head and functionally to the
Group Head, Risk Management.
The risk management approval process is
centralised and fully independent of the
businesses. Accordingly, all credit approval
requests require the no objection of Group
Risk Management before submission to the
relevant board of directors for approval.
• Credits to Governments, Financial
Institutions and Corporate businesses
• Subsidiary banks initiate and approve
credits within their approved limits.
• Group Risk Management through its
Corporate Credit Centre (CCC) reviews
all credits initiated by the subsidiaries
for consistency with Group policies
and procedures and provides its no
objection.
• Upon receipt of the no objection from
CCC and other required Approvers
depending on the facility limits and
nature of the transaction, the initiating
subsidiary submits the request to the
local board for approval for transactions
above their approved limits.
• Credit to Individuals and SMEs
• Credit transactions are approved under
the terms and conditions of credit
programs previously approved by Group
Risk Management through its Domestic
Credit Centre (DCC).
• DCC reviews all credits initiated by the
subsidiaries for consistency with Group
policies and procedures and provides its
no objection.
• Upon receipt of no objection from DCC,
the initiating subsidiary submits the
request to the local board for approval.
The Group Asset and Liability Committee
(GALCO), a sub-committee of the Group
Executive Committee (GEC) is responsible
for the supervision and management
of market risk, mainly interest rate and
liquidity risks. Its members are: Group Chief
Executive Officer, Deputy GCEO and GED
Corporate and Investment Bank, Deputy
GCEO and Group Chief Operating Officer, GED
Finance and Risk, GED Domestic Bank, GED
Operations and Technology, Group Head
Risk Management, Group Head, Internal
Audit, Group Market Risk Manager, Group
Head, Strategy Management, Group General
Council, Group Head Compliance and Group
Treasurer. The committee meets quarterly
and on a more frequent basis when deemed
105
necessary to review the structure and pricing
of Group assets and liabilities, to agree on
the optimum maturity profile and mix of
incremental assets and liabilities, to evaluate
inherent market risks in new products and to
articulate the Group’s interest rate view.
At the subsidiary bank level, the
responsibility of asset and liability
management lies with the Treasury
Department. Specifically, the Asset and
Liability Management (ALM) desk of the
Treasury Unit manages the balance sheet.
The results of balance sheet analysis along
with appropriate recommendations are
reviewed in monthly ALCO meetings where
important decisions are made to minimise
risk and maximise returns. Local ALCO
membership includes the Country Managing
Director, the Country Treasurer, the Country
Risk Manager, the head of Internal Audit, the
head of Finance and the head of Legal.
Organogram of Group Risk
Group Head,
Risk Management
Corporate Credit
Centre
Domestic Credit
Centre
Early Warning,
Remedial and
Recovery
Corporate Credit
Risk Managers
Domestic Credit
Risk Managers
EWRR
Managers
Portfolio and Capital
Management
Operational
Risk Management
Enterprise Risk
Management
Group Credit
Administration
Cluster and Country
Risk Heads
Group Insurance
Market Risk
Risk Management
Risk Analytics
Environmental and
Sustainability
106
Risk Management
Risk Management
4. Risk Management
Approach
4.1 Credit Risk
4.1.1 Organisation
The Group manages credit risk by means of
a governance structure with clearly defined
responsibilities and credit approval authority.
The Board of Directors of ETI is the highest
credit approval authority at Ecobank. It sets
credit policies and ensures that all officers
involved in the extension of credit across the
Group strictly adhere to these policies.
From time to time, the Board delegates
its credit approval authority to individual
credit officers based on their credit skills,
experience and independence of judgment.
While credit approval limits are delegated
to individual credit officers, no credit officer
approves credits alone. All extensions
of credit are approved by at least three
credit officers, one of whom must have an
individual credit limit equal to or greater
than the amount of credit extension
under consideration. Also, because of the
separation of duties between origination
and risk management, at least one of the
three credit officers must come from the
Risk Management department. Furthermore,
all credits require the no objection of Group
Credit risk managers at the Group level (as
described in section 3 above).
The Board reviews and approves all credits
in excess of the policy limit, defined as
the maximum credit exposure to any
borrower or group of related borrowers,
currently set at 7.5% of the group
consolidated shareholders’ funds. It has,
however, delegated this function to the
Risk Committee, which has the authority
to approve all such credits when the
Board is not sitting. The Risk Committee
comprises the Group Chief Executive
Officer, two executive directors including
the Group Executive Director Finance &
Risk and four non-executive directors.
One of the non-executive directors is the
Committee Chairman. The Group Head, Risk
Management participates in Risk Committee
meetings in a consultative and record
keeping capacity.
The primary responsibility for managing
credit risk, however, lies with the Group
Head, Risk Management. He ensures that
Ecobank has resources, expertise, and
controls in place for efficient and effective
management of credit risk across the
Group. The Group Head, Risk Management
is expected to review all unusual risks as
well as extensions of credit which exceed
the credit authority granted to the Corporate
Credit Centre and the Domestic Credit
Centre and issue a no objection, where
applicable. At the subsidiary bank level, the
above functions are fulfilled by a specially
designated country risk manager.
Ecobank subsidiaries receive delegations
of credit approval authority from their
respective boards of directors, in line with the
general framework set up by the Group Chief
Executive Officer, the Group Executive Director
Finance and Risk and the Group Head, Risk
Management.
Portfolio distribution by facility risk rating
(Percent of total portfolio)
50
9
6
4
1
Dec 2013
13
12 11
52
10
9
7
4 4
2
2
3
Dec 2012
4
5
6
7
3 3
8
1 0
0 0
9
10
107
Risk Management
4.1.2 Risk Identification
The Group is involved in a number of
business activities. These activities can
be divided roughly into three segments:
Domestic Bank, Corporate and Investment
Bank and support units designed to improve
operating efficiencies. Each of these activities
entails various risks, which fall into the main
categories of the Group risk management
framework; these are credit, market,
operational and liquidity risks.
Ecobank is exposed to credit risk through
direct lending, issuance of financial and
performance guarantees and capital
market activities. Credit risk analysts work
in partnership with the sales function in
identifying risk exposures within each
subsidiary bank.
Credit decisions are based on an in-depth
review of obligor creditworthiness. The
Group utilises an internal risk rating system
that is based on a scale of 1 to 10 to rate
commercial and industrial obligors, financial
institutions, sovereign governments, as well
as small and medium scale enterprises. A
rating of ‘1’ identifies obligors of the highest
quality, comparable to AAA on the scale of
Standard and Poor’s. A risk rating of ‘10’
is assigned to obligors of lowest quality or
highest risk, identical to D on the scale of
Standard and Poor’s. Obligors risk rated 1
to 6 are considered as ‘normal borrowers’;
those risk rated 7 and 8 are considered as
‘borrowers requiring caution’ while those
risk rated 9 are ‘substandard borrowers’,
and those risk rated 10, ‘borrowers at risk of
permanent default’.
Risk ratings provide an objective means to
compare obligors and facilities within a given
portfolio, and to measure and manage credit
risk across different geographies, industry
segments, and business segments and
other relevant risk factors using the same
standards.Accordingly, the level of credit
authority required to approve any credit
transaction is also based on the risk rating of
obligors and facilities involved.
Risk ratings are assigned to obligors based on
the probability that the obligor will default,
and to facilities based on the loss that is
expected in the event of such a default. An
obligor risk rating is defined as the risk of
default on long-term unsecured debt in local
currency over a twelve month period. It is
assigned and approved when a credit facility
is first extended and is reviewed annually
and upon the occurrence of a significant
adverse event. The risk of default is derived
from an analysis of the obligor’s historical
and projected financial statements and such
qualitative criteria as industry issues, the
obligor position in the market, the quality
of the board and management and access
to financing. The process for determining
the obligor risk rating is carried out through
automated decision-making tools.
With regard to consumer lending, the Group
utilises a credit program approach whereby
credit is extended on the basis of productspecific risk parameters, using manual
scoring systems. The products involved are
secured and of a self-liquidating nature.
A facility risk rating describes the risk
associated with a particular facility of a given
obligor. It is usually equivalent to the obligor
risk rating; however, a different facility risk
rating may be assigned by adjusting the
obligor risk rating to take into account such
factors as the facility structure or collateral.
As at 31 December 2013, the credit portfolio
distribution by facility risk rating remained
fairly stable with the normal credit risk
category represented 87.6% of the portfolio
compared to 89.5% as at 31 December 2012.
Portfolio breakdown by risk category
87 90
12 10
1
Normal Risk (1-6)
Risk Under Watch (7-8)
0
Substandard Risk (9)
0
0
Risk of Permanent Default (10)
108
Risk Management
Risk Management
4.1.3 Risk Measurement
4.1.4 Risk Monitoring and Control
Credit risk measurement takes into account
the actual risk exposure (‘Exposure at
Default’ or EAD), the probability of default
(PD), and the percentage of loss in the
event of default (also called ‘loss given
default’ or LGD).
Credit risk exposures of subsidiaries are
monitored at both the subsidiary level and
the Group Risk Management level. At the
subsidiary level, credit administration units
monitor the performance of individual
exposures on a daily basis, ensure regularity
of credit approvals and line utilisations,
authorise disbursements of credit facilities
when approval conditions are met and
perform periodical reviews of collateral.
These units are also responsible for the
preparation of internal risk management
reports for country management and Group
Risk Management. Risk control units within
internal control department provide a second
line of defence as they ensure that controls
are in place and are effective. Remedial
management units identify early warning
signals of portfolio quality deterioration, and
monitor past due exposures with a view to
maximizing collections of delinquent loans
and recoveries of loans previously reserved
or written-off.
To measure credit risk, the Group estimates
the level of the statistical expected economic
loss in the event of default. This figure
measures the net present value of credit
costs that the Group would face from the
time of default until the end of the recovery
process. Credit costs include all provisions
taken against bad debts, write-offs, fully
reserved interest earned not collected
and possibly attorney fees incurred in the
process of enforcing the Group’s claims in
court. Under the current methodology, the
Group proceeds by assigning risk ratings
to credit facilities of all the obligors in the
credit portfolio. Then, the amount of credit
exposure with a given facility risk rating is
multiplied by the corresponding loss norms
to arrive at a statistical measure of loss
in the event of default on the exposure
involved. The loss norm is the probability
that an obligor will default within the next
twelve months multiplied by the economic
loss expected in the event of such a default.
The weighted average loss norm provides
a measure of the portfolio risk profile and
portfolio risk rating. The results are compared
with statistical loss measurement under the
Group economic capital model.
The portfolio risk rating remained stable at
6, as of December 2013, and the average
probability of default for the portfolio
increased from 6.1% in December 2012 to
6.7% in December 2013; this deterioration
of the average probability of default was
triggered by the increase in exposure to
obligors with risk rating in the 7 to 9 bucket.
At the Group level, the portfolio
management unit monitors risks taken
by subsidiaries on individual obligors and
economic groupings through a review of
monthly reports submitted by country risk
management units of subsidiary banks.
These reports include early warning systems
designed to monitor troubled exposures and
credit process problems. They also include
detailed credit exposure data that enable
the Group to monitor the risk profile in terms
of obligors, business segments, industry
segments, geography, currency, and asset
maturity at country and Group level. Group
Risk Management also determines the level
of the statistical unexpected and expected
economic loss, and the overall direction of
the portfolio risk profile.
The portfolio management unit ensures
that the Group is not exposed to excessive
concentration of credit risk on any one
obligor, asset class, industry segment or
geography. In particular, the unit ensures that
the Group achieves its strategic diversification
objectives within the prescribed time horizon.
4.1.4.1 Credit Risk Portfolio
In accordance with the Group Credit Policy,
risk concentration limits are in place for
managing the credit portfolio and monitoring
compliance with the Group’s risk appetite.
These limits are regularly reviewed by the
Risk Committee to take into account changes
in our operating environment, or in our
business segments.
The Group has developed a framework for
setting concentration limits. Concentration
risk is monitored by addressing credit quality
deterioration and portfolio diversification.
With respect to portfolio quality, the
probability of default (PD) of each risk factor
(geography, industry segment, business
sector, product, etc.) is the main driver for
limit setting because any increase in the
PD (loss norms) is an indication of portfolio
quality deterioration; conversely, any
decrease is indicative of an improvement
in portfolio quality. With regard to portfolio
diversification, concentration risk is measured
by the level of statistical unexpected loss
associated with each risk factor. Whereas
the expected loss has a direct impact on
Group profitability, unexpected loss affects
Group capital, and consequently future
Credit portfolio
Risk Assets (US$ millions)
2013
2012
Treasury bills and government bonds
Loans and advances to banks and financial institutions
Deposits with central banks
Other on-balance sheet assets
11,422
4,048
1,312
2,167
224
9,441
3,720
2,175
1,432
231
Sub-Total Direct Exposures
19,172
16,999
1,762
3,088
4,850
1,495
2,068
3,563
24,022
20,562
Import letters of credit
Other guarantees and undertakings
Sub-Total Contingent Exposures
Total Portfolio
Risk Management
performance. With the unexpected loss
concept, Group Risk Management has been
able to cap risk factors, which otherwise
would have widened the gap between
regulatory capital and economic capital, and
thus, improve the credit risk profile.
The credit portfolio, net of provisions,
amounted to US$24.02 billion as of 31
December, 2013 (US$20.56 billion as of 31
December, 2012). The 17% increase was
driven mainly by Loans and Advances to
customers, which increased by 21% from
December 2012 to December 2013. The
portfolio consisted of loans and advances to
customers, securities, deposits with central
banks, loans, advances and placements with
banks and financial institutions, as well as
off-balance sheets exposures in the form
of financial and performance guarantees as
shown in the table opposite.
4.1.4.2 Obligor Concentration
A large exposure is defined as any individual
exposure that represents at least 10% of the
total portfolio, or at least 10% of the Group
capital at the obligor level. As at December,
2013, there was no exposure equal to or
greater than 10% of total portfolio. However,
three non-bank obligors had individual
outstanding balances in excess of 10% of
Group capital. The twenty largest non-bank
exposures represented 129% of the Group
capital (December 2012: 107%) and 13%
of the total non-bank credit exposures
(December 2012: 14%). These exposures
came mainly from four industry sectors (Oil
and Gas, Manufacturing, Telecommunications
and Services) and were all performing.
Eighty-two percent (82%) of the top twenty
exposures were ‘normal credit risk’ quality,
i.e. with ratings ranging from 1 to 6 and
18% were classified as ‘exposures requiring
caution’ (rating 7 and 8).
Top 20 exposures per
industry sector
Electricity
Top 20 exposures per
risk category
3%
Normal borrowers
82%
Manufacturing
18%
18%
Oil and gas
45%
Borrowers
requiring caution
Services
13%
Telecommunications
18%
Trade, service
and manufacturing
3%
109
110
Risk Management
Risk Management
4.1.4.3 Industry Diversification
The portfolio breakdown by industry is
consistent with a well-diversified credit
portfolio, notwithstanding the highlighted
concentrations in the Government sector
(mainly treasury bills held for liquidity
management purposes), the Services sector,
the oil and gas sector and the Wholesale
and Retail trade sector. These four industry
sectors accounted for 61% of the total credit
portfolio (December 2012: 62%).
2012 exposures by region
of residence percent of
total portfolio
4.1.4.4 Geographic Diversification
The Group has banking operations in 35
countries and benefits substantially from
the geographic diversification of its credit
portfolio. Thirty-three percent of the Group
credit portfolio was granted to obligors in
Nigeria (December 2012: 36%). Apart from
Nigeria, no other country represented more
than 10% of the portfolio.
Central Africa
At the regional level, Nigeria was the highest
(33%) followed by the Francophone West
Africa Region (31%), the Rest of West Africa
excluding Nigeria (14%), Central Africa (8%),
OECD countries (6%), EAC (4%), SADC (3%)
and others countries (1%).
2013 exposures by region
of residence percent of
total portfolio
8%
Central Africa
8%
Nigeria
33%
Nigeria
33%
31%
31%
Rest of West Africa
14%
Rest of West Africa
14%
East Africa
4%
East Africa
Southern Africa
3%
Southern Africa
3%
OECD countries
6%
OECD countries
6%
Others
1%
Others
1%
Diversification by industry
4%
Credit portfolio per currency
14
Government
Services
Oil & Gas
12
6
8
8
8
Manufacturing
Central Bank
Construction
6
Telecom.
4
2
2
All Others
Coffee & Cocoa T.
Cotton
Dec 2013
1
1
1
1
Dec 2012
5
18
18
10
10
Whol. & Retail T.
Commercial Bank
23
19
7
7
9
XOF/XAF
34%
NGN
24%
USD
27%
EUR
5%
GHS
4%
Others
6%
111
Risk Management
4.1.4.5 Currency Breakdown
The portfolio was mainly denominated in
3 major currencies, namely the CFA Franc
(34%), the US Dollar (27%) and the Nigeria
Naira (24%). The three currencies accounted
for 85% of the lending portfolio.
4.1.4.5 Asset Quality
4.1.4.5.1 Gross Loans and Advances to
Customers
Gross loans and advances to customers
rose by 22% in 2013 to US$12.0 billion. The
growth was mainly driven by the Corporate
Bank segment (+34%) while the Domestic
Bank segment increased by 11%.
Gross loans by business
segment
(US$m)
12,010
9,847
6,385
UEMOA contributed 37% of the gross loan
growth in 2013, followed by NIGERIA (28%),
WAMZ (17%), CEMAC (14%), EAC (4%) and
SADC (2%).
4,772
5,625
5,075
2013
2012
Corporate Bank
Domestic Bank
Loans: product concentration
(2012)
Loans: product concentration
(2013)
(%)
(%)
Overdrafts
24%
Overdrafts
Credit Cards
0%
Credit Cards
22%
0%
Term Loans
73%
Term Loans
76%
Mortgage Loans
1%
Mortgage Loans
2%
Others
2%
Others
0%
Geographical contribution to the increase in loans
to customers
(US$m)
9,847
2012
Gross Loans
792
UEMOA
600
364
304
95
39
-32
12,010
Nigeria
WAMZ
CEMAC
EAC
SADC
Others
2013
Gross Loans
112
Risk Management
Risk Management
At the product level, loan growth was driven
by term loans, which represented 76% of
total loans (2012: 73%).
4.1.4.5.2 Non-Performing Loans
Non-performing loans (NPLs) increased by
36% (+$197 million) from $548 million
in December 2012 to US$745 million in
December 2013.
At the regional level, Nigeria remained the
Cluster with the highest NPLs at 48% (24%
in December 2012) of total NPLs, followed
by UEMOA which accounted for 22% (25% in
December 2012) of total NPLs.
Due to the higher increase in total NonPerforming Loans (+36%) compared to Total
Gross Loans and Advances to customers
(+22%), the ratio of non-performing loans
to gross loans and advances (‘NPL ratio’)
increased from 5.6% as of December 2012 to
6.2% as of December 2013.
The breakdown of non-performing loans
by business segment highlights a higher
concentration of non-performing loans in
the Domestic Bank (90%) relative to the
Corporate Bank (10%). Within the Domestic
Bank, non-performing loans are attributed
to local corporate customers, SMEs and
consumers who are more vulnerable to
economic cycles.
Consistent with additional loan loss
provisions established during the year,
the NPL provisioning rate (‘NPL coverage’)
improved from 74% in 2012 to 79% in 2013.
However, the unreserved portion of the
non-performing loans (i.e. the ‘open credit
exposure ratio’) increased to 7.3% of the
total equity (December 2012: 6.5%).
The cost of credit (i.e. impairment loss on
loans) for the year increased to US$363
million compared to US$148 million in 2012.
Ecobank Nigeria recorded a US$258 million
cost of credit partly as a result of the one-off
charge for impairment losses of $165 million
relating to certain legacy assets in Nigeria.
NPL ratio trend (%)
(US$m)
6.2
5.6
As a ratio of average gross loans and
advances to customers, the cost of credit also
increased from 167 basis points in 2012 to
331 basis points in 2013.
Dec 2013
Dec 2012
Dec 2013
Non-performing loans
by cluster
Non-performing loans by
business segment
Dec 2012
NPL coverage and net
open exposure
(US$m)
79.0
Central Africa
7%
Domestic
90%
Nigeria
48%
Corporate
10%
22%
Rest of West Africa
11%
East Africa
5%
Southern Africa
2%
Others
5%
74.2
7.3 6.5
Coverage Ratio (%)
Dec 2013
Open Credit Exposure (%)
Dec 2012
Risk Management
4.1.5 Portfolio Stress Testing
4.1.6 Risk Reporting
Stress tests are an important means of
analysing our risk profile since they give
management a better understanding
of how the Group portfolio is affected
by macroeconomic changes, including
the effects of negative events on Group
capital. The tests support compliance with
regulatory capital requirement and are an
important tool in capital planning. When the
Group uses stress tests in capital planning,
stress is applied to risks, income and costs.
Stressing income affects the Group capital,
while stressing risk exposures affects the
capital need. This means that the stress
tests quantify the effect of macroeconomic
changes on the capital buffer.
Group Risk Management submits a monthly
Dashboard to the Group Chief Executive
Officer and Group Executive Committee
(GEC). The Risk Committee reviews Risk
Management’s quarterly reports to ensure
that the portfolio performs in accordance
with approved policies, limits and risk
appetite. The Risk Committee refers decisions
to the Board for final approval.
For credit risk, the Group uses statistical
models that transform macroeconomic
scenarios into loss levels. The models are
used to stress the probability of default
(PD), causing higher loan impairment
charges and a greater need for capital.
The exposure is stressed further by
subjecting collateral to stress, that is, a
reduction in the collateral value.
For other risk types, such as market risk, the
Group uses scenario-specific variables on
current market positions, and this can result
in a decline in market values. The changes in
market value are considered as losses that
reduce Group earnings and capital.
The outcomes of stress test scenarios are
reviewed on a consolidated basis across all
risk types and compared with the Group
risk appetite. They are reviewed by the
management and the Risk Committee to
ensure that the Group is prepared for worst
case scenarios, and that appropriate decisions
are taken in the areas of Group risk appetite
and capital management.
Several stress testing exercises were
undertaken during 2013 to assess the
potential impact of various crisis (including
political) on our businesses. The results
showed that the Group had adequate capital
in all scenarios.
Ecobank maintains an Operational Risk
Management Framework with a Governance
Structure to support its core operational
risk management activities of anticipation,
mitigation and recovery. To ensure effective
management of operational risk across
Ecobank, the Governance Structure presents
three lines of defence.
4.2 Market Risk
Market risk comprises both price risk and
liquidity risk. Price risk measures the
impact of changes in interest rates, foreign
exchange rates, equity and commodity prices
and their implied volatilities on earnings.
Group trading and non-trading books are
exposed to price risk. Liquidity risk on
the other hand refers to the risk that an
organisation is unable or is perceived to be
unable to meet its financial commitments.
The objective of Ecobank market risk
management policy framework is to ensure
that all significant market risks are identified,
measured, and managed in a consistent and
effective manner across the Group in order to
stabilise earnings and capital under a broad
range of market conditions, and to ensure
that the Group possesses adequate sources
of liquidity.
4.2.1 Organisation
Group market risk management oversees
market risks related to all assets, liabilities
and off-balance sheet items. The Risk
Committee sets the overall risk policies
for Group market risk exposures, including
risk limits. Group Internal Audit provides
timely and objective assurance regarding
the continuing appropriateness of, and the
adequacy of compliance with the policy
framework.
113
The Group Market Risk Manager (GMRM)
plays a coordination, aggregation,
facilitation and enabling function. GMRM
drafts market risk policies, defines market
risk management standards, develops
and distributes tools, techniques, and is
responsible for training and promoting
common risk language across the Group.
GMRM also publicises knowledge on market
risk to create awareness and understanding
at all levels of employees. GMRM approves
balance sheet limits, price risk limits and
liquidity contingency plans for banking
subsidiaries. In addition, GMRM constantly
monitors market risk exposures and ensures
that they are maintained within prudential
levels at all times. GMRM also ensures
that market risk management processes
(including people, systems, operations, limits,
and controls) satisfy Group policies.
The Group Treasurer is responsible for market
risk taking activities and manages market
risks within the limits approved by the Board.
Group Treasurer reports market risk positions
to GMRM and Group Executive Committee on
a monthly basis and to the Board quarterly.
He prepares an annual liquidity contingency
and capital plan for the Group and provides
the first-level approval for liquidity
contingency and capital plans of subsidiary
banks. Country treasurers report directly to
Group Treasurer.
The Group Asset and Liability Committee
(GALCO) is responsible for the supervision
and management of market risk at the Group
level. GALCO members meet quarterly, and
more often if warranted by market conditions
to review the Group’s liquidity and funding
needs, the structure and pricing of the
Group’s assets and liabilities, and market risk
involved in new products. They articulate
the Group’s interest rate view and decide
on the required maturity profile and mix
of incremental assets and liabilities. ALCO
committees of subsidiary banks fulfil these
functions monthly at the country level.
The staff and management working within
or managing operational business units and
their board of directors are responsible for
the day-to-day management and control of
market risk within their businesses.
114
Risk Management
Risk Management
4.2.2 Risk Identification
Consistent with an independent and
centralised risk management function,
Ecobank measures, monitors, manages, and
reports its exposure to market risk on a daily
basis. It also conducts intraday spot checks
of market risks in individual subsidiaries by
calculating risk exposures with internally
developed systems that cover all of its
positions. In addition, conventional risk
measures and mathematical and statistical
measures, such as Value at Risk, are utilised
to calculate market risk exposures as wells as
economic and regulatory capital.
At the subsidiary level, trading units
maintain blotters for recording movements
and balance sheet positions of traded
instruments, which include daily monitoring
of profit and loss balances of trading and
non-trading positions. Internal controllers and
market risk managers monitor daily trading
activities to ensure that risk exposures taken
are within the approved price risk limits
and the overall risk tolerance levels set by
the Board. ALCO members, treasurers and
market risk managers monitor market risk
factors that affect the value of trading and
non-trading positions as well as income
streams on non-trading portfolios on a daily
basis. They also track liquidity indicators to
ensure that subsidiaries meet their financial
obligations at all times.
The Group currently uses repricing maturity
gap analysis to measure exposure to interest
rate risk in its non-trading book. Through
this analysis, subsidiary banks compare the
values of interest rate sensitive assets and
interest rate sensitive liabilities that mature
or re-price at various time periods in the
future. In performing this analysis, the Group
may make judgmental assumptions about
the behaviour of assets and liabilities which
do not have specific contractual maturity or
re-pricing dates.
4.2.3.2 Trading Book
At Ecobank, trading market risk generally
emanates from the Group’s market making
activities where the Group acts as principal
with the market. It therefore arises from
open positions in interest rate and foreign
currency positions, and it is generally affected
by changes in the level and volatilities of
yields and foreign exchange rates.
An interest rate sensitive gap is positive or
a gap profile is said to be asset sensitive
when the amount of interest rate sensitive
assets exceeds that of interest rate sensitive
liabilities maturing or re-pricing within a
specified time period. It is negative (liability
sensitive) when the amount of interest rate
sensitive liabilities exceeds that of interest
rate sensitive assets maturing or re-pricing
within a specified period.
• Risk limits, driven by the notional size of
net open positions (NOPs) by currency and
subsidiary
In general, an asset sensitive institution may
expect net interest income to increase with
rising market interest rates and decline with
falling market interest rates. Conversely, an
institution with a negative gap can expect
net income to increase when market interest
rates are falling and to decline when interest
rates are increasing.
4.2.3 Risk Measurement
4.2.3.1 Banking Book
The bank’s traditional banking loan and
deposit products are non-trading positions
and are generally reported at amortized cost.
However, economic values of these positions
may vary as a result of changes in market
conditions, primarily changes in the levels
of interest rates and foreign exchange rate
given that the Ecobank group has operations
in 35 countries in Africa with exposure to
17 different currencies. The risk of adverse
changes in the economic value of our nontrading positions is managed through the
bank’s Asset Liability Management activities.
Tools used to manage trading risk exposures
include the following:
• Management Action Triggers (MAT)
• Stop Loss Limits
• Value at Risk
4.2.3.3 Liquidity Risk
Liquidity risk is currently managed using
a balance sheet approach that estimates
all sources and uses of liquidity including
loans, investments, deposits and borrowings,
as well as contingent off-balance sheet
exposures. Respective subsidiary treasurers
are generally responsible for formulating the
subsidiary liquidity and contingency planning
strategies and identifying, monitoring and
reporting on all liquidity risks. The main tools
used for liquidity risk measurement are the
contractual maturity gap, ratio analysis and
stress testing.
Contractual liquidity maturity gap
(US$m)
1,871
1,068
2,209
3,551
3,003
2,644
1,903
-385
-4,155
-8,012
Up to 1 month
Dec 2013
1-3 months
Dec 2012
3-12 months)
1-5 years
Over 5 years
Risk Management
As shown in the graph opposite, the Group is
exposed to liquidity risk as of 31 December
2013 for maturities of up to one month; this
is due mainly to the overnight contractual
maturity of current and savings deposits
which accounted for nearly 70% of total
deposits and are included in this maturity
bucket. However, the risk is mitigated by
the stable nature of these deposits from
a behavioural perspective and the Group’s
ability to pledge its robust investments
portfolio for cash at central banks.
The analyses are based on the assumption
that the Group does not reduce its lending
activities. This means that existing lending
activities are maintained and require funding.
Most of the Group’s unencumbered treasury
bills and bonds holding can be used as
collateral for loan facilities with central banks,
and are thus, considered liquid. Scenariospecific haircuts are used on the treasury
bills and bonds portfolio. Potential liquidity
outflows from unutilised, but irrevocable loan
commitments are also factored in.
The Group liquidity position slightly
deteriorated from previous year; the liquidity
ratio (LR) decreased from 32% to 26% while
the loan-to-deposit ratio (LDR) increased
from 67% in 2012 to 73% as at the end of
2013. The deterioration in both ratios was
driven primarily by the increase in the Cash
Reserve Requirement (CRR) for Public Sector
Deposits from 12% to 50% by the Central
Bank of Nigeria and a 14% increase in total
assets during the year.
The degree of possible refinancing of
funding sources varies depending on the
scenario in question as wells as on the
specific funding source. To analyse the
stability of funding, the Group breaks down
deposits into personal/corporate, core/
non-core and term/non-maturing as well
as geographically according to the Group’s
position in each market.
In line with policy, the Group conducts stress
tests to measure its immediate liquidity
risk and to ensure that it has enough time
to respond to potential crises. The stress
test, which is conducted monthly, covers a
time horizon of up to six months. The test
estimates liquidity risk in various scenarios,
including three standard scenarios: a scenario
specific to the Group, a general market crisis
and a combination of the two.
The Group monitors the diversification
of funding sources by product, currency,
maturity and counterparty to ensure
that its funding base provides the best
possible protection if the markets come
under pressure.
Although the level of liquidity slightly
deteriorated compared to 2012, the Group
was able to largely remain within its internal
stress test targets throughout 2013.
Key liquidity indicators
86
59
65
73
67
50
26
32
Liquid Assets/
Total Assets (%)
Dec 2013
Dec 2012
Demand Deposits/
Total Deposits (%)
NIB/Total Loans (%)
Loans-to-Deposits
Ratio (%)
115
116
Risk Management
Risk Management
4.2.3.4 Interest Rate Risk
As of 31 December 2013, the Group’s
balance sheet showed a re-pricing profile
that was less asset sensitive compared to
the previous year. There was a significant
decline in the re-pricing mismatch in the
up to 1 month bucket and an increase in
the re‑pricing mismatch in the 1 to 5 years
bucket. Overall, the Bank is liability sensitive
up to the 1-month bucket, and asset
sensitive through the rest of the time bands.
Based on the re-pricing profile as of
31 December 2013, it is estimated that a
200 basis points decrease (increase) in rates
across the maturity buckets is expected
to increase (reduce) one-year earnings by
approximately US$39 million (US$22 million
in 2012). This is a reflection of the re-pricing
profile (liability sensitive on the up to
1 month bucket and asset sensitive on the
rest of the tenors) because under rising
(falling) interest rate environments, the
expected negative (positive) impact on net
interest income as the negative gap exposure
in the up to 1-month bucket re-prices more
than offsets the positive (negative) impact
on net interest income accruing from the
longer buckets which are asset sensitive.
In order to estimate the impact of varying
interest rates on the economic value of
Ecobank’s equity, duration based weighting
factors (based on an assumption of 200 basis
points across the time frame) recommended
by the Bank for International Settlements
(BIS) were applied to exposures in different
maturity buckets, and the results were
expressed as a percentage of the Group
capital. The results for the position as
of 31 December 2013 are shown in the
table below.
Interest rate repricing profile
(US$ millions)
3,766
2,446
615
1,479
920
2,074
1,856
1,017
174
-1,397
Up to 1 month
Dec 2013
1-3 months
3-12 months
1-5 years
Over 5 years
Dec 2012
Interest rate risk ratio
(US$ millions except ratios)
Up to 1
month
1-3
months
3-12
months
1-5
years
Over 5
years
Total
Gap
Weighting Factor (%)
Adjusted Gap
Interest Rate Risk Ratio (%)
-1,397
0.08
-1
-0.05
1,479
0.32
5
0.22
1,856
1.08
20
0.93
2,446
5.28
129
6.05
2,074
17.94
372
17.43
525
24.58
The aggregate interest rate risk ratio
increased from 11.02% in December 2012
to 24.58% of capital as of December 2013.
Thus, a 200 basis points increase in interest
rates, is expected to reduce economic value
by 24.58% (11.02% in 2012) Conversely,
a 200 basis points reduction in rates
is anticipated to positively impact the
economic value of Group equity by the same
magnitude. The deterioration was largely the
result of a 21% growth in loans and advances
to customers, an increase in securities with
over 5 year tenor held in the available for
sale portfolio and the shortening duration
of long term borrowed funds. All the three
developments resulted in an extension of
the duration gap. The exposures nevertheless
remain within Group approved limits.
Risk Management
4.2.3.5 Foreign Exchange Risk
Foreign exchange risk is the risk of losses on
foreign currency positions caused by changes
in exchange rates.
A change in monitoring policy stance of
the United States Federal Reserve had
significant implications on some of the
currencies in which the Group had major
exposure, including the Nigeria Naira (NGN)
and the Ghana Cedi (GHS); the NGN and
the GHS came under severe pressure as
the US Federal Reserve announced plans to
moderate its bond purchase program. The
year-on-year change from a net long to a net
short USD position and the increase in the net
long EUR position therefore were the result
of efforts by some subsidiaries to reduce
their vulnerability to their depreciating local
currencies in line with a Group directive.
The Group is exposed to foreign exchange
rate fluctuations in 17 currencies. The Nigeria
Naira and the CFA Franc continued to be the
currencies to which the Group has significant
exposure; accounting for 24% and 34% of
the Group’s total assets respectively as of the
end of the year. It is important to note that
the CFA Franc is a common currency for 14
out of the 35 countries in which the Group
operates, and it is pegged to the Euro under
financial agreements between the French
Treasury and countries in the Francophone
West Africa and Central Africa regions.
As of 31 December 2013 the Group had a
net on-balance sheet long open position in
EUR of US$367 million (net long position of
US$316 million in December 2012), a net
short open position in USD of US$82 million
(net short position of US$147 million in
2012) and a net long open position in the
CFA of US$179 million (US$163 million short
position in December 2012) as shown in the
figure below.
Net foreign exchange position
(US$ millions)
367
316
179
-82
-147
-163
Dollar
Dec 2013
Euro
CFA
Dec 2012
2013 value at risk (US$ millions)
Risk category
Average VaR
2013
Minimum VaR
Maximum VaR
Year End
Interest rate risk
Foreign exchange risk
2.06
5.28
0.17
0.84
3.92
9.16
2.3
4.0
Total VaR
7.34
1.01
13.08
6.30
117
4.2.3.6 Value at Risk
The Group measures and manages price risks
in its foreign exchange and fixed income
trading portfolios on the basis of Value at
Risk (VaR) calculations and stress testing. VaR
represents the potential loss in the market
value of a position or portfolio at a given
confidence interval level and over a predefined time horizon, and it is used for risk
monitoring and economic capital assessment.
The table below shows basic statistics of the
10-day VaR for the foreign exchange and
fixed income trading positions for 2013. The
average VaR for 2013 was US$7.3 million
(2012: US$7.4 million), of which US$5.28
million is attributable to foreign exchange
risk and US$2.06 million to interest rate risk.
118
Risk Management
Risk Management
4.3 Operational Risk
Ecobank Group defines operational risk as the
risk of loss arising from failed or inadequate
internal control processes, systems or
people or from events external to the
group. Operational risks include fraud, legal,
regulatory, compliance and execution and
business practices but exclude strategic and
reputational risk. Other risks like reputational,
credit and market risks are seen as potential
consequences of operational risk events.
Legal risk is the risk of loss resulting from the
failure to comply with laws, prudent ethical
standards and contractual obligations. Legal
risk arises also when contracts executed with
counterparties are not legally enforceable
or documented correctly. The Group has
established a common risk language to
provide a consistent framework for the
definition and categorization of risk.
General and specific trainings through
workshops, newsletters and mandatory
operational risk awareness are conducted
throughout the Group. Group Operational
Risk Management (GORM) acts as the
coordinating point where all significant
operational risks are identified, measured,
assessed, prioritised, managed, monitored,
reported and treated in a consistent
and effective manner across the Group.
GORM also ensures that existing policies
and procedures adequately address
risks emerging from changing operating
environments. All subsidiaries have adopted
the operational risk policies and procedures
manual (ORPPM) approved by the Board.
The Group enforces other policies, including
policies on security, fraud, control and
compliance that also support operational
risk management.
4.3.2 Organisation
4.3.2.1 Board Approval/Board Reporting
Pursuant to the Group Operational Risk
Policies and Procedures Manual, ETI’s Board
of Directors must be advised of Ecobank’s
Operational Risk Management Framework,
made aware of the major aspects of
Ecobank’s Operational Risks, and receive
periodic reporting of Ecobank’s Operational
Risk exposures, Loss experience and other
relevant Operational Risk information.
The Group operates an operational risk
structure that ensures that the Board of
Directors and the Group Chief Executive
Officer have direct responsibility for
operational risk throughout the Group.
The Board acts through the Risk Committee,
whose decisions are implemented
by a centralised and independent
Group Risk Management.
4.3.2.2 Operational Risk Governance Structure
Ecobank maintains an Operational Risk
Management Framework with a Governance
Structure to support its core operational
risk management activities of anticipation,
mitigation and recovery. To ensure effective
management of operational risk across
Ecobank, the Governance Structure presents
three lines of defence.
First Line of Defence – The business: Owns
its risks, including its operational risk, and
is responsible for its management.
Second Line of Defence: Ecobank’s Control
Functions make up the second line of
defence to enhance the effectiveness of
controls and manage operational risks across
products and business lines. The Second
Line of Defence includes Operational Risk
Management, Compliance, Internal Control,
Finance, Human Resources and Legal.Legal
and Compliance additionally advise on legal
and regulatory issues that affect our risk and
control environment and provide certain
information related to Emerging Risks.
The Operational Risk Management team
oversees the management of operational risk
framework for Ecobank. Group Operational
Risk Management works proactively with
Businesses and Functions at the Group
and subsidiary levels to embed a strong
operational risk management culture and
framework across Ecobank through effective
identification, anticipation and mitigation
of risks that could impact business objectives;
and in minimizing operational risk events
and losses.
Third Line of Defence: Internal Audit
recommends enhancements on an ongoing
basis and provides independent assessment
and evaluation of the control environment.
4.3.1 Operational Risk Policy
The Group operational risk policy covers the
following activities:
Operational risk governance structure: the three lines of defence
• Identifying, monitoring and managing
current and potential operational risk
exposures;
• Managing ‘critical risks’ identified in the
course of business unit reviews;
• Following up on reports from Internal
Audit and regulatory authorities and
informing the Risk Committee of issues
that involve Group operational risks;
• Preparing management information on
issues such as IT security, physical security,
business continuity and compliance with
legislation in these areas.
Internal
audit
3rd Line
Control
functions
2nd Line
Business and functional
units / departments
1st Line
Risk Management
The Group Operational Risk Management
(GORM) is a central function at the Group
office, supported by operational risk officers
in all the affiliates and subsidiaries. GORM
drafts operational risk policies, defines
operational risk management standards,
and develops tools, techniques, analysis,
reporting, communication and training.
It partners with the Business Continuity
Management (BCM) in preparing, testing
and reviewing the business continuity and
disaster recovery plans. Business Continuity
is coordinated from the Business Continuity
Management (BCM) program office. The
Group Operational Risk Manager plays
coordination, aggregation, facilitation
and enabling functions.
GORM also continues to disseminate the
operational risk governance structure which
has been in existence since 2010. Over
the past year, GORM worked closely with
Business units and Control functions
notably Internal Control, Compliance,
Human Resources, Legal and Internal Audit
to develop the foundational framework for
the effective implementation of the risk
and control self-assessment (RCSA)
program across the group.
4.3.3 Operational Risk Management
(ORM) Framework
An operational risk framework is an essential
prerequisite for the effective and efficient
implementation of a risk and control
assessment. It provides a clear understanding
of the structure and process around the
identification of risks and controls and how
the risk and control assessment fits into the
overall management of operational risks.
The figure below depicts the ORM
framework. It anchors the Group’s
operational risk management approach
and escalation processes:
4.3.3.1 Risk and Control Self-Assessment
(RCSA)
The Risks and Controls Self-Assessment
(RCSA) program provides a range of
diagnostic tools that assist Senior Business
Managers to:
• Identify the most Significant Operational
Risks to Business activities
• Assess the overall effectiveness of
Key Controls that mitigate Significant
Operational Risks
• Detect and address specific weaknesses
in the design and/or execution of Key
Operational Controls and/or related
Business processes, and
• Detect and address Emerging Operational
Risks to business activities
RCSA also provides a common framework
to facilitate comprehensive and consistent
Risk and Control Assessments across
Ecobank Group and its Subsidiaries, including
consistent assessment of control issue
materiality and RCSA Entity Ratings, and
detection of Emerging Risks and Systemic
Control weaknesses across Ecobank Group
and its Subsidiaries.
4.3.3.2 Key Risk Indicators (KRIs)
Key Risk and Control Indicators are tools that
can be utilized to monitor the risk and control
environment and assist in the assessment
of Operational Risk. A Key Risk and Control
Indicator’s threshold or limit is set to establish
values or limits that, when exceeded, alert
the Business to a potentially significant
change in risk exposure and trigger
escalation and action. They should be set
with consideration of the Business’s overall
risk appetite. Certain risks, e.g. emerging
operational risks may not lend themselves
well to establishment of Key Risk and Control
Indicators, in which case, for Key Operational
Risks, alternatives such as scenario analysis
may be explored.
Key Risk Indicators (KRIs) complement
the RCSA processes. They are quantifiable
measures linked to the documented key risks
in the risk evaluation processes. They enable
changes in a risk level to be monitored
for improvement. They are effective
management tools for validating the
RCSA process.
Operational Risk Management Framework
• Business
Units
RCSA
KRIs
Events
• Identify risks
• Select key risks
• Capture
• Design controls
• Design indicators
• Casual Analysis
• Test controls
• Track Breaches
• Back-testing
Corrective Action Plans (CAPs)
Governance
Assurance
• Risks
Owners
• Controls
Owners
119
Reviewing Scenarios, Modeling, Capital Assessments, Reporting Risks and Controls
120
Risk Management
Risk Management
Business units collect KRI data to signal
issues where remedial action is required. The
process thus leads to senior management
committing to corrective action plans (CAPs)
for KRI breaches, which are tracked by GORM.
4.3.3.3 Events
Events management involves identifying,
analysing and recording details of events
such that the bank can avoid a repeated
occurrence. Analysing root causes
that crystallise into loss events assists
management in taking the necessary steps
to tighten controls. Early detection and
escalation facilitates effective remediation
and improves the chances of recovery
of operational risk losses. The Group has
implemented a centralized platform for
managing all losses.
The process also leads to senior management
committing to corrective action plans (CAPs)
when root cause analyses are complete.
4.3.3.4 Risks and Controls Ownership,
Governance, and Assurance
Within the framework, business units own
the risks and controls. Their efforts are guided
by control and risk functions (Internal Control
and Operational Risk) because these are
independent from the business. Both Internal
Control and Operational Risk track corrective
actions plans (CAPs) and report on these to
senior management. The Group Operational
Risk unit has the primary responsibility for
profiling business risks using methodologies
covered in the ORM framework. It deploys
the necessary tools across the Group. The
Group Internal Audit function provides
independent assurance through audits and
risk reviews.
4.3.4 Risk identification, measurement,
monitoring and control
Losses are categorised according to the
Basel II event categories for operational
risk losses. The loss categories are: internal
fraud, external fraud, employment
practices and workplace safety, disputes
with clients, damage to physical assets,
business disruptions and systems failure,
and execution, delivery and process
management.
The Group utilises an operational risk
management application to collect, analyse
and report operational loss event data across
the network. Business units are thus able to
monitor the key operational risk exposures
and underlying drivers against policy
thresholds set in the ORM framework.
Operational risk managers throughout the
group ensure that all operational risk events
are recorded and reported to the appropriate
management levels. Internal loss events are
categorised into actual loss (an incident that
has resulted in a financial loss), potential
loss (an incident that has been discovered,
that may or may not ultimately result in
a financial loss) and ‘near miss’ events. A
‘near miss’ event is an incident that was
discovered through means other than normal
operating practices and that, through good
fortune or focused management action,
resulted in no loss or a gain.
4.3.5 Compliance and Regulatory Risk
Ecobank has to deal with challenges as a
result of significant regulatory changes in
countries where it has footprints. These
challenges could negatively impact its
operations especially in the face of dwindling
world economy and unrelenting stiff
business competition. Ecobank continues
to be impacted by significant number of
new regulatory requirements from multiple
sources. Therefore, management continues
to provide attention and resources to ensure
that regulatory reforms do not create
disruption to our operations.
Ecobank has implemented robust processes
to ensure business units comply with
laws and regulations. The objective of the
bank’s compliance program is to protect the
company against reputational risk, regulatory
sanctions and enable it to conduct its
business the right way. This is complemented
by strong support functions comprising of
audit, legal and internal control.
In 2012, a set of compliance policies ensuring
transparency and best corporate practices
was unequivocally supported and approved
by the Board of Directors. The compliance
unit, which reports to the DGCEO/GCOO,
has the primary duty of ensuring that the
business complies with local regulations and
that the risks identified are not above the risk
appetite of the bank.
4.3.6 Know-Your-Customer (KYC) and
Due Diligence
The Compliance unit ensures that the Bank’s
network is firmly secured against money
laundering, corruption or terrorism financing
(AML/CFT). The bank, in order to effectively
monitor these diverse risks and international
financial crimes has put in place standard,
effective and efficient automated monitoring
tools through which compliance risks which
are identified are monitored and reduced at
their lowest level.
Ecobank closely collaborates with local
law enforcement authorities and financial
intelligence units (FIUs) in an open and
efficient manner. Ecobank has planned to
enhance AML/CFT monitoring processes
further in 2014.
Risk Management
121
4.3.7 Business Continuity Management
4.3.8 People Risk
4.3.9 Reputational Risk
Ecobank Business Continuity Management
program is based on international BCM
standards and principles. It outlines core
business and function procedures for the
recovery of operations or relocation in
response to various disruptions. These
procedures provide information for key
Ecobank personnel responsible to:
People risk is categorized into intentional
or dishonest acts (frauds, unauthorized
policy and procedure breaches, collusion,
or sabotage) and unintentional causes
(mistakes or errors due to lack of awareness
of policies and procedures) both of which
can lead to losses. The Group maintains
zero tolerance for all dishonest acts and
enforces Codes of Ethics for all staff.
Management has implemented a number
of control measures, including increasing
on-site reviews, increased control awareness
trainings, screening workers, and disciplining
staff involved in dishonest behaviours.
People risk is further managed through the
hiring process. Management continued to
maintain an efficient balance between sales
and processing staff ratios. Where external
organisations provided services, subsidiaries
were guided to assign less sensitive roles to
such support staff; employee screening was
also extended to cover such non-permanent
staffing arrangements.
The Ecobank brand is strong across Africa.
Some events however happened which
were reported in a way that was potentially
detrimental to the Ecobank brand. There was
thus the need to conduct a review of the
overall impact of these events on the brand
image. To perform this review, Operational
Risk looked at public media information
and records from internal sources including
Internal Audit, Internal Control, Customer
Service, Legal and Compliance, Finance,
and Communications. Contributions of each
of these sources to the reputational risk
was based on scores arrived at based on
the strength of their estimated severity
and probability of occurrence. Generally,
negative publications by globally renowned
sources and national news media were rated
higher than internal contributors for which
management has implemented corrective
actions for their remediation.
• protect Ecobank staff safety and Ecobank
property
• recover and resume operations to ensure
continuation of business
• evaluate the disruption situation and
commence appropriate action
• provide our clients with access to critical
applications
• establish communication procedures
between Ecobank and our employees,
clients and regulators
• safeguard Ecobank records and intellectual
property
Subsidiaries and Business Units are guided
to develop, maintain and regularly test
comprehensive business continuity plans
(BCPs) to ensure continuous and reliable
service. The BCPs are based on predefined
strategies and are designed to ensure
provision of critical business processes and
applications within predefined recovery
time frames.
The BCM Program has assigned roles and
responsibilities, which are detailed in
the corporate policy and standards. This
stimulates an effective approach throughout
Ecobank and results in efficient business
continuity capability. Business continuity
specialists manage the BCM Program at the
local and group level. Group BCM provide
expertise and guidance to all Ecobank
subsidiaries in developing, implementing,
testing and maintaining effective BCPs and
recovery procedures.
Reputational Risk
Distribution
Reputational risk –
Basic assumptions
Type
International networks
Positive: critical/high
Negative: critical/high
Negative/positive: critical/high
In conclusion, the review noted a
reputational risk distribution of Negative:
63%, Positive: 34% and Other: 3%.
Risk score
81-100%
81-100%
10-50%
National networks
Positive: critical/medium
Negative: critical/medium
Negative/positive: critical/medium
Positive: moderate/medium
Negative: moderate/medium
61-80%
61-80%
5-20%
51-60%
51-60%
Internal sources
Negative: moderate/medium
Positive: moderate/low
Negative: moderate/low
Positive: minor/low
31-50%
11-40%
11-40%
0-10%
Negative
63%
Positive
34%
Others
3%
122
Risk Management
Risk Management
4.3.10 Legal Risk
The 2013 Legal risk exposure analysis
looked at legal fines, penalties, or punitive
damages resulting from supervisory actions,
as well as private settlements. As at Q4
2013 the bank recorded a total of 1,143
lawsuits across the group with a potential
liability impact of US$119.1 million. The
breakdown of lawsuits by entity is shown
in the table below.
4.3.11 Operational Risk Reporting
Operational risk reporting is an integral part
of the governance structure. Clear mandates
have been established in the group. In
addition to the day-to-day monitoring of
events and follow-ups, all Business Units
Risk Committees (BURCs) in countries
meet monthly to review operational risks
specific to those units and also identify
emerging risks. Country Operational Risk and
Country Internal Control or Internal Audit
observed the meetings, which proceedings
are documented and escalated to Group
Operational Risk.
On quarterly basis, functional heads in
countries meet as members of the Country
Business Risk and Control Committee
(BRCC) to review key operational risks.
Responsibilities are assigned as appropriate
for outstanding action plans for follow-up.
Country Operational Risk reports to GORM for
escalation of significant issues to Group BRCC
and Group Risk Committee through the Group
Head, Risk Management.
4.3.12 Events and Losses
Fraud events decreased between 2012 and
2013. Internal Frauds (US$3.8 million – of
which US$1.6 million is attributable to Nigeria)
constituted 51% of the total net loss for 2013
(2012: US$5.2 million or 45%). External Frauds
amounted to US$2 million or 27% of the
total net loss for 2013 (2012: US$4 million or
34%); Execution amounted to US$1.2 million
or 16% of the total net loss for 2013 (2012:
US$1.7 million or 15%) and Damage to Assets
constituted 5% of the total net loss for 2013
(2012: 6%). Rebel attacks in Central African
Republic resulted in a total loss of US$0.7
million comprising cash theft and damage
to physical assets. Due to multiple attacks by
rebels in the country, only branches in Bangui
(4 out of 12) are currently operational.
Legal risk distribution
Entity
No. of lawsuits Potential liability (US$ thousands)
ETI
Benin
Burkina Faso
Nigeria
Cameroon
Chad
Togo
Côte d’Ivoire
Senegal
Ghana
Others
Total
7
28
244
720
60
15
20
12
6
5
26
11,050
18,712
3,386
17,996
3,274
7,173
10,300
1,801
8,213
12,530
24,662
1,143
119,097
Net Operational Losses
(Percent of total)
Employment Practices
Operational Risk Management Framework
Group Risk Committee
0
0
0
Business Disruption 0
(Board sub-committee)
6
6
Physical Assets
Group BRCC
Group Functional Heads (meets quarterly)
Business Practices
Group Operational Risk Management (GORM)
Country Business Risk and Control Committee
Business and Functional Heads (meets quarterly)
Country Business Units Risk
Committee (BURC)
Treasury, Corporate, Domestic, Operations and
Technology (separate monthly meetings)
0
0
Execution
External Fraud
Internal Fraud
Country Operational
Risk Management
Dec 2013
Dec 2012
16
15
27
34
51
45
Risk Management
5. Capital Adequacy
5.1 Group Level
The Group’s capital management
policies support the Group’s business
strategy and ensure that the Group is
sufficiently capitalised to withstand severe
macroeconomic downturns. In addition,
they are designed to ensure that the
Group complies with regulatory capital
requirements and to support the Group’s
credit rating objectives.
Ecobank has two approaches to the
measurement of its capital requirements:
a regulatory approach and an internal
approach. The regulatory approach is based
on fixed uniform rules for holding adequate
capital to support the risk that the Group
assumes. Therefore, in all the countries
where Ecobank operates, banks are required
to hold a minimum capital level, which
is determined by the regulators, and is
consistent with the recommendations of the
Basel Committee on Banking Supervision.
Under the original Basel accord, banks were
to maintain a ratio of regulatory capital to
risk-weighted assets of 8%. This ratio has
been increased in some countries to 10%,
and in some cases, 15%. Since 2007, the
Group has been using an internal model
based on Basel II standards for assessment
of capital adequacy on a consolidated
basis. In line with an evolving capital
management framework and best-practice
recommendations, the Board in 2010
approved the adoption of the economic
capital concept as an additional internal
method for capital assessment. At Ecobank,
economic capital is defined as the amount of
capital required to absorb unexpected losses
arising from credit, operational and market
risks over a one-year time horizon at a 95%
confidence level.
Under Basel I standards, risk-weighted
assets rose by 22% from US$12.87 billion
in December 2012 to US$15.76 billion,
largely driven by the increase in Loans and
advances to customers (+$1.98 billion or
21%). The unimpaired capital, on the other
hand, increased slightly from US$2.55 billion
in December 2012 to US$2.57 billion in
December 2013.
Accordingly, the capital adequacy ratio under
Basel I as of December 31, 2013 was 16.3%
(19.3% in December 2012), significantly
exceeding regulatory requirements and
minimum international standards and the
core (Tier-1) capital adequacy ratio was
13.0% (15.2% in December 2012). The yearon-year decrease in the capital ratios was
driven by a 22% increase in risk weighted
assets while total regulatory capital remained
fairly stable (+1%).
123
5.2 Capital Adequacy in Subsidiaries
In line with our commitment to comply
with local regulations and ensure that our
subsidiaries are well-capitalized to meet
local business needs, the Group continued to
monitor capital adequacy in subsidiaries. All
subsidiaries comply with limits imposed by
local regulators, and when a shortage arises,
proper actions are taken for immediate
compliance with regulations.
Our internal models (Basel II and economic
capital) have also confirmed the adequacy of
the capital funds of the Group.
Laurence do Rego
Risk-weighted Assets
Risk-Weighted Assets (US$ millions)
2013
2012
Liquid assets
Loans to customers
Other on-balance sheet assets
Off-balance sheet assets
312
11,422
3,052
970
483
9,441
2,235
713
Total
15,755
12,871
Capital Adequacy Ratio (%)
19.3
16.3
15.2
13.0
Capital Adequacy Ratio
Dec 2013
Dec 2012
Tier-1 Capital Adequacy Ratio
124
Improving infrastructure of all types is one
of Africa’s key challenges, but also one of its
biggest opportunities.
Ecobank is using its financial resources and
expertise to support vital infrastructure
development across our countries, including
both public and private sector projects.
Image taken from Ecobank’s Corporate and Investment Bank
advertising campaign, Q1 – 2014.
125
126
Statement of Directors’ responsibilities
Responsibility for annual consolidated financial statements
The directors are responsible for the preparation of the consolidated financial statements for each financial year that give a true and fair
view of the state of the financial affairs of the Group at the end of the year and of its profit or loss. This responsibility includes ensuring that
the Group:
(a)keeps proper accounting records that disclose, with reasonable accuracy, the financial position of the Company and its subsidiaries;
(b)establishes adequate internal controls to safeguard its assets and to prevent and detect fraud and other irregularities; and
(c)prepares its consolidated financial statements using suitable accounting policies supported by reasonable and prudent judgments and
estimates, that are consistently applied.
The directors accept responsibility for the annual consolidated financial statements, which have been prepared using appropriate accounting
policies supported by reasonable and prudent judgments and estimates, in conformity with International Financial Reporting Standards.
Nothing has come to the attention of the directors to indicate that the Company and its subsidiaries will not remain a going concern for at
least twelve months from the date of this statement.
The directors are of the opinion that the consolidated financial statements give a true and fair view of the state of the financial affairs of the
Company and its subsidiaries and of its profit or loss. The directors further accept responsibility for the maintenance of accounting records that
may be relied upon in the preparation of the financial statements, as well as adequate systems of internal financial control.
Approval of annual consolidated financial statements
The annual consolidated financial statements, presented on pages 128 to 205 were approved by the Board of Directors on 25 April 2014 and
signed on its behalf by:
ndré Siaka
A
Interim Chairman, Board of Directors
Albert Essien
127
Report of the Independent Auditor to the Members
of Ecobank Transnational Incorporated
Report on the consolidated financial statements
We have audited the accompanying consolidated financial statements of Ecobank Transnational Incorporated and its subsidiaries (“the Group”)
which comprise the consolidated statement of financial position as of 31 December 2013 and the consolidated income statement, the
consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated statement of cash flows,
a summary of significant accounting policies and other explanatory notes.
Directors’ responsibility for the financial statements
The directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial
Reporting Standards and for such internal control as the directors determine is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an independent opinion on the consolidated financial statements based on our audit. We conducted our audit
in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and
perform our audit to obtain reasonable assurance that the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as
evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion
In our opinion the accompanying consolidated financial statements give a true and fair view of the financial position of the Group as of
31 December 2013 and of its profits and cash flows for the year then ended in accordance with International Financial Reporting Standards.
PricewaterhouseCoopers
Chartered Accountants
Lagos, Nigeria
29 April 2014
PricewaterhouseCoopers
Chartered Accountants
Abidjan, Côte d’Ivoire
29 April 2014
128
Consolidated income statement
(All amounts in thousands of US dollars unless otherwise stated)
Note
2013
2012
Interest income
Interest expense
Net interest income
6
6
1,599,756
(548,998)
1,050,758
1,348,086
(499,396)
848,690
7
7
626,548
(25,402)
601,146
515,228
(26,809)
488,419
8
9
10
308,960
(1,581)
44,173
351,552
255,707
(4,279)
141,462
392,890
Net trading income
Other income
Operating income before impairment loss
Impairment losses for loans and advances
2,003,456
11
12
Operating income after impairment loss
Staff expenses
Depreciation and amortization
13
13
13
Operating profit
Share of profit/(loss) of associates
24
(Loss)/Profit for the year from discontinued operations
1,574,648
(639,459)
(134,898)
(630,607)
(1,404,964)
(567,464)
(131,032)
(537,510)
(1,236,006)
16
221,778
14
(65,728)
156,050
29
(147,910)
(7,441)
(155,351)
1,626,726
221,762
Profit before income tax
Income tax expense
(362,628)
(14,102)
(376,730)
1,729,999
(8,277)
338,642
(613)
338,029
(56,207)
281,822
4,910
Profit for the year
147,773
286,732
Profit attributable to:
• Profit for the year from continuing operations
• (Loss)/Profit for the year from discontinued operations
95,541
102,932
(7,391)
249,743
246,311
3,432
Non-controlling interests (total)
• (Loss)/Profit for the year from discontinued operations
52,232
53,118
(886)
36,989
35,511
1,478
147,773
286,732
Earnings per share for the profit from continuing operations attributable to owners
of the parent during the year (expressed in US cents per share):
• Basic
• Diluted
15
15
0.60
0.55
1.67
1.28
Earnings per share for the profit from discontinued operations attributable to owners
of the parent during the year (expressed in US cents per share):
• Basic
• Diluted
15
15
(0.04)
(0.03)
0.02
0.02
The notes on pages 133 to 205 are an integral part of these consolidated financial statements.
129
Consolidated statement of comprehensive income
Note
Profit for the year
2013
2012
147,773
286,732
Other comprehensive income:
Items that may be subsequently reclassed to profit or loss:
Exchange difference on translation of foreign operations
(55,754)
(32,443)
40
(54,341)
–
58,555
(49)
Taxation relating to components of other comprehensive income
that may be subsequently reclassed to profit or loss
36
12,013
(98,082)
(42,990)
(16,927)
Items that will not be reclassed to profit or loss:
Property and equipment – net revaluation gain/(loss)
27
2,493
(1,143)
Taxation relating to components of other comprehensive income
that will not be reclassed profit or loss
36
(517)
1,976
(34)
(1,177)
Other comprehensive loss for the year, net of tax
(96,106)
(18,104)
Total comprehensive income for the year
51,667
268,628
(2,649)
4,742
(7,391)
230,371
226,939
3,432
54,317
55,203
(886)
38,257
36,779
1,478
Available-for-sale investments:
Net valuation (loss)/gain taken to equity
Reclassified to income statement
Total comprehensive income attributable to:
Owners of the parent
• Total comprehensive income for the year from continuing operations
• Total comprehensive (loss)/income for the year from discontinued operations
Non-controlling interests
• Total comprehensive income for the year from continuing operations
• Total comprehensive (loss)/income for the year from discontinued operations
51,667
268,628
Items in the statement above are disclosed net of tax. The deferred income tax relating to each component of other comprehensive income
is disclosed in Note 36.
130
Consolidated statement of financial position
As at 31 December
Assets
Financial assets held for trading
Reinsurance assets
Pledged assets
Investment in associates
Other assets
Intangible assets
Investment properties
Deferred income tax assets
Assets held for sale
Note
2013
2012
16
17
18
19
2,877,868
1,127,927
114,917
141,346
–
1,312,150
11,421,605
1,893,489
1,135,434
21,993
689,913
496,748
872,145
168,048
122,747
22,396,330
1,981,625
825,883
92,854
143,417
5,262
2,175,156
9,440,945
2,331,748
700,054
7,530
580,110
503,149
861,316
196,588
93,746
19,939,383
136,123
–
22,532,453
19,939,383
706,953
16,489,904
677,960
1,454
–
1,303,406
926,098
28,511
63,818
44,450
8,019
20,250,573
662,201
14,620,478
369,360
129
5,262
1,239,683
732,659
26,040
44,151
58,283
7,220
17,765,466
147,232
–
20,397,805
17,765,466
1,409,001
527,435
1,936,436
1,409,001
597,187
2,006,188
198,212
167,729
2,134,648
2,173,917
22,532,453
19,939,383
20
21
22
23
24
25
26
27
28
36
29
Total assets
Liabilities
Deposits from banks
Due to customers
Other deposits
Insurance liabilities
Borrowed funds
Other liabilities
Provisions
Current income tax liabilities
Deferred income tax liabilities
Retirement benefit obligations
Liabilities held for sale
30
31
32
19
33
34
35
36
37
29
Total liabilities
Equity
Equity attributable to the owners of the parent
Share capital and premium
Retained earnings and reserves
39
40
Total equity
The notes on pages 133 to 205 are an integral part of these consolidated financial statements. The financial statements were approved for
issue by the Board of Directors on 25 April 2014 and signed on its behalf by:
ndré Siaka
A
Interim Chairman, Board of Directors
Albert Essien
131
Consolidated statement of changes in equity
Note
At 01 January 2012
Net changes in available-for-sale investments, net of tax
Foreign currency translation differences
Net gains on revaluation of property
40
40
Other comprehensive income for the year
Profit for the year
Attributable to equity holders
of the Company
Share
capital and
Retained
Other
premium
earnings
reserves
• Private placement
Refund of deposit for shares
Treasury shares
Share issue expenses
40
40
40
40
40
40
39
39
At 31 December 2012/01 January 2013
Total equity
1,354,205
105,131
1,459,336
1,080,186
315,209
(41,190)
–
–
–
–
–
–
15,515
(33,711)
(1,177)
15,515
(33,711)
(1,177)
–
1,268
–
15,515
(32,443)
(1,177)
–
–
–
249,743
(19,373)
–
(19,373)
249,743
1,268
36,989
(18,105)
286,732
249,743
(19,373)
230,370
38,257
268,627
–
–
–
–
–
(55,612)
44,715
(22,791)
(3,748)
181
–
–
22,791
3,748
(181)
(55,612)
44,715
–
–
–
(22,525)
–
–
–
–
(78,137)
44,715
–
–
–
–
–
–
102,495
–
–
–
1,200
–
102,495
1,200
–
–
–
31,422
102,495
1,200
31,422
–
–
–
–
–
–
–
–
350,000
(3)
(13,299)
(7,883)
15,444
–
–
–
365,444
(3)
(13,299)
(7,883)
Dividends relating to 2011
Adjustments to opening retained earnings
Transfer to general banking reserves
Transfer to statutory reserve
Reclassification of share option reserve
Gain on shares held in Ecobank Ghana used as purchase
consideration
Share options granted
Additional non-controlling interest from Ecobank Ghana
Net Proceeds from shares issued:
Total
Noncontrolling
interests
350,000
(3)
(13,299)
(7,883)
1,409,001
630,192
(33,005)
–
–
–
–
–
–
(40,685)
(57,839)
1,976
(40,685)
(57,839)
1,976
–
2,085
–
(40,685)
(55,754)
1,976
Other comprehensive income for the year
Profit for the year
–
–
–
95,541
(96,548)
–
(96,548)
95,541
2,085
52,232
(94,463)
147,773
–
95,541
(96,548)
(1,007)
54,317
53,310
–
–
–
–
(68,879)
(24,913)
(57,172)
–
–
24,913
57,172
134
(68,879)
–
–
134
(23,834)
–
–
–
(92,713)
–
Net changes in available-for-sale investments, net of tax
Foreign currency translation differences
Net gains on revaluation of property
Transfer to general banking reserves
Convertible loans – equity component
At 31 December 2013
40
40
40
40
40
1,409,001
574,769
(47,333)
2,006,188
1,936,436
167,729
198,212
2,173,917
134
2,134,648
132
Consolidated statement of cash flows
Cash flows from operating activities
Profit before tax
Adjustments for:
Net trading income – foreign exchange
Net gain from investment securities
Fair value losses/(gain) on investment properties
AMCON refund relating to acquisition of Oceanic Bank
Depreciation of property and equipment
Net interest income
Amortization of software and other intangibles
Impairment charges:
• Property and equipment
Profit on sale of property and equipment
Share of (profit)/loss of associates
Note
13
13
24
–
–
(16)
172
(1,885)
613
(88,895)
(60,172)
(22,063)
2,071
(391,457)
451,675
(2,162,352)
(435,380)
(109,803)
(522,048)
308,600
1,869,426
1,325
2,471
193,438
(91,284)
–
70,932
656,903
(2,081,005)
(602,608)
(5,009)
(490,543)
199,261
2,543,983
(10,141)
14,830
(296,425)
1,599,756
(548,998)
(388,547)
1,348,086
(499,396)
173,418
–
(5,807)
(17,158)
(163,877)
36,724
(4,301,604)
(11,519)
4,591,754
128,152
119,245
–
(38,711)
(160,136)
25,069
(1,481,828)
(90,228)
1,747,571
120,981
(897,690)
970,249
–
(23,834)
(68,879)
(20,154)
(1,182,533)
1,012,307
344,617
(22,525)
(55,612)
96,254
29
26
27
22
39
40
Net (decrease)/increase in cash and cash equivalents
338,029
(190,450)
3,570
(33,735)
(72,364)
140,936
7,441
107,319
(848,690)
25,050
Interest received
Interest paid
Net cash flow (used in)/from operating activities
Cash and cash equivalents at start of year
Effects of exchange differences on cash and cash equivalents
Cash and cash equivalents at end of year
221,778
(228,999)
1,581
8,472
–
362,628
14,102
110,379
(1,050,758)
24,519
Changes in operating assets and liabilities
• Trading assets
• Derivative financial assets
• Other treasury bills
• Loans and advances to banks
• Loans and advances to customers
• Pledged assets
• Other assets
• Mandatory reserve deposits
• Other deposits
• Due to customers
• Derivative liabilities
• Other provisions
• Other liabilities
Cash flows from financing activities
Repayment of borrowed funds
Proceeds from borrowed funds
Proceeds of subscription of ordinary shares
Dividends paid to non-controlling shareholders
Dividends paid to owners of the parent
Net cash flow (used in)/from financing activities
2012
8
9
9
9
11
12
13
6
13
Income taxes paid
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired
Disposal of subsidiaries, net of cash disposed
Purchase of software
Purchase of property and equipment
Proceeds from sale of property and equipment
Purchase of investment securities
Purchase of investment properties
Proceeds from sale and redemption of securities
Net cash flow from investing activities
2013
(280,189)
42
42
1,813,053
108,886
1,641,749
390,652
1,330,596
91,804
1,813,053
133
1. General information
Ecobank Transnational Incorporated (ETI) and its subsidiaries
(together, ‘the group’) provide retail, corporate and investment
banking services throughout sub Saharan Africa outside South Africa.
The Group had operations in 39 countries and employed over 19,546
people (2012: 18,564) as at 31 December 2013.
Ecobank Transnational Incorporated is a limited liability company and
is incorporated and domiciled in the Republic of Togo. The address
of its registered office is as follows: 2365 Boulevard du Mono,
Lome, Togo. The company has a primary listing on the Ghana Stock
Exchange, the Nigerian Stock Exchange and the Bourse Regionale Des
Valeurs Mobilieres (Abidjan) Côte d’Ivoire.
The consolidated financial statements for the year ended
31 December 2013 have been approved by the Board of Directors
on 25 April 2014.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these
consolidated financial statements are set out below. These policies
have been consistently applied to all the years presented, unless
otherwise stated.
2.1. Basis of presentation
The Group’s consolidated financial statements for the year ended 31
December 2013 have been prepared in accordance with International
Financial Reporting Standards (IFRS) and IFRS Interpretations
Committee (IFRS IC) applicable to companies reporting under IFRS.
The consolidated financial statements comprise the consolidated
statement of comprehensive income shown as two statements, the
statement of financial position, the statement of changes in equity,
the statement of cash flows and the notes.
The consolidated financial statements have been prepared under
the historical cost convention, except for available-for-sale financial
assets, financial assets and financial liabilities held at fair value
Standard
Amendments to IAS 1
IAS 19
IFRS 7
IAS 27
IFRS 10
IFRS 12
IFRS 11
IFRS 13
through profit or loss, all derivative contracts and investment
properties, which have been measured at fair value and property and
equipment which have been revalued.
The consolidated financial statements are presented in US Dollars,
which is the group’s presentation currency. The figures shown in the
consolidated financial statements are stated in US Dollar thousands.
The disclosures on risks from financial instruments are presented in
the financial risk management report contained in Note 3.
The consolidated statement of cash flows shows the changes in
cash and cash equivalents arising during the period from operating
activities, investing activities and financing activities. Included in
cash and cash equivalents are highly liquid investments as shown
in Note 42.
The cash flows from operating activities are determined by using
the indirect method. The Group’s assignment of the cash flows to
operating, investing and financing category depends on the Group’s
business model.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires Directors to exercise judgment in the process of applying
the Group’s accounting policies. Changes in assumptions may have
a significant impact on the financial statements in the period the
assumptions changed. Management believes that the underlying
assumptions are appropriate and that the Group’s financial
statements therefore present the financial position and results fairly.
The areas involving a higher degree of judgment or complexity,
or areas where assumptions and estimates are significant to the
consolidated financial statements, are disclosed in Note 4
(a) Standards, amendment and interpretations effective on or
after 1 January 2013 adopted by the Group
In the current year, the Group has applied a number of new and
revised IFRSs issued by the International Accounting Standard Board
(IASB) that are mandatorily effective for an accounting period that
begins on or after 1 January 2013.
Content
Presentation of Financial statement, regarding other comprehensive income
Employee benefits
Financial instruments: Disclosures
IAS 27 (revised) separate financial statements
Consolidated financial statements
Disclosure of interests in other entities
Joint arrangements
Fair value measurement
i) Amendment to IAS 1, ‘Financial statement presentation’
regarding other comprehensive income
The main change resulting from these amendments is a
requirement for entities to group items presented in ‘other
comprehensive income’ (OCI) on the basis of whether they
are potentially reclassifiable to profit or loss subsequently
(reclassification adjustments). The amendments do not address
which items are presented in OCI. The impact of this amendment is
the presentation of the items of other comprehensive income.
Applicable for financial years beginning on/after
1 July 2012
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
ii) IAS 19, ‘Employee benefits’
This was amended in June 2011. The impact on the group will be
as follows: to immediately recognise all past service costs; and to
replace interest cost and expected return on plan assets with a net
interest amount that is calculated by applying the discount rate to the
net defined benefit liability (asset).
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iii) Amendment to IFRS 7 Disclosures – Offsetting financial assets and
financial liabilities
The amendment to IFRS 7 requires entities to disclose information
about rights of offset and related arrangements (such as collateral
posting requirements) for financial instruments under an enforceable
master netting agreement or similar arrangement. As the Group does
not have any offsetting arrangements in place, the application of the
amendments has had no material impact on the disclosures or on the
amounts recognised in the consolidated financial statements.
iv) IAS 27, ‘Separate financial statements’
IAS 27 was amended in May 2011 following the issuance of IFRS 10.
The revised IAS 27 deals only with the accounting for subsidiaries,
associates and joint ventures in the separate financial statements of
the parent company.
v) IFRS 10, ‘Consolidated financial statements’
This builds on existing principles by identifying the concept of
control as the determining factor in whether an entity should be
included within the consolidated financial statements of the parent
company. The standard provides additional guidance to assist in the
determination of control where this is difficult to assess. There has
been no change in the scope of consolidation as a result of applying
this new standard.
vi) IFRS 12, ‘Disclosures of interests in other entities’
This includes the disclosure requirements for all forms of interests
in other entities, including joint arrangements, associates, special
purpose vehicles and other off balance sheet vehicles. See Note 43
for the detailed impact of this standard.
vii) IFRS 11, ‘Joint arrangements’’
This focuses on the rights and obligations of the parties to the
arrangement rather than its legal form. Proportional consolidation is
no longer permitted. This standard has no impact on the Group as it
does not have joint arrangements relationships.
viii) IFRS 13, ‘Fair value measurement’
This aims to improve consistency and reduce complexity by providing
a precise definition of fair value and a single source of fair value
measurement and disclosure requirements for use across IFRSs. The
requirements, which are largely aligned between IFRSs and US GAAP,
do not extend the use of fair value accounting but provide guidance
on how it should be applied where its use is already required or
permitted by other standards within IFRSs. See Note 3 for the impact
of this standard.
(b) New standards and interpretations not yet adopted
A number of new standards and amendments to standards and
interpretations are effective for annual periods beginning after
1 January 2013, and have not been applied in preparing these
consolidated financial statement. None of these is expected to have
a significant effect on the consolidated financial statements of the
Group, except the following set out below:
IFRS 9, ‘Financial instruments’
This addresses the classification, measurement and recognition
of financial assets and financial liabilities. IFRS 9 was issued in
November 2009 and October 2010. It replaces the parts of IAS 39 that
relate to the classification and measurement of financial instruments.
IFRS 9 requires financial assets to be classified into two measurement
categories: those measured as at fair value and those measured at
amortised cost. The determination is made at initial recognition. The
classification depends on the entity’s business model for managing
its financial instruments and the contractual cash flow characteristics
of the instrument. For financial liabilities, the standard retains most
of the IAS 39 requirements. The main change is that, in cases where
the fair value option is taken for financial liabilities, the part of a fair
value change due to an entity’s own credit risk is recorded in other
comprehensive income rather than the income statement, unless this
creates an accounting mismatch. The group is yet to assess IFRS 9’s
full impact. The Group will also consider the impact of the remaining
phases of IFRS 9 when completed by the Board.
Amendments to IFRS 10 – Consolidated Financial Statements
(effective 1 January 2014)
The amendment to IFRS 10 define an investment entity and require a
reporting entity that meets the definition of an investment entity not
to consolidate its subsidiaries but instead to measure its subsidiaries
at fair value through profit or loss in its consolidated and seperate
financial statements. Consequential amendments have been made
to IFRS 12 and IAS 27 to introduce new disclosure requirements for
investment entities. The group does not anticipate that investment
entities will have any effect on the group’s consolidated financial
statements.
Amendments to IAS 32 – Financial Instruments: Presentation
The IASB has issued amendments to the application guidance in IAS
32, ‘Financial instruments: Presentation’, that clarify some of the
requirements for offsetting financial assets and financial liabilities on
the balance sheet. However, the clarified offsetting requirements for
amounts presented in the statement of financial position continue
to be different from Generally Accepted Accounting practices in the
United States of America.
Amendments to IAS 36 – Impairment of assets
These amendments address the disclosure of information about
the recoverable amount of impaired assets if that amount is based
on fair value less costs of disposal. These amendments address the
disclosure of information about the recoverable amount of impaired
assets if that amount is based on fair value less costs of disposal. To
require disclosure of the recoverable amount of an asset or CGU when
an impairment loss has been recognised or reversed; and to require
detailed disclosure of how the fair value less costs of disposal has
been measured when an impairment loss has been recognised or
reversed. IFRIC 21, ‘Levies’, sets out the accounting for an obligation
to pay a levy that is not income tax. The interpretation addresses
what the obligating event is that gives rise to pay a levy and when
should a liability be recognised. The Group is not currently subjected
to significant levies so the impact on the Group is not material.
There are no other IFRSs or IFRIC interpretations that are not yet
effective that would be expected to have a material impact on
the Group.
2.2 Consolidation
(a) Subsidiaries
Subsidiaries are all entities (including structured entities) over which
the group has control. The group controls an entity when the group
is exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through
its power over the entity. Subsidiaries are fully consolidated from
the date on which control is transferred to the group. They are
deconsolidated from the date that control ceases.
The Group applies the acquisition method to account for business
combinations. The consideration transferred for the acquisition of a
subsidiary is the fair values of the assets transferred, the liabilities
incurred to the former owners of the acquiree and the equity
interests issued by the Group. The consideration transferred includes
the fair value of any asset or liability resulting from a contingent
consideration arrangement. Identifiable assets acquired and liabilities
and contingent liabilities assumed in a business combination are
measured initially at their fair values at the acquisition date. The
Group recognises any non-controlling interest in the acquiree, either
at fair value or at the non-controlling interest’s proportionate share
of the recognised amounts of acquiree’s identifiable net assets
for components that are present ownership interests and entitle
their holders to a proportionate share of net assets in the event of
liquidation, otherwise they are recognised at fair value. Measurement
of non-controlling interest is required at the date of acquisition.
Subsequent increase in equity holding of the acquirer is seen to be
transaction between equity holders acting in their capacity as owners
of business.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition
date carrying value of the acquirer’s previously held equity interest in
the acquiree is re-measured to fair value at the acquisition date; any
gains or losses arising from such re-measurement are recognised in
profit or loss.
Any contingent consideration to be transferred by the Group is
recognised at fair value at the acquisition date. Subsequent changes to
the fair value of the contingent consideration that is deemed to be an
asset or liability is recognised in accordance with IAS 39 either in profit
or loss or as a change to other comprehensive income. For receivables
in cash, changes in fair value is transferred to the income statement.
Contingent consideration that is classified as equity is not re-measured,
and its subsequent settlement is accounted for within equity.
The excess of the consideration transferred, the amount of any
non-controlling interest in the acquiree and the acquisition-date fair
value of any previous equity interest in the acquiree over the fair
value of the identifiable net assets acquired is recorded as goodwill.
If the total of consideration transferred, non-controlling interest
recognised and peviously held interest measured is less than the fair
value of the net assets of the subsidiary acquired in the case of a
bargain purchase, the difference is recognised directly in the
income statement.
Inter-company transactions, balances and unrealised gains on
transactions between group companies are eliminated. Unrealised
135
losses are also eliminated. When necessary amounts reported
by subsidiaries have been adjusted to conform with the group’s
accounting policies.
(b) Changes in ownership interests in subsidiaries
without change of control
Transactions with non-controlling interests that do not result in
loss of control are accounted for as equity transactions – that is,
as transactions with the owners in their capacity as owners. The
difference between fair value of any consideration paid and the
relevant share acquired of the carrying value of net assets of the
subsidiary is recorded in equity. Gains or losses on disposals to noncontrolling interests are also recorded in equity.
(c) Disposal of subsidiaries
When the Group ceases to have control, any retained interest in
the entity is remeasured to its fair value at the date when control
is lost, with the change in carrying amount recognised in profit or
loss. The fair value is the initial carrying amount for the purposes of
subsequently accounting for the retained interest as an associate,
joint venture or financial asset. In addition, any amounts previously
recognised in other comprehensive income in respect of that entity
are accounted for as if the Group had directly disposed of the
related assets or liabilities. This may mean that amounts previously
recognised in other comprehensive income are reclassified to profit
or loss.
(d) Associates
Associates are all entities over which the Group has significant
influence but not control, generally accompanying a shareholding
of between 20% and 50% of the voting rights. Investments in
associates are accounted for using the equity method of accounting.
Under the equity method, the investment is initially recognised at
cost, and the carrying amount is increased or decreased to recognise
the investor’s share of the profit or loss of the investee after the date
of acquisition. The Group’s investment in associates includes goodwill
identified on acquisition.
If the ownership interest in an associate is reduced but significant
influence is retained, only a proportionate share of the amounts
previously recognised in other comprehensive income is reclassified
to profit or loss where appropriate.
The Group’s share of post-acquisition profit or loss is recognised in the
profit or loss, and its share of post-acquisition movements in other
comprehensive income is recognised in other comprehensive income
with a corresponding adjustment to the carrying amount of the
investment. When the Group’s share of losses in an associate equals
or exceeds its interest in the associate, including any other unsecured
receivables, the Group does not recognise further losses, unless it
has incurred legal or constructive obligations or made payments on
behalf of the associate.
The Group determines at each reporting date whether there is any
objective evidence that the investment in associate is impaired. If
this is the case, the Group calculates the amount of impairment as
the difference between the recoverable amount of the associate and
its carrying value and recognises the amount adjacent to ‘share of
profit/(loss) of associates in profit or loss.
136
2.3 Foreign currency translation
a) Functional and presentation currency
Items included in the financial statements of each of the Group’s
entities are measured using the currency of the primary economic
environment in which the entity operates (‘the functional currency’).
The consolidated financial statements are presented in United States
dollars, which is the Group’s presentation currency.
b) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions or valuation where items are re-measured. Foreign
exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies are
recognised in the income statement. Foreign exchange gains and
losses that relate to borrowings and cash and cash equivalents are
presented in the income statement.
Changes in the fair value of monetary securities denominated in
foreign currency classified as available for sale are analysed between
translation differences resulting from changes in the amortised cost
of the security and other changes in the carrying amount of the
security. Translation differences related to changes in amortised cost
are recognised in profit or loss, and other changes in carrying amount
are recognised in other comprehensive income.
Translation differences on non-monetary financial assets and
liabilities such as equities held at fair value through profit or loss
are recognised in profit or loss as part of the fair value gain or loss.
Translation differences on non-monetary financial assets, such
as equities classified as available for sale, are included in other
comprehensive income.
c) Group companies
The results and financial position of all group entities (none of
which has the currency of a hyperinflationary economy) that have
a functional currency different from the presentation currency are
translated into the presentation currency as follows:
i)Assets and liabilities for each statement of financial position
presented are translated at the closing rate at the date of that
statement of financial position;
ii)Income and expenses for each income statement are translated
at average exchange rates; (unless this average is not a
reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case income and
expenses are translated at the dates of the transactions) and
iii)All resulting exchange differences are recognized in other
comprehensive income.
Exchange differences arising from the above process are reported in
shareholders’ equity as ‘Foreign currency translation differences’. On
consolidation, exchange differences arising from the translation of the
net investment in foreign entities are taken to ‘Other comprehensive
income’. When a foreign operation is sold, such exchange differences
are recognized in the income statement as part of the gain or loss
on sale.
Goodwill and fair value adjustments arising on the acquisition of a
foreign entity are treated as assets and liabilities of the foreign entity
and translated at the closing rate. Exchange differences arising are
recognised in OCI.
2.4 Sale and repurchase agreements
Securities sold subject to repurchase agreements (‘repos’) are
reclassified in the financial statements as pledged assets when the
transferee has the right by contract or custom to sell or repledge the
collateral; the counterparty liability is included in deposits from banks
or deposits from customers, as appropriate. Securities purchased
under agreements to resell (‘reverse repos’) are recorded as loans
and advances to other banks or customers, as appropriate. The
difference between sale and repurchase price is treated as interest
and accrued over the life of the agreements using the effective
interest method. Securities lent to counterparties are also retained in
the financial statements.
2.5 Financial assets and liabilities
All financial assets and liabilities – which include derivative
financial instruments – have to be recognized in the consolidated
statement of financial position and measured in accordance with
their assigned category.
2.5.1 Financial assets
The Group allocates financial assets to the following IAS 39
categories: financial assets at fair value through profit or loss; loans
and receivables; held-to-maturity investments; and available-forsale financial assets. Management determines the classification
of its financial instruments at initial recognition. Financial assets
are recognised initially on the trade date, which is the date that
the Group becomes a party to the contractual provisions of the
instrument.
a) Financial assets at fair value through profit or loss
This category comprises two sub-categories: financial assets classified
as held for trading, and financial assets designated by the Group as
at fair value through profit or loss upon initial recognition. A financial
asset is classified as held for trading if it is acquired or incurred
principally for the purpose of selling or repurchasing it in the near
term or if it is part of a portfolio of identified financial instruments
that are managed together and for which there is evidence of a
recent actual pattern of short-term profit-taking. Derivatives are
also categorized as held for trading unless they are designated and
effective as hedging instruments. Financial assets held for trading
consist of debt instruments, including money-market paper, traded
corporate and bank loans, and equity instruments, as well as financial
assets with embedded derivatives. They are recognized in the
consolidated statement of financial position as ‘Financial assets held
for trading’.
Financial assets and financial liabilities are designated at fair value
through profit or loss when:
(i)Doing so significantly reduces measurement inconsistencies that
would arise if the related derivative were treated as held for
trading and the underlying financial instruments were carried
at amortized cost for such loans and advances to customers or
banks and debt securities in issue;
137
(ii)Certain investments, such as equity investments, are managed
and evaluated on a fair value basis in accordance with a
documented risk management or investment strategy and
reported to key management personnel on that basis are
designated at fair value through profit or loss; and
c) Held-to maturity financial assets
(iii)Financial instruments, such as debt securities held, containing
one or more embedded derivatives significantly modify the cash
flows, are designated at fair value through profit or loss.
(a)those that the Group upon initial recognition designates as at fair
value through profit or loss;
Gains and losses arising from changes in the fair value of derivatives
that are managed in conjunction with designated financial assets
or financial liabilities are included in ‘net income from financial
instruments designated at fair value’.
Financial instruments included in this category are recognized initially
at fair value; transaction costs are taken directly to the consolidated
income statement. Gains and losses arising from changes in fair value
are included directly in the consolidated income statement and are
reported as ‘Net trading income’. Interest income and expense and
dividend income and expenses on financial assets held for trading are
included in ‘Net interest income’ or ‘Dividend income’, respectively.
The instruments are derecognized when the rights to receive cash
flows have expired or the Group has transferred substantially all
the risks and rewards of ownership and the transfer qualifies for
derecognizing.
Financial assets for which the fair value option is applied are
recognized in the consolidated statement of financial position as
‘Financial assets designated at fair value’. Fair value changes relating
to financial assets designated at fair value through profit or loss are
recognized in ‘Net trading income’.
b) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed
or determinable payments that are not quoted in an active market,
other than:
(a)those that the Group intends to sell immediately or in the short
term, which are classified as held for trading, and those that the
entity upon initial recognition designates as at fair value through
profit or loss;
(b)those that the Group upon initial recognition designates as
available for sale; or
(c)those for which the holder may not recover substantially all of its
initial investment, other than because of credit deterioration.
Loans and receivables are initially recognized at fair value – which
is the cash consideration to originate or purchase the loan including
any transaction costs – and measured subsequently at amortized
cost using the effective interest rate method. Loans and receivables
are reported in the consolidated statement of financial position
as loans and advances to banks or customers. Interest on loans is
included in the consolidated income statement and is reported as
‘Interest income’. In the case of an impairment, the impairment loss
is reported as a deduction from the carrying value of the loan and
recognized in the consolidated income statement as ‘impairment
losses for loans and advances’.
Held-to-maturity investments are non-derivative financial assets
with fixed or determinable payments and fixed maturities that the
Group’s management has the positive intention and ability to hold to
maturity, other than:
(b)those that the Group designates as available for sale; and
(c)those that meet the definition of loans and receivables.
These are initially recognized at fair value including direct and
incremental transaction costs and measured subsequently at
amortized cost, using the effective interest method. Interest on
held-to-maturity investments is included in the consolidated income
statement and reported as ‘Interest income’. In the case of an
impairment, the impairment loss is reported as a deduction from the
carrying value of the investment and recognized in the consolidated
income statement as ‘net gains/(losses) on investment securities’.
There were no held-to-maturity financial assets as at the
reporting date.
d) Available-for-sale
Available-for-sale investments are financial assets that are intended
to be held for an indefinite period of time, which may be sold
in response to needs for liquidity or changes in interest rates,
exchange rates or equity prices or that are not classified as loans
and receivables, held-to-maturity investments or financial assets at
fair value through profit or loss. Available-for-sale financial assets
are initially recognized at fair value, which is the cash consideration
including any transaction costs, and measured subsequently at fair
value with gains and losses being recognized in other comprehensive
income, except for impairment losses and foreign exchange gains
and losses, until the financial asset is derecognized. If an availablefor-sale financial asset is determined to be impaired, the cumulative
gain or loss previously recognized in the equity is recognized
under income statement. However, interest is calculated using the
effective interest method, and foreign currency gains and losses on
monetary assets classified as available for sale are recognized in
the consolidated statement of comprehensive income. Dividends
on available-for-sale equity instruments are recognized in the
consolidated income statement in ‘Dividend income’ when the
Group’s right to receive payment is established.
2.5.2 Financial liabilities
The Group’s holding in financial liabilities is in financial liabilities at
fair value through profit or loss (including financial liabilities held
for trading and those that are designated at fair value) and financial
liabilities at amortized cost. Financial liabilities are derecognized
when extinguished.
138
a) Financial liabilities at fair value through profit or loss
This category comprises two sub-categories: financial liabilities
classified as held for trading, and financial liabilities designated by the
Group as at fair value through profit or loss upon initial recognition.
A financial liability is classified as held for trading if it is acquired
or incurred principally for the purpose of selling or repurchasing it
in the near term or if it is part of a portfolio of identified financial
instruments that are managed together and for which there is
evidence of a recent actual pattern of short-term profit-taking.
Derivatives are also categorized as held for trading unless they are
designated and effective as hedging instruments. Financial liabilities
held for trading also include obligations to deliver financial assets
borrowed by a short seller. Those financial instruments are recognized
in the consolidated statement of financial position as ‘Financial
liabilities held for trading’.
Gains and losses arising from changes in fair value of financial
liabilities classified as held for trading are included in the
consolidated income statement and are reported as ‘Net trading
income’. Interest expenses on financial liabilities held for trading are
included in ‘Net interest income’.
Financial liabilities for which the fair value option is applied are
recognized in the consolidated statement of financial position as
‘Financial liabilities designated at fair value’. Fair value changes
relating to such financial liabilities are passed through the statement
of comprehensive income.
b) Other liabilities measured at amortized cost
Financial liabilities that are not classified as at fair value through
profit or loss fall into this category and are measured at amortized
cost. Financial liabilities measured at amortized cost are deposits
from banks or customers, borrowed funds which the fair value option
is not applied, convertible bonds and subordinated debts.
c) Determination of fair value
Fair value under IFRS 13 is defined as the price that would
be received to sell an asset or paid to transfer a liability in an
orderly transaction in the principal (or most advantageous) at the
measurement date under current market condition (i.e. an exit price)
regardless of whether that price is directly observable or estimated
using another valuation technique.
For financial instruments traded in active markets, the determination
of fair values of financial assets and financial liabilities is based on
quoted market prices or dealer price quotations. This includes listed
equity securities and quoted debt instruments on exchanges
(for example, NSE, BVRM, GSE) and quotes from approved bond
market makers.
A financial instrument is regarded as quoted in an active market if
quoted prices are readily and regularly available from an exchange,
dealer, broker, industry group, pricing service or regulatory agency,
and those prices represent actual and regularly occurring market
transactions on an arm’s length basis. If the above criteria are not
met, the market is regarded as being inactive. Indications that a
market is inactive are when there is a wide bid-offer spread or
significant increase in the bid-offer spread or there are few
recent transactions.
For all other financial instruments, fair value is determined using
valuation techniques. In these techniques, fair values are estimated
from observable data in respect of similar financial instruments, using
models to estimate the present value of expected future cash flows
or other valuation techniques, using inputs existing at the dates of
the consolidated statement of financial position.
The Group uses widely recognized valuation models for determining
fair values of non-standardized financial instruments of lower
complexity, such as options or interest rate and currency swaps.
For these financial instruments, inputs into models are generally
market observable.
The output of a model is always an estimate or approximation of
a value that cannot be determined with certainty, and valuation
techniques employed may not fully reflect all factors relevant to the
positions the Group holds. Valuations are therefore adjusted, where
appropriate, to allow for additional factors including model risks,
liquidity risk and counterparty credit risk. Based on the established
fair value model governance policies, and related controls and
procedures applied, management believes that these valuation
adjustments are necessary and appropriate to fairly state the values
of financial instruments carried at fair value in the consolidated
statement of financial position. Price data and parameters used in
the measurement procedures applied are generally reviewed
carefully and adjusted, if necessary – particularly in view of the
current market developments.
The fair value of over-the-counter (OTC) derivatives is determined
using valuation methods that are commonly accepted in the financial
markets, such as present value techniques and option pricing models.
The fair value of foreign exchange forwards is generally based on
current forward exchange rates. Structured interest rate derivatives
are measured using appropriate option pricing models (for example,
the Black-Scholes model) or other procedures such as Monte Carlo
simulation.
In cases when the fair value of unlisted equity instruments cannot
be determined reliably, the instruments are carried at cost less
impairment. The fair value for loans and advances as well as
liabilities to banks and customers are determined using a present
value model on the basis of contractually agreed cash flows, taking
into account credit quality, liquidity and costs.
The fair values of contingent liabilities and irrevocable loan
commitments correspond to their carrying amounts.
d) Derecognition
Financial assets are derecognized when the contractual rights to
receive the cash flows from these assets have ceased to exist or
the assets have been transferred and substantially all the risks and
rewards of ownership of the assets are also transferred. Financial
liabilities are derecognized when they have been redeemed or
otherwise extinguished.
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2.6 Reclassification of financial assets
2.7 Financial guarantees and loan commitments
The Group may choose to reclassify a non-derivative financial asset
held for trading out of the held-for-trading category if the financial
asset is no longer held for the purpose of selling it in the near-term.
Financial assets other than loans and receivables are permitted
to be reclassified out of the held for trading category only in rare
circumstances arising from a single event that is unusual and highly
unlikely to recur in the near-term. In addition, the Group may choose
to reclassify financial assets that would meet the definition of loans
and receivables out of the held-for-trading or available-for-sale
categories if the Group has the intention and ability to hold these
financial assets for the foreseeable future or until maturity at the date
of reclassification.
‘Financial guarantees’ are contracts that require the Group to make
specified payments to reimburse the holder for a loss that it incurs
because a specified debtor fails to make payment when it is due in
accordance with the terms of a debt instrument. ‘Loan commitments’
are firm commitments to provide credit under pre-specified terms
and conditions.
Reclassifications are made at fair value as of the reclassification date.
Fair value becomes the new cost or amortized cost as applicable,
and no reversals of fair value gains or losses recorded before
reclassification date are subsequently made. Effective interest rates
for financial assets reclassified to loans and receivables and heldto-maturity categories are determined at the reclassification date.
Further increases in estimates of cash flows adjust effective interest
rates prospectively.
On reclassification of a financial asset out of the ‘at fair value through
profit or loss’ category, all embedded derivatives are re-assessed and,
if necessary, separately accounted for.
Liabilities arising from financial guarantees or commitments to
provide a loan at a below-market interest rate are initially measured
at fair value and the initial fair value is amortised over the life of the
guarantee or the commitment. The liability is subsequently carried
at the higher of this amortised amount and the present value of any
expected payment to settle the liability when a payment under the
contract has become probable.
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2.8 Classes of financial instrument
The Group classifies the financial instruments into classes that reflect the nature of information and take into account the characteristics of
those financial instruments. The classification made can be seen in the table below:
Financial assets
Category (as defined by IAS 39)
Financial assets at fair value through profit or loss
Loans and receivables
Class (as determined by the Group)
Derivative financial assets
Balances with central banks
Other assets excluding prepayments
Note
18
19
16
20
21
25
Held-to-maturity Investments
None
Not applicable
Available-for-sale financial assets
Investment securities – available for sale
Pledged assets
None
17
22
23
Not applicable
Hedging derivatives
Financial liabilities
Financial liabilities at fair value through profit or loss Derivative financial liabilities
Other deposits
Borrowed funds
Other liabilities, excluding non-financial liabilities
Off balance sheet financial instruments
Loan commitments
Loan commitments
Guarantees, acceptances and other financial facilities Guarantees, acceptances and other financial facilities
Note
19
32
31
33
34
Note
38
38
2.9 Offsetting financial instruments
2.13 Impairment of financial assets
Financial assets and liabilities are offset and the net amount reported
in the consolidated statement of financial position when there is a
legally enforceable right to offset the recognized amounts and there
is an intention to settle on a net basis or realize the asset and settle
the liability simultaneously.
a) Assets carried at amortized cost
2.10 Interest income and expense
Interest income and expense for all interest-bearing financial
instruments are recognized within ‘interest income’ and ‘interest
expense’ in the consolidated income statement using the effective
interest method.
The effective interest method is a method of calculating the
amortized cost of a financial asset or a financial liability and of
allocating the interest income or interest expense over the relevant
period. The effective interest rate is the rate that exactly discounts
estimated future cash payments or receipts through the expected
life of the financial instrument or, when appropriate, a shorter period
to the net carrying amount of the financial asset or financial liability.
When calculating the effective interest rate, the Group estimates cash
flows considering all contractual terms of the financial instrument
(for example, prepayment options) but does not consider future
credit losses. The calculation includes all fees and points paid or
received between parties to the contract that are an integral part of
the effective interest rate, transaction costs and all other premiums
or discounts.
Once a financial asset or a group of similar financial assets has been
written down as a result of an impairment loss, interest income is
recognized using the rate of interest used to discount the future cash
flows for the purpose of measuring the impairment loss.
2.11 Fee and commission income
Fees and commissions are generally recognized on an accrual basis
when the service has been provided. Loan commitment fees for
loans that are likely to be drawn down are deferred (together with
related direct costs) and recognized as an adjustment to the effective
interest rate on the loan. Loan syndication fees are recognized as
revenue when the syndication has been completed and the Group
has retained no part of the loan package for itself or has retained
a part at the same effective interest rate as the other participants.
Commission and fees arising from negotiating, or participating
in the negotiation of, a transaction for a third party – such as the
arrangement of the acquisition of shares or other securities, or the
purchase or sale of businesses – are recognized on completion of the
underlying transaction. Portfolio and other management advisory and
service fees are recognized based on the applicable service contracts,
usually on a time-apportionate basis. Asset management fees
related to investment funds are recognized ratably over the period
in which the service is provided. The same principle is applied for
wealth management, financial planning and custody services that are
continuously provided over an extended period of time. Performancelinked fees or fee components are recognized when the performance
criteria are fulfilled.
2.12 Dividend income
Dividends are recognized in the consolidated income statement
in ‘Dividend income’ when the entity’s right to receive payment
is established.
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The Group assesses at each reporting date whether there is
objective evidence that a financial asset or group of financial
assets is impaired. A financial asset or a group of financial assets is
impaired and impairment losses are incurred only if there is objective
evidence of impairment as a result of one or more events that
occurred after the initial recognition of the asset (a ‘loss event’) and
that loss event (or events) has an impact on the estimated future
cash flows of the financial asset or group of financial assets that can
be reliably estimated.
The criteria that the Group uses to determine that there is objective
evidence of an impairment loss include:
i) significant financial difficulty of the issuer or obligor;
ii) a breach of contract, such as a default or delinquency in interest
or principal payments;
iii) the lender, for economic or legal reasons relating to the
borrower’s financial difficulty, granting to the borrower a
concession that the lender would not otherwise consider;
iv) it becomes probable that the borrower will enter bankruptcy or
other financial reorganization;
v) the disappearance of an active market for that financial asset
because of financial difficulties; or
vi) observable data indicating that there is a measurable decrease
in the estimated future cash flows from a portfolio of financial
assets since the initial recognition of those assets, although the
decrease cannot yet be identified with the individual financial
assets in the portfolio.
The estimated period between a loss occurring and its identification
is determined by local management for each identified portfolio.
In general, the periods used vary between three months and 12
months; in exceptional cases, longer periods are warranted.
The Group first assesses whether objective evidence of impairment
exists individually for financial assets that are individually significant,
and individually or collectively for financial assets that are not
individually significant. If the Group determines that no objective
evidence of impairment exists for an individually assessed financial
asset, whether significant or not, it includes the asset in a group
of financial assets with similar credit risk characteristics and
collectively assesses them for impairment. Assets that are
individually assessed for impairment and for which an impairment
loss is or continues to be recognized are not included in a collective
assessment of impairment.
The amount of the loss is measured as the difference between
the asset’s carrying amount and the present value of estimated
future cash flows (excluding future credit losses that have not been
incurred) discounted at the financial asset’s original effective interest
rate. The carrying amount of the asset is reduced through the use
of an allowance account and the amount of the loss is recognized
in the consolidated income statement. If a loan or held-to-maturity
investment has a variable interest rate, the discount rate for
measuring any impairment loss is the current effective interest rate
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determined under the contract. As a practical expedient, the Group
may measure impairment on the basis of an instrument’s fair value
using an observable market price.
Future cash flows in a group of financial assets that are collectively
evaluated for impairment are estimated on the basis of the
contractual cash flows of the assets in the Group and historical loss
experience for assets with credit risk characteristics similar to those
in the Group. Historical loss experience is adjusted on the basis of
current observable data to reflect the effects of current conditions
that did not affect the period on which the historical loss experience
is based and to remove the effects of conditions in the historical
period that do not currently exist.
Estimates of changes in future cash flows for groups of assets
should reflect and be directionally consistent with changes in related
observable data from period to period (for example, changes in
unemployment rates, property prices, payment status, or other
factors indicative of changes in the probability of losses in the
Group and their magnitude). The methodology and assumptions
used for estimating future cash flows are reviewed regularly by the
Group to reduce any differences between loss estimates and actual
loss experience.
When a loan is uncollectible, it is written off against the related
allowance for loan impairment. Such loans are written off after all the
necessary procedures have been completed and the amount of the
loss has been determined. Impairment charges relating to loans and
advances to banks and customers are classified in loan impairment
charges whilst impairment charges relating to investment securities
(hold to maturity and loans and receivables categories) are classified
in ‘Net gains/(losses) on investment securities’.
If, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an
event occurring after the impairment was recognized (such as an
improvement in the debtor’s credit rating), the previously recognized
impairment loss is reversed by adjusting the allowance account.
The amount of the reversal is recognized in the consolidated
income statement.
When a loan is uncollectible, it is written off against the related
provision for loan impairment. Such loans are written off after all the
necessary procedures have been completed and the amount of the
loss has been determined.
If, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an
event occurring after the impairment was recognized (such as an
improvement in the debtor’s credit rating), the previously recognized
impairment loss is reversed by adjusting the allowance account. The
amount of the reversal is recognized in the income statement in
impairment charge for credit losses.
b) Assets classified as available-for-sale
The Group assesses at each date of the consolidated statement of
financial position whether there is objective evidence that a financial
asset or a group of financial assets is impaired. In the case of equity
investments classified as available-for-sale, a significant or prolonged
decline in the fair value of the security below its cost is objective
evidence of impairment resulting in the recognition of an impairment
loss. If any such evidence exists for available-for-sale financial assets,
the cumulative loss – measured as the difference between the
acquisition cost and the current fair value, less any impairment loss
on that financial asset previously recognized in
profit or loss – is removed from equity and recognized in the
consolidated income statement. Impairment losses recognized
in the consolidated income statement on equity instruments are
not reversed through the consolidated income statement. If, in a
subsequent period, the fair value of a debt instrument classified
as available-for-sale increases and the increase can be objectively
related to an event occurring after the impairment loss was
recognized in profit or loss, the impairment loss is reversed through
the consolidated income statement.
c) Renegotiated loans
Loans that are either subject to collective impairment assessment
or individually significant and whose terms have been renegotiated
are no longer considered to be past due but are treated as new
loans. In subsequent years, the asset is considered to be past due
and disclosed only if renegotiated again. Where possible, the Bank
seeks to restructure loans rather than to take possession of collateral.
This may involve extending the payment arrangements and the
agreement of new loan conditions. Once the terms have been
renegotiated, any impairment is measured using the original EIR as
calculated before the modification of terms and the loan is no longer
considered past due. Management continually reviews renegotiated
loans to ensure that all criteria are met and that future payments are
likely to occur. The loans continue to be subject to an individual or
collective impairment assessment, calculated using the loan’s
original EIR.
2.14 Impairment of non-financial assets
Intangible assets that have an indefinite useful life are not subject
to amortization and are tested annually for impairment. Assets
are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognized for the amount by
which the asset’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value
less costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash inflows (cash-generating units). The
impairment test also can be performed on a single asset when the
fair value less cost to sell or the value in use can be determined
reliably. Non-financial assets other than goodwill that suffered
impairment are reviewed for possible reversal of the impairment at
each reporting date.
2.15 Share-based payments
The Group engages in equity settled share-based payment
transactions in respect of services received from certain categories
of its employees. The fair value of the services received is measured
by reference to the fair value of the shares or share options granted
on the date of the grant. The cost of the employee services received
in respect of the shares or share options granted is recognized in the
consolidated income statement over the period that the services are
received, which is the vesting period.
The fair value of the options granted is determined using option
pricing models, which take into account the exercise price of the
option, the current share price, the risk free interest rate, the
expected volatility of the share price over the life of the option and
other relevant factors. Except for those which include terms related
to market conditions, vesting conditions included in the terms of the
grant are not taken into account in estimating fair value.
(b) A group company is the lessor
Non-market vesting conditions are taken into account by adjusting
the number of shares or share options included in the measurement
of the cost of employee services so that ultimately, the amount
recognized in the consolidated income statement reflects the number
of vested shares or share options. Where vesting conditions are
related to market conditions, the charges for the services received
are recognized regardless of whether or not the market related
vesting condition is met, provided that the non-market vesting
conditions are met.
(c) Fees paid in connection with arranging leases
2.16 Cash and cash equivalents
Cash and cash equivalents comprise balances with less than three
months’ maturity from the date of acquisition, including cash in hand,
deposits held at call with banks and other short-term highly liquid
investments with original maturities of three months or less.
2.17 Repossessed collateral
Repossed collateral are equities, landed properties or other
investments repossessed from customers and used to settle the
outstanding obligations. Such investments are classified in accordance
with the intention of the Group in the asset class which they belong.
2.18 Leases
Leases are accounted for in accordance with IAS 17 and IFRIC 4. They
are divided into finance leases and operating leases.
(a) A group company is the lessee
The Group enters into operating leases. The total payments made
under operating leases are charged to other operating expenses
in the income statement on a straight-line basis over the period of
the lease. When an operating lease is terminated before the lease
period has expired, any payment required to be made to the lessor
by way of penalty is recognized as an expense in the period in which
termination takes place.
The Group leases certain property, plant and equipment. Leases of
property, plant and equipment where the group has substantially all
the risks and rewards of ownership are classified as finance leases.
Finance leases are capitalised at the lease’s commencement at the
lower of the fair value of the leased property and the present value
of the minimum lease payments. Each lease payment is allocated
between the liability and finance charges. The corresponding rental
obligations, net of finance charges, are included in other longterm
payables. The interest element of the finance cost is charged to the
income statement over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of the liability
for each period. The property, plant and equipment acquired under
finance leases is depreciated over the shorter of the useful life of the
asset and the lease term.
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When assets are held subject to a finance lease, the present value
of the lease payments is recognized as a receivable. The difference
between the gross receivable and the present value of the
receivable is recognized as unearned finance income. Lease income
is recognized over the term of the lease using the net investment
method (before tax), which reflects a constant periodic rate of return.
The Group makes payments to agents for services in connection
with negotiating lease contracts with the Group’s lessees. For
operating leases, the letting fees are capitalized within the carrying
amount of the related investment property, and depreciated over the
life of the lease.
2.19 Investment properties
Properties that are held for long-term rental yields or for capital
appreciation or both, and that are not occupied by the entities in
the consolidated group, are classified as investment properties.
Investment properties comprise office buildings and Domestic Bank
parks leased out under operating lease agreements.
Some properties may be partially occupied by the Group, with the
remainder being held for rental income or capital appreciation. If that
part of the property occupied by the Group can be sold separately,
the Group accounts for the portions separately. The portion that is
owner-occupied is accounted for under IAS 16, and the portion that
is held for rental income or capital appreciation or both is treated as
investment property under IAS 40. When the portions cannot be sold
separately, the whole property is treated as investment property only
if an insignificant portion is owner-occupied.
Recognition of investment properties takes place only when it is
probable that the future economic benefits that are associated
with the investment property will flow to the entity and the cost
can be measured reliably. This is usually the day when all risks are
transferred. Investment properties are measured initially at cost,
including transaction costs. The carrying amount includes the cost
of replacing parts of an existing investment property at the time
the cost has been incurred if the recognition criteria are met; and
excludes the costs of day-to-day servicing of an investment property.
Subsequent to initial recognition, investment properties are stated
at fair value, which reflects market conditions at the date of the
consolidated statement of financial position. Gains or losses arising
from changes in the fair value of investment properties are included
in the consolidated income statement in the year in which they arise.
Subsequent expenditure is included in the asset’s carrying amount
only when it is probable that future economic benefits associated
with the item will flow to the Group and the cost of the item can
be measured reliably. All other repairs and maintenance costs are
charged to the consolidated income statement during the financial
period in which they are incurred.
Rental income from investment property is recognised in the income
statement on a straight-line basis over the term of the lease.
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Rental income from investment property is recognised in the income
statement on a straight-line basis over the term of the lease.
The fair value of investment properties is based on the nature,
location and condition of the specific asset. The fair value is calculated
by discounting the expected net rentals at a rate that reflects the
current market conditions as of the valuation date adjusted, if
necessary, for any difference in the nature, location or condition of
the specific asset. The fair value of investment property does not
reflect future capital expenditure that will improve or enhance the
property and does not reflect the related future benefits from this
future expenditure. These valuations are performed annually by
external appraisers.
2.20 Property and equipment
Land and buildings comprise mainly branches and offices. All property
and equipment used by the parent or its subsidiaries is stated at
historical cost less depreciation. Historical cost includes expenditure
that is directly attributable to the acquisition of the items.
Subsequent expenditures are included in the asset’s carrying amount
or are recognized as a separate asset, as appropriate, only when it
is probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. The carrying amount of the replaced part is derecognized.
All other repair and maintenance costs are charged to other operating
expenses during the financial period in which they are incurred.
After recognition as an asset, an item of property and equipment
whose fair value can be measured reliably shall be carried at a
revalued amount, being its fair value at the date of the revaluation
less any subsequent accumulated depreciation and subsequent
accumulated impairment losses. Revaluations shall be made with
sufficient regularity to ensure that the carrying amount does not
differ materially from that which would be determined using
fair value at the reporting date. If an item of property, plant and
equipment is revalued, the entire class of property, plant and
equipment to which that asset belongs shall be revalued. The fair
value of land and buildings is usually determined from market-based
evidence by appraisal that is normally undertaken by professionally
qualified valuers. The fair value of items of plant and equipment is
usually their market value determined by appraisal.
If an asset’s carrying amount is increased as a result of a revaluation,
the increase shall be credited directly to other comprehensive
income. However, the increase shall be recognized in profit or loss to
the extent that it reverses a revaluation decrease of the same asset
previously recognized in profit or loss. If an asset’s carrying amount
is decreased as a result of a revaluation, the decrease shall be
recognized in profit or loss. However, the decrease shall be debited
directly to equity under the heading of revaluation reserve to the
extent of any credit balance existing in the revaluation surplus in
respect of that asset.
For assets revalued, any accumulated depreciation at the date of
revaluation is eliminated against the gross carrying amount of the
asset, and the net amount is restated to the revalued amount of
the asset.
Land is not depreciated. Depreciation on other assets is calculated
using the straight-line method to allocate their cost to their residual
values over their estimated useful lives, as follows:
•Buildings: 25 – 40 years
•Leasehold improvements: 25 years, or over the period of the
lease if less than 25 years
•Furniture, equipment and installations: 3 – 5 years
•Motor vehicles: 3 – 10 years
The assets’ residual values and useful lives are reviewed, and
adjusted if appropriate, at the end of each reporting period. Assets
are subject to review for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be
recoverable. An asset’s carrying amount is written down immediately
to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount. The recoverable amount is
the higher of the asset’s fair value less costs to sell and value in use.
Gains and losses on disposals are determined by comparing proceeds
with carrying amount. These are included in other operating
expenses in the consolidated income statement.
2.21 Intangible assets
a) Goodwill
Goodwill represents the excess of the cost of acquisition over the
fair value of the Group’s share of the net identifiable assets of the
acquired subsidiaries and associates at the date of acquisition.
Goodwill on acquisitions of subsidiaries is included in intangible
assets. Goodwill on acquisitions of associates is included in
investments in associates.
Goodwill is allocated to cash-generating units for the purpose
of impairment testing. Each of those cash-generating units is
represented by each primary reporting segment.
Goodwill is tested annually as well as whenever a trigger event
has been observed for impairment by comparing the present value
of the expected future cash flows from a cashgenerating unit with
the carrying value of its net assets, including attributable goodwill
and carried at cost less accumulated impairment losses. Impairment
losses on goodwill are not reversed.
b) Computer software licences
Acquired computer software licences are capitalized on the basis of
the costs incurred to acquire and bring to use the specific software.
These costs are amortized on the basis of the expected useful lives.
Costs associated with developing or maintaining computer
software programs are recognized as an expense incurred.
Costs that are directly associated with the production of identifiable
and unique software products controlled by the Group, and that will
probably generate economic benefits exceeding costs beyond one
year, are recognized as intangible assets. Direct costs include
software development employee costs and an appropriate portion of
relevant overheads.
Computer software development costs recognized as assets are
amortized using the straight-line method over their useful lives (not
exceeding three years).
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2.22 Income tax
2.23 Provisions
a) Current income tax
Provisions for restructuring costs and legal claims are recognised
when the Group has a present legal or constructive obligation as a
result of past events; it is more likely than not that an outflow of
resources will be required to settle the obligation; and the amount
has been reliably estimated. The Group recognises no provisions for
future operating losses.
Income tax payable (receivable) is calculated on the basis of the
applicable tax law in the respective jurisdiction and is recognized
as an expense (income) for the period except to the extent that
current tax related to items that are charged or credited in other
comprehensive income or directly to equity. In these circumstances,
current tax is charged or credited to other comprehensive
income or to equity (for example, current tax on of availablefor-sale investment).
Where the Group has tax losses that can be relieved against a tax
liability for a previous year, it recognizes those losses as an asset,
because the tax relief is recoverable by refund of tax previously paid.
This asset is offset against an existing current tax balance. Where tax
losses can be relieved only by carry-forward against taxable profits of
future periods, a deductible temporary difference arises. Those losses
carried forward are set off against deferred tax liabilities carried in
the consolidated statement of financial position. The Group does not
offset income tax liabilies and current income tax assets.
b) Deferred income tax
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial
statements. Deferred income tax is determined using tax rates (and
laws) that have been enacted or substantially enacted by the date of
the consolidated statement of financial position and are expected to
apply when the related deferred income tax asset is realised or the
deferred income tax liability is settled.
The principal temporary differences arise from depreciation of
property, plant and equipment, revaluation of certain financial assets
and liabilities, provisions for pensions and other post-retirement
benefits and carry-forwards; and, in relation to acquisitions, on the
difference between the fair values of the net assets acquired and
their tax base, fair value changes on available for sale financial
assets, tax loss carried forward, revaluation on property and
equpment. However, the deferred income tax is not accounted for if
it arises from initial recognition of an asset or liability in a transaction
other than a business combination that at the time of the transaction
affects neither accounting nor taxable profit or loss. Deferred tax
assets are recognised when it is probable that future taxable profit
will be available against which these temporary differences can be
utilised. Deferred income tax is provided on temporary differences
arising from investments in subsidiaries and associates, except where
the timing of the reversal of the temporary difference is controlled by
the Group and it is probable that the difference will not reverse in the
foreseeable future.
The tax effects of carry-forwards of unused losses or unused tax
credits are recognised as an asset when it is probable that future
taxable profits will be available against which these losses can
be utilised.
Deferred tax related to fair value re-measurement of available-forsale investments, which are recognised in other comprehensive
income, is also recognised in the other comprehensive income and
subsequently in the consolidated income statement together with
the deferred gain or loss.
Where there are a number of similar obligations, the likelihood
that an outflow will be required in settlement is determined by
considering the class of obligations as a whole. A provision is
recognised even if the likelihood of an outflow with respect to any
one item included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditures
expected to be required to settle the obligation using a pre-tax rate
that reflects current market assessments of the time value of money
and the risks specific to the obligation. The increase in the provision
due to passage of time is recognised as interest expense.
2.24 Employee benefits
a) Pension obligations
A defined contribution plan is a pension plan under which the
group pays fixed contributions into a separate entity. The group
has no legal or constructive obligations to pay further contributions
if the fund does not hold sufficient assets to pay all employees
the benefits relating to employee service in the current and prior
periods. A defined benefit plan is a pension plan that is not a defined
contribution plan.
Typically defined benefit plans define an amount of pension benefit
that an employee will receive on retirement, usually dependent on
one or more factors such as age, years of service and compensation.
The liability recognised in the balance sheet in respect of defined
benefit pension plans is the present value of the defined benefit
obligation at the end of the reporting period less the fair value of
plan assets. The defined benefit obligation is calculated annually by
independent actuaries using the projected unit credit method. The
present value of the defined benefit obligation is determined by
discounting the estimated future cash outflows using interest rates of
high-quality corporate bonds that are denominated in the currency
in which the benefits will be paid, and that have terms to maturity
approximating to the terms of the related pension obligation. In
countries where there is no deep market in such bonds, the market
rates on government bonds are used.
Actuarial gains and losses arising from experience adjustments and
changes in actuarial assumptions are charged or credited to equity in
other comprehensive income in the period in which they arise.
Past-service costs are recognised immediately in income.
For defined contribution plans, the group pays contributions to
publicly or privately administered pension insurance plans on a
mandatory, contractual or voluntary basis. The group has no further
payment obligations once the contributions have been paid.
The contributions are recognised as employee benefit expense when
they are due. Prepaid contributions are recognised as an asset to
the extent that a cash refund or a reduction in the future payments
is available.
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b) Other post-retirement obligations
The Group also provides gratuity benefits to its retirees. The
entitlement to these benefits is usually conditional on the employee
remaining in service up to retirement age and the completion of a
minimum service period. The expected costs of these benefits are
accrued over the period of employment using the same accounting
methodology as used for defined benefit pension plans. Actuarial
gains and losses arising from experience adjustments and changes
in actuarial assumptions are charged or credited to equity in other
comprehensive income in the period in which they arise. These
obligations are valued annually by independent qualified actuaries.
c) Termination benefits
Termination benefits are payable when employment is terminated
by the group before the normal retirement date, or whenever an
employee accepts voluntary redundancy in exchange for these
benefits. The group recognises termination benefits at the earlier
of the following dates: (a) when the group can no longer withdraw
the offer of those benefits; and (b) when the entity recognises costs
for a restructuring that is within the scope of IAS 37 and involves
the payment of termination benefits. In the case of an offer made
to encourage voluntary redundancy, the termination benefits are
measured based on the number of employees expected to accept the
offer. Benefits falling due more than 12 months after the end of the
reporting period are discounted to their present value.
d) Profit-sharing and bonus plans
The group recognises a liability and an expense for bonuses and
profit-sharing, based on a formula that takes into consideration
the profit attributable to the company’s shareholders after certain
adjustments. The group recognises a provision where contractually
obliged or where there is a past practice that has created a
constructive obligation.
2.25 Borrowings
2.27 Compound financial instruments
Compound financial instruments issued by the group comprise
convertible notes that can be converted to share capital at the option
of the holder.
The liability component of a compound financial instrument is
recognised initially at the fair value of a similar liability that does
not have an equity conversion option. The equity component is
recognised initially at the difference between the fair value of the
compound financial instrument as a whole and the fair value of the
liability component. Any directly attributable transaction costs are
allocated to the liability and equity components in proportion to their
initial carrying amounts.
Subsequent to initial recognition, the liability component of a
compound financial instrument is measured at amortised cost using
the effective interest method. The equity component of a compound
financial instrument is not re-measured subsequent to initial
recognition except on conversion or expiry.
2.28 Fiduciary activities
Group companies commonly act as trustees and in other fiduciary
capacities that result in the holding or placing of assets on behalf of
individuals, trusts, retirement benefit plans and other institutions.
An assessment of control has been performed and this does result
in control for the group. These assets and income arising thereon are
excluded from these financial statements, as they are not assets of
the Group.
2.29 Share capital
a) Share issue costs
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or to the acquisition of a business
are shown in equity as a deduction, net of tax, from the proceeds.
Borrowings are recognised initially at fair value net of transaction
costs incurred. Borrowings are subsequently stated at amortised cost;
any difference between proceeds net of transaction costs and the
redemption value is recognised in the income statement over the
period of the borrowing using the effective interest method.
b) Dividends on ordinary shares
2.26 Borrowing costs
c) Treasury shares
General and specific borrowing costs directly attributable to the
acquisition, construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to get ready
for their intended use or sale, are added to the cost of those assets,
until such time as the assets are substantially ready for their intended
use or sale.
Investment income earned on the temporary investment of specific
borrowings pending their expenditure on qualifying assets is
deducted from the borrowing costs eligible for capitalisation. All
other borrowing costs are recognised in profit or loss in the period in
which they are incurred.
There were no such borrowing costs capitalised as at the
reporting date.
Dividends on ordinary shares are recognised in equity in the period in
which they are approved by the Company’s shareholders. Dividends
for the year that are declared after the reporting date are dealt with
in the subsequent events note.
Where the company purchases its equity share capital, the
consideration paid is deducted from total shareholders’ equity as
treasury shares until they are cancelled. Where such shares are
subsequently sold or reissued, any consideration received is included
in shareholders’ equity.
2.30 Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker is the person or group that
allocates resources to and assesses the performance of the operating
segments of an entity. The Group has determined the Group
Executive Committee as its chief operating decision maker.
All transactions between business segments are conducted on an arm´s
length basis, with intra-segment revenue and costs being eliminated
in head office. Income and expenses directly associated with each
segment are included in determining business segment performance.
In accordance with IFRS 8, the Group has the following business
segments: Domestic and Corporate and Investment Banking.
Domestic Bank: Focuses on serving local companies, small and
medium scale enterprises, government and government agencies
and the retail market.
Corporate and Investment Bank: Corporate Bank focuses on providing
one-stop banking services to multinationals and regional companies,
financial institutions and international organisations across network
of the group. Investment Bank constitutes the treasury, corporate
finance and asset management business. This unit provides valueadded solutions primarily to corporate clients and governments.
2.31 Non-current assets (or disposal groups)
held for sale
Non-current assets (or disposal groups) are classified as assets held
for sale when their carrying amount is to be recovered principally
through a sale transaction and a sale is considered highly probable.
This condition is regarded as met only when the asset (or disposal
group) is available for immediate sale in its present condition subject
only to terms that are usual and customary for sales of such asset
(or disposal group) and its sale is highly probable. Management
must be committed to the sale, which should be expected to qualify
for recognition as a completed sale within one year from the date
of classification.
When the Group is committed to a sale plan involving loss of control
of a subsidiary, all of the assets and liabilities of that subsidiary are
classified as held for sale when the criteria described above are met,
regardless of whether the Group will retain a non-controlling interests
in its former subsidiary after the sale.
Non-current assets (and disposal groups) classified as held for sale
are measured at the lower of their previous carrying amount and fair
value less costs to sell.
147
Discontinued operations:
The Group presents discontinued operations in a separate line in the
Income statement if an entity or a component of an entity has been
disposed of or is classified as held for sale and:
(a)Represents a separate major line of business or geographical
area of operations;
(b) Is part of a single co-ordinated plan to dispose of a separate
major line of business or geographical area of operations; or
(c)Is a subsidiary acquired exclusively with a view to resale
Net profit from discontinued operations includes the net total of
operating profit and loss before tax from operations, including net
gain or loss on sale before tax or measurement to fair value less
costs to sell and discontinued operations tax expense. A component
of an entity comprises operations and cash flows that can be clearly
distinguished, operationally and for financial reporting purposes, from
the rest of the Group´s operations and cash flows. If an entity or a
component of an entity is classified as a discontinued operation, the
Group restates prior periods in the Income statement.
2.32 Comparatives
Except when a standard or an interpretation permits or requires
otherwise, all amounts are reported or disclosed with comparative
information.
Where IAS 8 ‘Accounting policies, changes in accounting estimates
and errors’ applies, comparative figures have been adjusted to
conform with changes in presentation in the current year.
148
3 Financial risk management
The Group’s business involves taking on risks in a targeted manner
and managing them professionally. The core functions of the
group’s risk management are to identify all key risks for the Group,
measure these risks, manage the risk positions and determine
capital allocations. The Group regularly reviews its risk management
policies and systems to reflect changes in markets, products and best
market practice. The Group’s aim is to achieve an appropriate balance
between risk and return and minimise potential adverse effects
on the Group’s financial performance. The Group defines risk as the
possibility of losses or profits foregone, which may be caused by
internal or external factors.
Risk management is carried out by the Group Risk Management
under policies approved by the Board of Directors. Group Risk
Management identifies, evaluates and hedges financial risks in
close co-operation with the operating units of the Group. The Board
provides written principles for overall risk management, as well as
written policies covering specific areas, such as foreign exchange risk,
interest rate risk, credit risk, use of derivative financial instruments
and non-derivative financial instruments. In addition, the Group Audit
and Compliance is responsible for the independent review of risk
management and the control environment.
The most important types of risk are credit risk, liquidity risk and
market risk. Market risk includes currency risk, interest rate risk and
other price risk.
3.1 Credit risk
The Group takes on exposure to credit risk, which is the risk that a
counterparty will cause a financial loss to the Group by failing to pay
amounts in full when due. Credit risk is the most important risk for
the Group’s business: management therefore carefully manages the
exposure to credit risk. Credit exposures arise principally in lending
and investment activities. There is also credit risk in off-balance
sheet financial instruments, such as loan commitments. Credit risk
management and control is centralised in the risk management
team, which reports regularly to the Board of Directors.
3.1.1 Credit risk measurement
(i) Probability of default:
The Group assesses the probability of default of individual
counterparties using internal rating tools tailored to the various
categories of counterparty. They have been developed internally
and combine statistical analysis with credit officer judgment and
are validated, where appropriate, by comparison with externally
available data. Clients of the Group are segmented into three rating
classes. The Group’s rating scale, which is shown below, reflects
the range of default probabilities defined for each rating class. This
means that, in principle, exposures migrate between classes as
the assessment of their probability of default changes. The rating
tools are kept under review and upgraded as necessary. The Group
regularly validates the performance of the rating and their predictive
power with regard to default events.
Group’s internal ratings scale and mapping of external ratings are as
follows;
Group’s rating
1–4
5–6
7 – 10
Description of grade
Investment Grade
Standard Grade
Non Investment Grade
Mapping to external rating
(Standards and Poors)
AAA to BBB
BB to B
CCC to D
The ratings of the major rating agency shown in the table above
are mapped to the group’s rating classes based on the long-term
average default rates for each external grade. The Group uses the
external ratings where available to benchmark our internal credit risk
assessment. Observed defaults per rating category vary year on year,
especially over an economic cycle.
The Group’s policy requires the review of individual financial assets
that are above materiality thresholds at least annually or more
regularly when individual circumstances require. Impairment
allowances on individually assessed accounts are determined by an
evaluation of the incurred loss at the reporting date on a case-bycase basis, and are applied to all individually significant accounts.
The assessment normally encompasses collateral held (including
re-confirmation of its enforceability) and the anticipated receipts for
that individual account.
Collectively assessed impairment allowances are provided for:
(i) portfolios of homogenous assets that are individually below
materiality thresholds; and (ii) losses that have been incurred
but have not yet been identified, by using the available historical
experience, experienced judgment and statistical techniques.
(ii) Exposure at default
EAD is based on the amounts the Group expects to be owed at the
time of default. For example, for a loan this is the face value. For a
commitment, the Group includes any amount already drawn plus the
further amount that may have been drawn by the time of default,
should it occur.
(iii) Loss given default/loss severity
Loss given default or loss severity represents the Group’s expectation
of the extent of loss on a claim should default occur. It is expressed
as percentage loss per unit of exposure. It typically varies by type of
counterparty, type and seniority of claim and availability of collateral
or other credit support.
(iv) Debt securities and other bills
For debt securities and other bills, external rating such as Standard
& Poor’s rating or their equivalents are used by Group Treasury
for managing the credit risk exposures. The investments in those
securities and bills are viewed as a way to gain a better credit quality
mapping and maintain a readily available source to meet funding
requirements at the same time.
3.1.2 Risk limit control and mitigation policies
The Group manages, limits and controls concentrations of credit
risk wherever they are identified − in particular, to individual
counterparties and groups, and to industries and countries.
The Group structures the levels of credit risk it undertakes by placing
limits on the amount of risk accepted in relation to one borrower, or
groups of borrowers, and to geographical and industry segments.
Such risks are monitored on a revolving basis and subject to an
annual or more frequent review, when considered necessary. Limits
on the level of credit risk by product, industry sector and by country
are approved quarterly by the Board of Directors.
The exposure to any one borrower including banks and other non
bank financial institutions is further restricted by sub-limits covering
on- and off-statement of financial position exposures, and daily
delivery risk limits in relation to trading items such as forward
foreign exchange contracts. Actual exposures against limits are
monitored daily.
Exposure to credit risk is also managed through regular analysis of
the ability of borrowers and potential borrowers to meet interest
and capital repayment obligations and by changing these lending
limits where appropriate. Some other specific control and mitigation
measures are outlined below:
(a) Collateral
The Group employs a range of policies and practices to mitigate credit
risk. The most traditional of these is the taking of security for funds
advances, which is common practice. The Group implements guidelines
on the acceptability of specific classes of collateral or credit risk
mitigation. The principal collateral types for loans and advances are:
• Mortgages over residential properties;
• Charges over business assets such as premises, inventory
and accounts receivable;
• Charges over financial instruments such as debt securities
and equities.
Longer-term finance and lending to corporate entities are generally
secured; individual credit facilities are generally unsecured. In
addition, in order to minimise the credit loss the Group will seek
additional collateral from the counterparty as soon as impairment
indicators are noticed for the relevant individual loans and advances.
149
(b) Credit-related commitments
The primary purpose of these instruments is to ensure that funds
are available to a customer as required. Guarantees and standby
letters of credit carry the same credit risk as loans. Documentary and
commercial letters of credit – which are written undertakings by the
Group on behalf of a customer authorising a third party to draw drafts
on the Group up to a stipulated amount under specific terms and
conditions – are collateralised by the underlying shipments of goods
to which they relate and therefore carry less risk than a direct loan.
Commitments to extend credit represent unused portions of
authorisations to extend credit in the form of loans, guarantees or
letters of credit. With respect to credit risk on commitments to extend
credit, the Group is potentially exposed to loss in an amount equal to
the total unused commitments. However, the likely amount of loss
is less than the total unused commitments, as most commitments
to extend credit are contingent upon customers maintaining specific
credit standards. The Group monitors the term to maturity of credit
commitments because longer-term commitments generally have a
greater degree of credit risk than shorter-term commitments.
3.1.3 Impairment and provisioning policies
The internal rating systems described above focus more on creditquality mapping from the inception of the lending. In contrast,
impairment provisions are recognised for financial reporting purposes
only for losses that have been incurred at the statement of financial
position date based on objective evidence of impairment. Due to the
different methodologies applied, the amount of incurred credit losses
provided for in the financial statements usually differs from the
amount determined from the expected loss model that is used for
internal operational management and banking regulation purposes.
The impairment provision shown in the statement of financial
position at year-end is derived from each of the three rating classes.
The internal rating tool assists management to determine whether
objective evidence of impairment exists under IAS 39, based on the
following criteria set by the Group;
• Delinquency in contractual payments of principal or interest;
• Cash flow difficulties experienced by the borrower;
• Breach of loan covenants or conditions;
• Initiation of legal proceedings to enforce security;
• Deterioration of the borrower’s competitive position; and
• Deterioration in the value of collateral.
150
Group’s rating
1 Current
1A. Watchlist
II. Substandard
III. Doubtful
IV. Loss
2013
Loans and advances
10,356,072
87%
369,563
3%
539,563
4%
442,736
4%
301,836
3%
Impairment provision
77,307
1%
10,661
3%
45,287
8%
182,366
41%
272,544
90%
2012
Loans and advances
8,417,199
86%
330,433
3%
551,733
6%
428,724
4%
119,329
1%
Impairment provision
115,612
1%
5,501
2%
55,594
10%
123,356
29%
106,410
89%
12,009,770
588,165
9,847,418
406,473
100%
5%
100%
4%
3.1.4 Credit Concentration
2013
Maximum exposure
2012
2,166,640
1,127,927
1,312,150
1,431,879
825,883
2,175,156
• Overdrafts
• Term loans
• Others
Domestic Bank
1,357,792
4,917,436
20,233
1,087,778
3,408,201
229,927
• Overdrafts
• Credit cards
• Term loans
• Mortgages
1,117,730
6,827
3,812,040
189,547
1,065,990
6,829
3,507,344
134,875
114,830
141,346
92,752
143,417
1,669,321
1,135,434
–
529,006
2,100,978
700,054
5,262
392,441
4,555,929
293,909
3,224,935
338,143
24,468,097
20,871,844
Maximum exposure to credit risk before collateral held
Credit risk exposures relating to on-statement of financial position assets are as follows:
Balances with central banks
Loans and advances to customers:
Corporate Bank
• Debt securities
Investment securities - available-for-sale:
- Debt securities
Pledged assets
Reinsurance assets
Other assets
Credit risk exposures relating to off-balance sheet items are as follows:
Financial guarantees
Loan commitments
At 31 December
The above table represents a worse case scenario of credit risk exposure of the Group at 31 December 2013 and 2012, without taking into
account any collateral held or other credit enhancements attached. For on-balance-sheet assets, the exposures set out above are based on net
carrying amounts as reported in the statement of financial position.
As shown above, 52% (2012: 56%) of the total maximum exposure is derived from loans and advances to banks and customers; 7% (2012:
10%) represents investments in debt securities.
Management is confident in its ability to continue to control and sustain minimal exposure of credit risk to the group resulting from its loan
and advances portfolio, debt securities and other assets based on the following:
• 89% (2012: 89%) of the loans and advances portfolio are considered to be neither past due nor impaired;
• 68% (2012: 61%) of loans and advances are backed by collateral;
• Investment in debt securities are largely government securities.
• Other assets are considered to be neither past due nor impaired
151
3.1.5 Loans and advances
Loans and advances are summarised as follows:
31 December 2013
Loans and advances
Loans and advances
to banks
to customers
31 December 2012
Loans and advances
Loans and advances
to banks
to customers
Neither past due nor impaired
Past due but not impaired
Impaired
1,312,150
–
–
10,725,635
539,563
744,572
2,175,156
–
–
8,747,632
551,733
548,053
Gross
1,312,150
–
12,009,770
(588,165)
2,175,156
–
9,847,418
(406,473)
Net
1,312,150
11,421,605
2,175,156
9,440,945
(a) Loans and advances neither past due nor impaired
The credit quality of the portfolio of loans and advances that were neither past due nor impaired can be assessed by reference to the internal
rating system adopted by the Group.
31 December 2013
Grades:
Overdrafts
Corporate Bank
Term loans
Current
Watchlist
1,249,176
34,948
4,654,635
191,419
20,264
–
673,131
14,312
4,427
15
3,569,939
123,052
184,500
5,817
10,356,072
369,563
Total
1,284,124
4,846,054
20,264
687,443
4,442
3,692,991
190,317
10,725,635
Overdrafts
Corporate Bank
Term loans
Others
Overdrafts
Domestic Bank
Credit cards
Term Loans
Mortgages
Current
Watchlist
972,246
14,523
3,152,718
174,910
229,927
–
716,484
21,168
4,688
–
3,215,558
112,041
125,578
7,791
8,417,199
330,433
Total
986,769
3,327,628
229,927
737,652
4,688
3,327,599
133,369
8,747,632
Others
Overdrafts
Domestic Bank
Credit cards
Term Loans
Total
Mortgages
31 December 2012
Grades:
All loans and advances to banks are neither past due nor impaired and all fall under the ‘current’ grade.
Total
152
(b) Loans and advances past due but not impaired
Loans and advances less than 90 days past due are not considered impaired, unless other information is available to indicate the contrary.
Gross amount of loans and advances by class of customers that were past due but not impaired were as follows:
31 December 2013
Past due
Overdrafts
Corporate Bank
Term loans
Others
Overdrafts
Domestic Bank
Credit Cards
Term Loans
Total
Mortgages
Past due up to 30 days
Past due 30-60 days
Past due 60-90 days
23,871
992
45,580
36,676
38,615
7,964
–
–
–
19,824
22,766
245,705
–
–
2,451
48,427
30,524
15,181
744
146
97
129,542
93,043
316,978
Total
70,443
83,255
–
288,295
2,451
94,132
987
539,563
Fair value of collateral
7,996
14,356
–
28,125
–
52,356
324
103,157
Amount of
undercollateralisation
62,447
68,899
–
260,170
2,451
41,776
663
436,406
Others
Overdrafts
Domestic Bank
Credit Cards
Term Loans
Mortgages
31 December 2012
Past due
Past due up to 30 days
Past due 30-60 days
Past due 60-90 days
Overdrafts
Corporate Bank
Term loans
Total
19,582
55,124
27,514
20,141
26,045
22,503
–
–
–
30,410
34,887
214,173
–
–
1,937
34,549
36,730
24,708
1,409
557
1,464
106,091
153,343
292,299
102,220
68,689
–
279,470
1,937
95,987
3,430
551,733
66,158
3,339
–
95,395
–
9,621
516
175,029
Amount of
undercollateralisation
36,062
65,350
–
184,075
1,937
86,366
2,914
376,704
Total
Upon initial recognition of loans and advances, the fair value of collateral is based on valuation techniques commonly used for the
corresponding assets. In subsequent periods, the fair value is updated by reference to market price.
c) Loans and advances individually impaired
i) Loans and advances to customers
The breakdown of the gross amount of individually impaired loans and advances by class, along with the fair value of related collateral held
by the Group as security, are as follows:
31 December 2013
Overdrafts
Gross
Impairment allowance
19,689
11,400
3,276
16,413
Corporate Bank
Term loans
57,573
31,387
39,672
17,901
Others
Overdrafts
–
–
–
–
254,925
87,659
57,523
197,402
Others
Overdrafts
–
–
–
–
205,842
83,853
84,193
121,649
Domestic Bank
Credit Cards
Term Loans
237
182
–
237
Total
Mortgages
411,986
323,769
197,796
214,190
162
513
19
143
Domestic Bank
Credit Cards
Term Loans
Mortgages
744,572
454,910
298,286
446,286
31 December 2012
Overdrafts
Gross
Impairment allowance
5,679
2,550
–
5,679
Corporate Bank
Term loans
52,003
15,735
135
51,868
4,719
3,455
–
4,719
Total
272,530
115,775
32,206
240,324
ii) Loans and advances to banks
The total gross amount of individually impaired loans and advances to banks as at 31 December 2013 was nil (2012: nil).
7,280
8,398
44
7,236
548,053
229,766
116,578
431,475
153
3.1.6 Concentration of risks of financial assets with credit risk exposure
a) Geographical sectors
The following table breaks down the Group’s main credit exposure at their carrying amounts, as categorised by geographical region as of
31 December 2013. For this table, the Group has allocated exposures to regions based on the country of domicile of our counterparties.
West African
Monetary
Zone Central Africa
East Africa
Southern
Africa
Others
Total
32,131
35,270
48,664
38,257
29,499
99,704
–
666,074
1,127,927
1,312,150
193,269
572,862
178
172,990
529,694
992
43,903
182,139
–
42,837
102,751
49
–
250,888
–
1,357,792
4,917,436
20,233
561,900
5,110
1,068,240
25,692
190,597
1,717
355,378
11,995
86,399
–
547,169
14,950
44,702
–
167,963
23,228
24,235
–
96,701
–
28
–
435
140
1,117,730
6,827
3,812,040
189,547
–
–
–
683,725
173,753
113,367
1,135,434
–
486,232
244,926
–
–
–
228,215
60,554
1,463
–
–
94,693
29,980
–
–
–
123,326
12,160
–
–
–
6,349
6,141
–
–
141,346
46,781
1,492
114,830
1,135,434
141,346
1,669,321
529,006
5,159,825
1,276,996
6,503,415
1,845,200
2,042,857
652,339
1,545,731
497,444
684,342
147,659
408,266
173,212
1,107,184
256,988
17,451,619
4,849,838
238,295
198,112
259,244
340,416
260,464
105,419
32,229
69,451
14,490
23,201
21,161
42,640
–
1,395,917
825,883
2,175,156
• Overdrafts
• Term loans
• Others
Domestic Bank
389,787
1,156,302
–
303,823
1,312,023
33,573
175,674
247,722
–
161,785
460,502
406
30,246
119,549
–
26,463
78,109
–
–
33,994
195,948
1,087,778
3,408,201
229,927
• Overdrafts
• Credit cards
• Term loans
• Mortgages
Financial assets held for trading –
debt securities
Reinsurance assets
Pledged assets
Investment securities – debt securities
Other assets
178,342
–
1,343,128
64,475
548,826
4,863
1,169,188
21,184
181,571
1,966
359,709
10,645
72,474
–
401,285
15,484
57,764
–
139,228
23,087
27,013
–
94,199
–
–
–
607
–
1,065,990
6,829
3,507,344
134,875
–
–
–
–
408,445
79,126
92,752
5,262
700,054
143,269
1,315,614
90,771
–
–
–
–
170,846
66,627
–
–
–
–
94,653
47,460
–
–
–
–
106,921
22,167
–
–
–
35
2,708
11,681
–
–
–
113
1,791
74,609
92,752
5,262
700,054
143,417
2,100,978
392,441
Total
4,056,012
6,340,862
1,580,643
1,355,729
536,653
304,009
1,702,979
15,876,887
UEMOA
Nigeria
321,023
110,437
389,076
241,851
307,534
120,558
• Overdrafts
• Term loans
• Others
Domestic Bank
415,716
1,536,592
19,014
489,077
1,742,510
–
• Overdrafts
• Credit cards
• Term loans
• Mortgages
Financial assets held for trading –
debt securities
Pledged assets
Investment securities – debt securities
Other assets
209,869
–
1,576,154
113,542
Total
Credit commitments
Corporate Bank
Corporate Bank
154
3.1.6 Concentration of risks of financial assets with credit risk exposure (continued)
(b) Industry sectors
The following table breaks down the Group’s main credit exposure at their carrying amounts, as categorised by the industry sectors of our
counterparties.
Financial
institutions
Wholesale and
retail trading
Manufacturing
Government
Mining and
construction
Services
and others
Total
7,374
1,281,736
–
–
–
–
1,120,553
–
–
–
–
30,414
1,127,927
1,312,150
59,567
–
129,176
426
–
1,464
907,984
–
1,761,655
46,772
20,006
–
266,918
–
1,178,738
4,462
–
–
140,121
–
805,946
6,770
–
113,366
331,686
–
1,257,085
12,970
–
–
769,246
6,827
3,596,876
118,147
227
–
–
141,346
–
–
–
–
1,135,434
–
–
–
–
–
2,475,522
6,827
8,729,476
189,547
20,233
114,830
–
1,135,434
141,346
22,737
3,239
–
32,760
–
40
1,452,924
4,918
–
333
193,660
487,716
1,669,321
529,006
1,647,064
240,927
2,769,177
1,115,677
1,450,158
416,706
4,780,032
140,159
1,602,074
336,473
5,203,114
2,599,896
17,451,619
4,849,838
–
2,175,156
–
–
–
–
825,883
–
–
–
–
–
825,883
2,175,156
70,563
–
166,860
314
84
–
5,262
700,054
143,304
707,347
–
1,306,575
11,479
10,567
–
–
–
–
354,015
–
714,830
308
10,594
–
–
–
–
110,799
–
642,728
–
7,477
92,752
–
–
–
347,351
–
1,302,809
9,294
296
–
–
–
–
563,693
6,829
2,781,743
113,480
200,909
–
–
–
113
2,153,768
6,829
6,915,545
134,875
229,927
92,752
5,262
700,054
143,417
149,183
25,836
–
1,660
–
720
1,917,867
1,008
–
–
33,928
363,217
2,100,978
392,441
3,436,616
1,447,560
2,037,628
453,005
1,080,467
684,651
3,598,514
233,770
1,659,750
72,747
4,063,912
48,730
15,876,887
2,940,463
31 December 2013
• Overdrafts
• Credit cards
• Term loans
• Mortgages
• Others
Reinsurance assets
Pledged assets
Investment securities –
available for sale
Other assets
Total
Credit commitments
31 December 2012
• Overdrafts
• Credit cards
• Term loans
• Mortgages
• Others
Reinsurance assets
Pledged assets
available for sale
Other assets
Total
Credit commitments
155
3.2 Market risk
Market risk is the risk that changes in market prices, which include currency exchange rates and interest rates, will affect the fair value or
future cash flows of a financial instrument. Market risk arises from open positions in interest rates and foreign currencies, both of which are
exposed to general and specific market movements and changes in the level of volatility. The objective of market risk management is to
manage and control market risk exposures within acceptable limits, while optimising the return on risk. Overall responsibility for managing
market risk rests with the Group Risk Management and the Board’s Risk Committee. The Group Risk Management is responsible for the
development of detailed risk management policies and procedures (subject to review and approval Board’s Risk Committee) and for the day
to day implementation of those policies.
The market risks arising from trading and non-trading activities are concentrated in Group Treasury. Regular reports are submitted to the
Board of Directors and heads of each business unit. Trading portfolios include those positions arising from market-making transactions where
the Group acts as principal with clients or with the market. Non-trading portfolios primarily arise from the interest rate management of the
subsidiary’s banking assets and liabilities. Non-trading portfolios also consist of foreign exchange and equity risks arising from the Group’s
held-to-maturity and available-for-sale investments.
The Group applies a ‘value at risk’ methodology (VAR) to its trading and non-trading portfolios, to estimate the market risk of positions held
and the maximum losses expected.
Foreign exchange risk
Interest risk
Low
2013
Average
High
Low
2012
Average
High
841
166
5,285
2,056
9,160
3,923
3,771
795
6,618
833
9,211
3,095
156
3.2.1 Foreign exchange risk
The Group takes on exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash
flows. The Board sets limits on the level of exposure by currency and in total for both overnight and intra-day positions, which are monitored
daily. The table below summarises the Group’s exposure to foreign currency exchange rate risk at 31 December. Included in the table are the
Group’s financial instruments at carrying amounts, categorised by currency.
31 December 2013
Dollar
Euro
CFA
Naira
Cedis
Others
Total
135,279
–
693,051
2,528,621
–
26
135,100
–
304,868
149,420
–
1,500
727,227
353,154
96,946
5,254,265
1,464
–
1,429,428
389,076
143,442
2,339,163
113,367
139,820
165,074
222,420
68,931
502,327
–
–
285,760
163,277
4,912
647,809
86
–
2,877,868
1,127,927
1,312,150
11,421,605
114,917
141,346
230,305
–
120,543
872
–
11,996
794,339
–
152,823
501,402
1,135,434
180,517
231,004
–
23,903
135,568
–
39,224
1,893,489
1,135,434
529,006
Total financial assets
3,707,825
603,756
7,380,218
6,371,648
1,213,659
1,276,636
20,553,742
Liabilities
Deposits from banks
Due to customers
Other deposits
Other borrowed funds
Other liabilities
303,830
2,683,139
2,666
1,443
692,950
105,357
31,639
187,610
–
11
–
17,066
123,538
6,137,479
673,091
–
76,132
191,145
35
5,786,554
–
–
484,053
482,169
156,429
787,838
–
–
10,615
72,625
91,483
907,284
2,203
–
39,656
57,735
706,953
16,489,904
677,960
1,454
1,303,406
926,098
Total financial liabilities
3,789,385
236,326
7,201,385
6,752,811
1,027,508
1,098,361
20,105,775
367,430
178,833
(381,162)
186,152
178,275
447,967
1,875,868
499,726
1,265,436
665,860
28,046
514,902
4,849,838
115,924
–
1,240,294
1,757,937
–
–
91,728
–
328,003
132,802
–
113
611,766
270,400
160,988
4,230,980
–
–
708,067
259,244
329,062
2,429,660
92,752
143,269
229,841
196,466
38,059
441,837
–
–
224,299
99,773
78,750
447,729
102
35
1,981,625
825,883
2,175,156
9,440,945
92,854
143,417
412,523
–
98,560
859
–
58,593
499,399
–
80,696
1,119,851
700,054
82,545
185,832
–
17,947
113,284
–
54,100
2,331,748
700,054
392,441
3,625,238
612,098
5,854,229
5,864,504
1,109,982
1,018,072
18,084,123
Liabilities
Deposits from banks
Due to customers
Other deposits
Other liabilities
250,831
2,606,917
3
35
808,495
105,587
75,666
200,786
–
94
1,506
17,960
206,903
5,163,020
334,699
–
93,350
205,350
867
5,133,051
–
–
328,280
373,524
44,452
777,833
34,658
–
4,155
24,643
83,482
738,871
–
–
3,897
5,595
662,201
14,620,478
369,360
129
1,239,683
732,659
3,771,868
296,012
6,003,322
5,835,722
885,741
831,845
17,624,510
28,782
224,241
186,227
459,613
349,676
108,403
152,420
3,563,078
Assets
available-for-sale
Pledged assets
Other assets
Net on-statement of financial position
Credit commitments
(81,560)
31 December 2012
Assets
Investment securities – available-forsale
Pledged assets
Other assets
Net on-statement of financial position
Credit commitments
(146,630)
1,460,758
316,086
(149,093)
571,776
920,045
157
Currency Sensitivity Analysis
ETI periodically performs sensitivity analysis to determine the impact on Group earnings resulting from a potential appreciation of the United
States Dollars (USD) relative to the currencies to which the Group has major exposure namely; CFA Franc (FCFA), the Euro (EUR), the Nigerian
Naira (NGN) and the Ghana Cedi (GHS). The results using data as of 31 December 2013 are shown in the table below.
Projected Appreciation of the USD
Estimated Impact on Earnings ($ Million)
5%
3.0
10%
6.1
20%
12.1
3.2.2 Interest rate risk
Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest
rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate because of changes in market interest rates. The
Group takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on both its fair value and cash flow risks.
Interest margins may increase as a result of such changes but may reduce losses in the event that unexpected movements arise. The Board of
Directors sets limits on the level of mismatch of interest rate repricing that may be undertaken, which is monitored daily by Group Treasury.
The table below summarises the Group’s exposure to interest rate risks. It includes the Group’s financial instruments at carrying amounts,
categorised by the earlier of contractual repricing or maturity dates. The Group’s derivatives will be settled on a net basis.
158
Up to 1 month
1-3 months
3-12 months
1-5 years
Over 5 years
Non-interest
bearing
Total
Assets
Investment securities – available-for-sale
Pledged assets
Other assets
1,002,433
105,037
838,840
3,116,308
–
854
46,922
434,905
22,443
23,291
203,916
76,722
1,905,340
31,609
657
31,747
362,324
12,660
2
658,637
47,495
1,763,717
82,115
14
336,490
144,876
318,151
–
160,337
43,376
3,329,760
1,193
–
580,764
123,564
4,614
–
–
256,161
1,306,480
–
–
897,567
69,765
–
1,852,142
–
49,556
–
–
139,821
–
–
171,138
2,877,868
1,127,927
1,312,150
11,421,605
114,917
141,346
1,893,489
1,135,434
529,006
5,567,742
2,648,265
3,351,497
4,243,607
2,529,973
2,212,657
20,553,742
Liabilities
Deposits from banks
Due to customers
Other deposits
Borrowed funds
Other liabilities
340,934
5,638,633
674,945
789
56,328
253,365
27,030
1,118,671
–
651
3,931
18,776
183,518
915,414
–
14
1,124
395,279
17,164
877,987
1,952
–
862,999
38,311
–
90,426
1,063
–
364,144
–
138,307
7,848,773
–
–
14,879
220,367
706,953
16,489,904
677,960
1,454
1,303,406
926,098
6,964,994
1,169,059
1,495,349
1,798,414
455,633
8,222,325
20,105,775
(1,397,252)
1,479,206
1,856,148
2,445,193
2,074,339
(6,009,668)
Assets
Pledged assets
Other assets
544,130
116,608
967,932
2,799,134
–
113
146,023
91,561
98,321
–
281,758
105,587
1,467,767
–
35
53,229
368,882
11,915
185
354,507
206,000
1,241,156
92,752
–
59,300
16,968
68,455
61,659
73,010
21,097
2,775,989
102
–
1,747,143
102,337
79,692
–
–
–
1,123,996
–
–
182,211
120,306
590
1,375,651
–
874,540
32,903
–
143,269
143,842
–
133,468
1,981,625
825,883
2,175,156
9,440,945
92,854
143,417
2,331,748
700,054
392,441
4,763,822
2,289,173
2,039,323
4,861,029
1,427,103
2,703,673
18,084,123
Liabilities
Deposits from banks
Due to customers
Other deposits
Borrowed funds
Other liabilities
488,321
3,153,337
369,316
94
43,696
94,538
31,975
1,212,152
20
35
10,130
115,323
20,371
817,857
–
–
3,637
180,562
1,118
839,126
24
–
90,096
164,931
–
170,306
–
–
1,077,061
5,496
120,416
8,427,700
–
–
15,063
171,809
662,201
14,620,478
369,360
129
1,239,683
732,659
4,149,302
1,369,635
1,022,427
1,095,295
1,252,863
8,734,988
17,624,510
614,520
919,538
1,016,896
3,765,734
174,240
Total interest repricing gap
Total interest repricing gap
(6,031,315)
Interest Rate Sensitivity Analysis
The Group performs a periodic analysis of the sensitivity of its one-year projected earnings to an increase or decrease in market interest rates
assuming a parallel shift in yield curves and a constant balance sheet position and the results using data as of 31 December 2013 are shown
below.
Projected Change in
Interest Rates
Estimated Impact on
Earnings ($ Million)
25 basis points
Increase
50 basis points
Increase
100 basis points
Increase
25 basis points
decrease
50 basis points
decrease
100 basis points
decrease
7.8
15.7
31.3
(7.8)
(15.7)
(31.3)
159
3.3 Liquidity risk
Liquidity risk is the risk that the Group is unable to meet its payment obligations associated with its financial liabilities when they fall due
and to replace funds when they are withdrawn. The consequence may be the failure to meet obligations to repay depositors and fulfil
commitments to lend.
3.3.1 Liquidity risk management process
The Group’s liquidity management process, as carried out within the Group and monitored by a separate team in Group Treasury, includes:
• Day-to-day funding, managed by monitoring future cash flows to ensure that requirements can be met. This includes replenishment of
funds as they mature or are borrowed by customers;
• Maintaining a portfolio of highly marketable assets that can easily be liquidated as protection against any unforeseen interruption
to cash flow;
• Monitoring statement of financial position liquidity ratios against internal and regulatory requirements; and
• Managing the concentration and profile of debt maturities.
Monitoring and reporting take the form of cash flow measurement and projections for the next day, week and month respectively, as these
are key periods for liquidity management. The starting point for those projections is an analysis of the contractual maturity of the financial
liabilities and the expected collection date of the financial assets.
3.3.2 Non-derivative cash flows
The table below presents the cash flows payable by the Group under non-derivative financial liabilities by remaining contractual maturities at
the statement of financial position date. The amounts disclosed in the table are the contractual undiscounted cash flows, whereas the Group
manages the inherent liquidity risk based on expected undiscounted cash inflows.
Up to 1 month
1 – 3 months
3 – 12 months
1 – 5 years
Over 5 years
Total
Assets
Trading assets
Pledged assets
Other assets
1,715,024
108,458
1,332,523
3,188,797
4,603
51,472
439,101
272,541
160,655
204,427
152,978
2,147,763
32,081
314,749
372,811
78,947
7,177
869,282
77,964
2,034,417
89,052
119,767
161,883
323,281
47,612
47,882
29,594
4,181,649
3,924
1,434,763
138,069
25,466
946,708
26,099
77
1,531,978
–
348,007
77,955
–
2,877,176
1,256,148
1,593,136
13,084,604
129,660
2,268,758
1,189,819
700,234
Total assets (expected maturity dates)
7,112,519
3,464,410
3,682,823
5,908,958
2,930,824
23,099,535
Liabilities
Deposits from banks
Due to customers
Other deposits
Other liabilities
581,873
13,535,886
675,780
191,464
139,078
112,490
1,284,332
–
154,587
41,826
230,674
798,033
–
4,229
441,103
8,872
1,064,284
2,196
978,198
303,980
–
92,983
1,064
193,024
110
933,909
16,775,518
679,040
1,521,502
926,097
Total liabilities (contractual maturity dates)
15,124,081
1,593,235
1,474,039
2,357,531
287,181
20,836,067
160
3.3.2 Non-derivative cash flows (continued)
Up to 1 month
1 – 3 months
3 – 12 months
1 – 5 years
Over 5 years
Total
Assets
Trading assets
Pledged assets
Other assets
1,153,685
123,549
2,104,032
3,355,369
2,490
229,893
–
176,614
124,090
295,062
234,696
1,804,326
–
162,044
700,054
70,504
45,638
371,735
186,626
1,560,966
101,357
422,321
–
31,463
16,207
96,540
47,867
2,894,413
2,822
1,442,170
–
41,193
642,010
–
11,310
1,416,227
–
381,881
–
19,667
1,981,630
886,886
2,584,531
11,031,301
106,669
2,638,309
700,054
339,441
Total assets (expected maturity dates)
7,145,632
3,390,776
2,720,106
4,541,212
2,471,095
20,268,821
Liabilities
Deposits from banks
Due to customers
Other deposits
Other liabilities
734,654
5,948,267
369,917
231,947
–
246,311
211,145
1,743,387
29,102
143,314
129
195,874
70,830
6,520,090
17,224
45,416
–
223,227
14,534
665,282
1,051
785,711
–
72,023
36,323
222,034
587
435,427
–
17,180
1,067,486
15,099,060
417,881
1,641,815
129
754,615
Total liabilities (contractual maturity dates)
7,531,096
2,322,951
6,876,787
1,538,601
711,551
18,980,986
Assets available to meet all of the liabilities and to cover outstanding loan commitments include cash, central bank balances, items in the
course of collection and treasury and other eligible bills; loans and advances to banks; and loans and advances to customers. In the normal
course of business, a proportion of customer loans and advances contractually repayable within one year will be extended. The Group would
also be able to meet unexpected net cash outflows by selling investment securities.
3.4 Off-balance sheet items
The dates of the contractual amounts of the Group’s off-balance sheet financial instruments that commit it to extend credit to customers and
other facilities, provide financial guarantees and capital commitments are summarised in the table below.
At 31 December 2013
Loan commitments
Guarantees, acceptances and other financial facilities
Capital commitments
No later than 1 year
234,270
3,273,764
7,266
Over 1 years
59,639
1,282,165
–
Total
293,909
4,555,929
7,266
Total
3,515,300
1,341,804
4,857,104
At 31 December 2012
Loan commitments
Guarantees, acceptances and other financial facilities
Capital commitments
289,592
2,566,787
28,163
48,551
658,148
–
338,143
3,224,935
28,163
Total
2,884,542
706,699
3,591,241
161
3.5 Fair value of financial assets and liabilities
(a) Financial instruments not measured at fair value
The table below summarises the carrying amounts and fair values of those financial assets and liabilities not presented on the group’s
consolidated statement of financial position.
Carrying value
Fair value
2013
2012
2013
2012
Financial assets:
1,312,150
11,421,605
2,175,156
9,440,945
1,541,263
11,650,868
3,125,878
9,440,311
Financial liabilities:
Deposits from banks
Due to customers
Other deposits
Borrowed funds
706,953
16,489,904
677,960
1,303,406
662,201
14,620,478
369,360
1,239,683
988,280
16,605,661
931,904
1,504,674
1,218,340
14,587,833
325,284
1,460,623
All the fair values are determined using the Level 2 fair value hierarchy
(i) Loans and advances to banks
Loans and advances to banks include inter-bank placements and items in the course of collection. The carrying amount of floating rate
placements and overnight deposits is a reasonable approximation of fair value. The estimated fair value of fixed interest bearing deposits is
based on discounted cash flows using prevailing money-market interest rates for debts with similar credit risk and remaining maturity.
(ii) Loans and advances to customers
Loans and advances are net of charges for impairment. The estimated fair value of loans and advances represents the discounted amount of
estimated future cash flows expected to be received. Expected cash flows are discounted at current market rates to determine fair value.
(iii) Deposit from banks, due to customers and other deposits
The estimated fair value of deposits with no stated maturity, which includes non-interest bearing deposits, is the amount repayable on
demand.
The estimated fair value of fixed interest-bearing deposits not quoted in an active market is based on discounted cash flows using interest
rates for new debts with similar remaining maturity.
(iv) Borrowed funds
For those notes where quoted market prices are not available, a discounted cash flow model is used based on a current yield curve
appropriate for the remaining term to maturity.
(b) Fair value hierarchy
IFRS 7 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or
unobservable. Observable inputs reflect market data obtained from independent sources; unobservable inputs reflect the Group’s market
assumptions. These two types of inputs have created the following fair value hierarchy:
i) Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities. This level includes listed equity securities and debt
instruments on exchanges.
ii) Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as
prices) or indirectly (that is, derived from prices).
iii) Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs). This level includes equity
investments and debt instruments with significant unobservable components.
This hierarchy requires the use of observable market data when available. The Group considers relevant and observable market prices in its
valuations where possible.
162
3.5 Fair value of financial assets and liabilities (continued)
Level 1
Treasury and other eligible bills
Trading assets
Investment securities – available-for-sale (AFS)
31 December 2013
Level 2
Level 3
Level 1
31 December 2012
Level 2
Level 3
330,816
113,454
–
760,554
797,111
1,463
141,346
1,026,482
–
–
–
106,453
–
102
–
742,309
825,883
92,752
143,417
1,490,517
–
–
–
85,427
1,204,824
1,966,403
106,453
742,411
2,552,569
85,427
–
1,454
–
–
129
–
–
1,454
–
–
129
–
There are no movements between Level 1 and Level 2. The following table presents the changes in Level 3 instruments for the available
for sale securities:
Opening balance
Transfer into Level 3
Gains and losses recognised in profit or loss
Gains and losses recognised in other comprehensive income
Closing balance
Total gains or losses for the period included in profit or loss for assets held at the end of the reporting period
2013
Level 3
2012
Level 3
85,427
8,900
–
12,126
–
109,677
–
(24,250)
106,453
85,427
–
–
*Cappa D’Alberto was transferred from level 2 hierarchy to level 3 during the year. This follows from a change in the method of valuation of
the unquoted securities. In the prior period, valuation was measured in relation to the quoted price of similar companies in the same industry.
EV/EBITDA method of valuation was considered more appropriate in the current period in line with IFRS 13 guidelines on the determination of
fair value. Fair value loss on the valuation of Cappa D’Alberto has been recognised in other comprehensive income.
Level 3 fair value measurement
The table below sets out information about significant unobservable value inputs used at year end in measuring financial instruments
categorised as Level 3 in the fair value hierarchy.
Type of financial
instrument
Airtel Network Limited
( Airtel)
Cappa d'Alberto
Compagnie Aerienne
ASKY S.A
Fair value as at
31 Dec 2013
Significant unobservable
input
Range of estimates for
unobservable input
97,900 Comparable multiples
EV/EBITDA multiple
4.00 – 5.80
6,845 Comparable multiples
EV/EBITDA multiple
2.0% – 6.0%
1,700 Discounted cash flow
Weighted average cost
of capital
11.5% – 12.0%
Valuation technique
Fair value measurement sensitivity
to unobservable inputs
Significant increase in multiple would
result in a higher fair value.
Significant increase in multiple would
result in a higher fair value.
Significant increase in WACC rate
would result in a lower fair value.
163
(c) Financial instrument classification
Assets at fair
value through
profit or loss
Loans and
receivables
Available-for- Liabilities at fair
sale financial
value through
assets
profit or loss
–
–
114,917
141,346
–
–
–
–
–
2,877,868
–
–
–
1,312,150
11,421,605
–
–
529,006
–
1,127,927
–
–
–
–
1,893,489
1,135,434
–
256,263
16,140,629
Liabilities
Deposits from banks
Due to customers
Other deposits
Borrowed funds
–
–
–
–
–
–
–
Total
Liabilities at
amortized cost
Total
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,877,868
1,127,927
114,917
141,346
1,312,150
11,421,605
1,893,489
1,135,434
529,006
4,156,850
–
–
20,553,742
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,454
–
–
–
706,953
16,489,904
677,960
–
1,303,406
926,098
–
706,953
16,489,904
677,960
1,454
1,303,406
926,098
–
–
–
1,454
20,104,321
20,105,775
Assets at fair
value through
profit or loss
Loans and
receivables
Available-for- Liabilities at fair
sale financial
value through
assets
profit or loss
Liabilities at
amortized cost
Total
–
–
92,854
143,417
–
–
–
–
–
1,981,625
–
–
–
2,175,156
9,440,945
–
–
392,441
–
825,883
–
–
–
–
2,331,748
700,054
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,981,625
825,883
92,854
143,417
2,175,156
9,440,945
2,331,748
700,054
392,441
236,271
13,990,167
3,857,685
–
–
18,084,123
Liabilities
Deposits from banks
Due to customers
Other deposits
Borrowed funds
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
129
–
–
–
662,201
14,620,478
369,360
–
1,239,683
732,659
–
662,201
14,620,478
369,360
129
1,239,683
732,659
Total
–
–
–
129
17,624,381
17,624,510
At 31 December 2013
Assets
Pledged assets
Other assets, excluding prepayments
Total
At 31 December 2012
Assets
Pledged assets
Other assets, escluding prepayments
Total
164
3.6 Capital Management
The Group’s objectives when managing capital, which is a broader concept than the ‘equity’ on the face of statement of financial positions, are:
• To comply with the capital requirements set by the banking regulators in the markets where the entities within the Group operate;
• To safeguard the Group’s ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for
other stakeholders; and
• To maintain a strong capital base to support the development of its business.
Capital adequacy and the use of regulatory capital by the subsidiaries are monitored daily by the Group’s Risk Management, employing
techniques based on the guidelines developed by the Basel Committee as implemented by the respective central banks. Monthly reports are
submitted to the central banks in the various jurisdictions by the individual subsidiaries.
The central banks in the various jurisdictions require each bank to: (a) hold the minimum level of the regulatory capital determined by the
banking regulations of the respective country, and (b) maintain a ratio of total regulatory capital to the risk-weighted asset (the ‘Basel ratio’) at or
above the internationally agreed minimum of 8%.
The Group’s capital is divided into two tiers:
• Tier 1 capital: share capital (net of any book values of the treasury shares), non-controlling interests arising on consolidation from interests
in permanent shareholders’ equity, retained earnings and reserves created by appropriations of retained earnings. The book value of
goodwill is deducted in arriving at Tier 1 capital; and
• Tier 2 capital: subordinated loan capital, unrealised gains arsing on the fair valuation of equity instruments held as available for sale.
The risk-weighted assets are measured by means of a hierarchy of risk weights classified according to the nature of − and reflecting an estimate
of credit, market and other risks associated with − each asset and counterparty. A similar treatment is adopted for off-statement of financial
position exposure, with some adjustments to reflect the more contingent nature of the potential losses.
The table below summarises the composition of regulatory capital and the ratios of the Group for the years ended 31 December 2013 and 2012.
During those two years, the individual entities within the Group complied with all of the externally imposed capital requirements to which they
are subject.
2013
2012
Tier 1 capital
Share capital
General bank reserves
Statutory reserve
Retained earnings
Less: goodwill
1,409,001
117,399
185,270
574,768
198,212
(433,167)
1,411,556
92,486
128,098
630,192
167,729
(433,167)
Total qualifying Tier 1 capital
2,051,484
1,996,894
Tier 2 capital
Redeemable preference shares
Convertible loans (including liability and equity portions)
Revaluation reserve – available-for-sale investments
116,515
466,816
(41,027)
116,327
453,834
(342)
Total qualifying Tier 2 capital
542,304
569,819
Less investments in associates
21,993
21,077
2,571,794
2,545,636
Risk-weighted assets:
On-statement of financial position
Off-statement of financial position
14,785,153
969,968
12,444,196
712,616
Total risk-weighted assets
15,755,120
13,156,812
Basel ratio
16.3%
19.3%
Tier I
13.0%
15.2%
Total regulatory capital
The increase of the capital in the year of 2013 is mainly due to contribution of the current-year profit.
165
4. Critical accounting estimates, and judgements in applying accounting policies
The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates
and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events
that are believed to be reasonable under the circumstances.
a) Impairment losses on loans and advances
The Group reviews its loan portfolios to assess impairment at least on a monthly basis. In determining whether an impairment loss should
be recorded in the income statement, the Group makes judgements as to whether there is any observable data indicating that there is a
measurable decrease in the estimated future cash flows from a portfolio of loans before the decrease can be identified with an individual
loan in that porfolio. This evidence may include observable data indicating that there has been an adverse change in the payment status of
borrowers in a group, or national or local economic conditions that correlate with defaults on assets in the group. Management uses estimates
based on historical loss experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the
portfolio when scheduling its future cash flows. The methodology and assumptions used for estimating both the amount and timing of future
cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience.
b) Fair value of financial instruments
The fair value of financial instruments that are not quoted in active markets are determined by using valuation techniques. Where valuation
techniques (for example, models) are used to determine fair values, they are validated and periodically reviewed by qualified personnel
independent of the area that created them. To the extent practical, models use only observable data; however, areas such as credit risk (both
own and counterparty), volatilities and correlations require management to make estimates. Changes in assumptions about these factors
could affect reported fair value of financial instruments.
c) Impairment of available for-sale equity investments
The Group determines that available-for-sale equity investments are impaired when there has been a significant or prolonged decline in the
fair value below its cost. This determination of what is significant or prolonged requires judgement. In making this judgement, the Group
evaluates among other factors, the normal volatility in share price. In addition, impairment may be appropriate when there is evidence of a
deterioration in the financial health of the investee, industry and sector performance, changes in technology, and operational and financing
cash flows.
d) Income taxes
The Group is subject to income taxes in numerous jurisdictions. Significant estimates are required in determining the provision for income
taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of
business. The Group recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. Where the
final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and
deferred tax provisions in the period in which such determination is made.
e) Share-based payment
The Group granted shares and share options to the employees as a common feature of employee remuneration. IFRS 2 requires recognition of
an expense for those shares and share options at the fair value on the grant date (equity-settled plans). For shares granted to employees, the
fair value is measured directly at the market price of the entity’s shares, adjusted to take into account the terms and conditions upon which
the shares were granted. For share options granted to employees, in many cases market prices are not available because the options granted
are subject to terms and conditions that do not apply to traded options. If this is the case, the Group estimates the fair value of the equity
instruments granted using a valuation technique, which is consistent with generally accepted valuation methodologies.
f) Goodwill impairment
The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2.6. These
calculations require the use of estimates. The recoverable amount of all CGUs has been determined based on value-in-use calculations. These
calculations use pre-tax cash flow projections based on financial budgets approved by management covering a three-year period. Cash flows
beyond the three-year period are extrapolated using the estimated growth rates. By adjusting the three main estimates (cashflows, growth
rate and discount rates) by 10%, no impairment charge on goodwill will arise.
g) Retirement benefits
The present value of the pension obligations depends on a number of factors that are determined on an actuarial basis using a number
of assumptions. The assumptions used in determining the net cost (income) for pensions include the discount rate. Any changes in these
assumptions will impact the carrying amount of pension obligations.
The Group determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the
present value of estimated future cash outflows expected to be required to settle the pension obligations. In determining the appropriate
discount rate, the group considers the interest rates of high-quality bonds that are denominated in the currency in which the benefits will
be paid and that have terms to maturity approximating the terms of the related pension obligation. Other key assumptions for pension
obligations are based in part on current market conditions.
166
h) Investment properties
The fair value of investment properties is based on the nature, location and condition of the specific asset. The fair value of investment
property does not include future capital expenditure that will improve or enhance the property and does not reflect the related future benefits
from this future expenditure. These valuations are performed annually by external appraisers.
i) Revaluation of property,plant and equipment
Appropriate indices, as determined by independent experts, are applied in the intervening periods to ensure that the assets are carried at fair
value at the reporting date. Judgement is applied in the selection of such indices. Fair value is derived by applying internationally acceptable
and appropriately benchmarked valuation techniques such as depreciated replacement cost or market value approach.
The depreciated replacement cost approach involves estimating the value of the property in its existing use and the gross replacement cost.
For this appropriate deductions are made to allow for age, condition and economic or functional obsolescence, environmental and other
factors that might result in the existing property being worth less than a new replacement.
The market value approach involves comparing the properties with identical or similar properties, for which evidence of recent transaction
is available or alternatively identical or similar properties that are available in the market for sale making adequate adjustments on price
information to reflect any differences in terms of actual time of the transaction, including legal, physical and economic characteristics of the
properties.
The useful life of each asset group has been determined by independent experts based on the build quality, maintenance history, operational
regime and other internationally recognised benchmarks relative to the assets.
5. Segment Analysis
Following the management approach of IFRS 8, operating segments are reported in accordance with the internal reporting provided to the
Group Executive Committee (the chief operating decision-maker), which is responsible for allocating resources to the reportable segments and
assesses its performance. All operating segments used by the group meet the definition of a reportable segment under IFRS 8.
In 2010, the group implemented a new structure. This new structure which is based on business replaced the erstwhile geography based
structure and now constitutes the operating segments of the group. This was further streamlined in 2012 with the combination of Corporate
Bank and Investment Bank.
The group operating segments are described below:
a) Domestic Bank:
Focuses on serving local companies, small and medium scale enterprises, government and government agencies and the retail market.
b) Corporate and Investment Bank:
Corporate Bank focuses on providing one-stop banking services to multinationals and regional companies, financial institutions and
international organisations across network of the group. Investment Bank constitutes the treasury, corporate finance and asset management
business. This unit provides value-added solutions primarily to corporate clients and governments.
Apart from Domestic Bank and Corporate and Investment Bank segment, our non-banking affiliates other than the EDC group are aggregated
under ‘others’.
All revenues are external revenues.
Segment assets and liabilities comprise operating assets and liabilities, being the majority of the statement of financial position, but exclude
items such as taxation and borrowings.
167
5. Segment Analysis (continued)
The following table shows the Group’s performance by business segments.
At 31 December 2013
Net interest income
Net fees and commission income
Other income
Operating income
Impairment losses
Operating expenses
Operating profit
Share of profit of associates
Profit before tax from continuing operations
Total assets
Total liabilities
Other segment items
At 31 December 2012
Net interest income
Other income
Operating income
Loan impairment charges
Operating expenses
Operating profit
Corporate and
Investment Bank
435,858
244,417
320,709
1,000,984
(60,073)
(450,975)
489,936
20
489,956
Domestic Bank
663,547
349,174
29,420
1,042,141
(316,148)
(858,699)
(132,706)
–
(132,706)
Others
(48,647)
46,367
196,118
193,838
(47,018)
(159,214)
(12,394)
–
(12,394)
Group
1,050,758
639,958
546,247
2,236,963
(423,239)
(1,468,888)
344,836
20
344,856
10,109,094
12,957,996
3,665,521
26,732,611
8,286,142
10,893,535
3,513,035
22,692,712
54,937
54,585
25,376
134,898
294,154
161,792
255,848
711,794
(13,562)
(369,537)
328,695
(510)
328,185
600,528
331,582
25,511
957,621
(134,547)
(879,533)
(56,459)
–
(56,459)
(45,992)
34,604
304,361
292,973
199
(120,035)
173,137
–
173,137
848,690
527,978
585,720
1,962,388
(147,910)
(1,369,105)
445,373
(510)
444,863
Total assets
9,021,961
4,715,039
9,963,049
23,700,049
Total liabilities
6,810,624
10,081,227
2,940,005
19,831,856
55,474
58,512
18,383
132,369
Other segment items
168
5. Segment Analysis (continued)
Reconciliation of segment results of operations to consolidated results of operations.
At 31 December 2013
Net interest income
Other income
Operating income
Impairment losses
Operating expenses
Operating profit
Total management
reporting
1,050,758
639,958
546,247
2,236,963
(423,239)
(1,468,888)
344,836
20
Consolidation
adjustments
–
38,812
194,695
233,507
(46,509)
(63,924)
123,074
4
Total consolidation
1,050,758
601,146
351,552
2,003,456
(376,730)
(1,404,964)
221,762
16
344,856
123,078
221,778
Total assets
26,732,611
4,200,158
22,532,453
Total liabilities
22,692,712
2,294,907
20,397,805
At 31 December 2012
Net interest income
Other income
Operating income
Operating expenses
Operating profit
848,690
527,978
585,720
1,962,388
(147,910)
(1,369,105)
445,373
(510)
–
39,559
192,830
232,389
7,441
(133,099)
106,731
103
848,690
488,419
392,890
1,729,999
(155,351)
(1,236,006)
338,642
(613)
444,863
106,834
338,029
Total assets
23,700,049
3,760,666
19,939,383
Total liabilities
19,831,856
2,066,390
17,765,466
5.1 Entity-wide disclosures
The group is also further organised under the following geographical clusters:
i) Union Economique et Monétaire Ouest Africaine (UEMOA) region comprises all subsidiaries within the UEMOA monetary zone. Countries in
this zone share a common currency except Cape Verde. This region currently includes subsidiaries in Benin, Burkina Faso, Cape Verde, Côte
d’Ivoire, Mali, Niger, Senegal, Togo and Guinea Bissau.
ii) Nigeria region is made up of Ecobank Nigeria.
iii) West African Monetary Zone (WAMZ) region comprises all subsidiaries in West African countries not included in the common monetary
zone described as UEMOA. This region currently includes subsidiaries in Ghana, Guinea, Liberia, Sierra Leone, Gambia.
iv) Communauté Economique des Etats de l’Afrique Centrale (CEEAC) region comprises all subsidiaries within the CEMAC monetary zone.
Countries in this zone share a common currency except Sao Tome. Cameroon, Chad, Central Africa, Congo Brazaville, Gabon, Sao Tome and
Equatorial Guinea are the only countries currently included in this segment.
v) Eastern Africa Community (EAC) comprises of Burundi, Kenya, Rwanda, Tanzania, Uganda and South Sudan.
vi) Southern Africa Development Co-operation (SADC) comprises of Democratic Republic of Congo, Malawi, Zambia and Zimbabwe.
Transactions between the business segments are carried out at arm’s length. The revenue from external parties reported to the Group
Executive Committee is measured in a manner consistent with that in the consolidated income statement. Funds are ordinarily allocated
between segments, resulting in funding cost transfers disclosed in inter-segment net interest income. Interest charged for these funds is
based on the Group’s cost of capital. There are no other material items of income or expense between the business segments.
169
5.1 Entity-wide disclosures (continued)
Internal charges and transfer pricing adjustments have been reflected in the performance of each business. Revenue-sharing agreements
are used to allocate external customer revenues to a business segment on a reasonable basis. The Group’s management reporting is based
on a measure of operating profit comprising net interest income, loan impairment charges, net fee and commission income, other income
and non-interest expenses. This measurement basis excludes the effects of non-recurring expenditure from the operating segments such as
restructuring costs, legal expenses and goodwill impairments when the impairment is the result of an isolated, non-recurring event. As the
Group Executive Board reviews operating profit, the results of discontinued operations are not included in the measure of operating profit.
The information provided about each segment is based on the internal reports about segment profit or loss, assets and other information,
which are regularly reviewed by the Group Executive Management Committee. Segment assets and liabilities comprise operating assets and
liabilities, being the majority of the consolidated statement of financial position, but exclude items such as taxation.
Segment results of operations
The segment information provided to the Group Executive Board for the reportable segments for the year ended 31 December 2013 is as
follows:
At 31 December 2013
Net interest income
Other income
Operating income
Operating expenses
Operating profit
Profit before tax from
continuing operations
Taxation
UEMOA
234,704
126,668
72,643
434,015
(33,114)
(274,580)
126,321
(78)
Nigeria
469,826
210,618
138,810
819,254
(271,707)
(538,106)
9,441
–
WAMZ
235,269
91,166
57,045
383,480
(33,619)
(193,990)
155,871
261
Central
Africa
83,700
60,417
41,214
185,331
(7,377)
(122,516)
55,438
(163)
East Africa
34,420
19,666
13,959
68,045
(14,389)
(77,284)
(23,628)
–
Southern
Africa
32,603
32,962
10,341
75,906
(4,764)
(58,670)
12,472
–
Others
(39,764)
98,461
212,234
270,931
(58,268)
(203,744)
8,919
–
Total
1,050,758
639,958
546,246
2,236,962
(423,238)
(1,468,890)
344,834
20
126,243
(20,880)
9,441
23,348
156,132
(45,909)
55,275
(16,051)
(23,628)
3,881
12,472
(4,225)
8,919
(5,892)
344,854
(65,728)
Profit after tax
105,363
32,789
110,223
39,224
(19,747)
8,247
3,027
279,126
Total assets
6,500,712
9,231,950
3,025,533
2,260,341
953,915
570,418
4,090,237
26,633,106
Total liabilities
6,076,216
8,238,967
2,692,436
2,077,200
824,202
479,955
2,156,499
22,545,475
At 31 December 2012
Net interest income
Other income
Operating income
Operating expenses
Operating profit
Profit before tax from
continuing operations
Taxation
194,427
108,803
64,289
367,519
(25,756)
(235,482)
106,281
(120)
397,771
179,249
122,564
699,584
(71,533)
(592,810)
35,241
–
185,197
79,448
42,240
306,885
(23,302)
(168,334)
115,249
160
72,812
50,433
20,929
144,174
(9,445)
(102,460)
32,269
(550)
21,927
16,445
13,354
51,726
(9,135)
(66,735)
(24,144)
–
17,759
20,639
6,100
44,498
(8,304)
(44,960)
(8,766)
–
(41,203)
72,961
316,244
348,002
(435)
(158,324)
189,243
–
848,690
527,978
585,720
1,962,388
(147,910)
(1,369,105)
445,373
(510)
106,161
(23,995)
35,241
16,252
115,409
(33,060)
31,719
(16,004)
(24,144)
4,957
(8,766)
591
189,243
(4,948)
444,863
(56,207)
82,166
51,493
82,349
15,715
(19,187)
(8,175)
184,295
388,656
Total assets
5,440,358
8,545,164
2,549,432
1,835,381
765,277
423,480
4,214,001
23,773,093
Total liabilities
5,076,352
7,597,648
2,233,494
1,684,198
675,744
366,124
2,198,293
19,831,853
Profit after tax
170
5.1 Entity-wide disclosures (continued)
Reconciliation of segment results of operations to consolidated results of operations
At 31 December 2013
Net interest income
Other income
Operating income
Operating expenses
Operating profit
Taxation
Profit after tax
Total management
reporting
1,050,758
639,958
546,246
2,236,962
(423,238)
(1,468,890)
344,834
20
344,854
(65,728)
Consolidation
adjustments
–
38,812
194,694
233,506
(60,610)
(63,926)
108,970
4
108,974
–
Total consolidation
1,050,758
601,146
351,552
2,003,456
(362,628)
(1,404,964)
235,864
16
235,880
(65,728)
279,126
108,974
170,152
Total assets
26,633,106
4,100,653
22,532,453
Total liabilities
22,545,475
2,147,670
20,397,805
At 31 December 2012
Net interest income
Other income
Operating income
Operating expenses
Operating profit
Taxation
Profit after tax
848,690
527,978
585,720
1,962,388
(147,910)
(1,369,105)
445,373
(510)
444,863
(56,207)
–
39,559
192,830
232,389
7,441
(133,099)
106,731
103
106,834
–
848,690
488,419
392,890
1,729,999
(155,351)
(1,236,006)
338,642
(613)
338,029
(56,207)
388,656
106,834
281,822
Total assets
23,773,093
3,822,758
19,950,335
Total liabilities
19,831,853
2,057,990
17,773,863
171
6. Net interest income
Interest income
• Corporate Bank
• Domestic Bank
Investment securities – available for sale
Others
Interest expense
Deposits from banks
Due to customers:
• Corporate Bank
• Domestic Bank
Borrowed funds
Others
2013
2012
34,490
52,830
542,190
616,280
234,244
133,271
29,369
9,912
428,494
507,209
79,934
129,621
147,242
2,756
1,599,756
1,348,086
8,767
55,701
156,150
277,830
98,454
7,797
122,643
271,815
43,601
5,636
548,998
499,396
2013
2012
251,177
27,873
7,813
4,398
241,489
64,056
29,742
175,874
20,944
3,038
4,527
249,727
47,958
13,160
626,548
515,228
2,933
22,469
6,330
20,479
25,402
26,809
7. Net fee and commission income
Credit related fees and commissions
Corporate finance fees
Portfolio and other management fees
Brokerage fees and commissions
Cash management and related fees
Card management fees
Other fees
Brokerage fees paid
Other fees paid
The Group provides custody, trustee, investment management and advisory services to third parties, which involve the Group making
allocation and purchase and sale decisions in relation to a wide range of financial instruments. Those assets that are held in a fiduciary
capacity are not included in these financial statements.
8. Net trading income
Foreign exchange
Income on securities measured at fair value through P&L
Other trading income on securities
2013
2012
228,999
164
79,797
189,768
163
65,776
308,960
255,707
172
9. Net gain from investment securities
2013
2012
–
(1,581)
5
(4,284)
(1,581)
(4,279)
2013
2012
1,049
374
11,536
8,819
1,289
466
12,959
10,574
2013
2012
Trading securities
Available-for-sale securities
87
3,523
300
1,946
3,610
2,246
2013
2012
Derecognition of available-for-sale financial assets
Impairment of available-for-sale equity securities
10. Other operating income
i) Lease income
Equipment
Motor vehicles
Other leased assets
ii) Dividend income
iii) Others
Fair value (loss)/gain on investment properties
AMCON refund relating to acquisition of Oceanic Bank
Profit on sale of property and equipment
Others
Total other operating income
(8,472)
–
1,755
34,321
33,735
72,364
1,876
20,667
27,604
128,642
44,173
141,462
2013
2012
11. Impairment losses on loans and advances
Provision for loan impairment (Note 21)
Provisons no longer required (Note 21)
Amounts recovered during the year (Note 21)
485,245
(55,300)
(67,317)
241,546
(31,136)
(62,500)
362,628
147,910
173
12. Impairment losses on other financial assets
2013
2012
14,102
7,441
2013
2012
572,549
48,909
508,647
33,704
13,747
4,254
639,459
23,090
2,023
567,464
110,379
24,519
134,898
106,126
24,906
131,032
Directors’ emoluments
Impairment charges on property and equipment (Note 26)
Restructuring costs
Social responsibility
Rent and utilities
Insurance
Advertising and promotion
Professional fees
Operational losses and fines
Communications and technology
Business travels
AGM and board activities
Training
Employee activities
Repairs and maintenance
Supplies and services
Allocated cost
Cash transportation
Fuel
Other taxes
Non capitalised items
Pre-opening expenses
Listing fees
Other administrative expenses
1,652
–
326
4,084
70,376
48,980
31,164
79,729
45,328
110,531
32,869
5,248
7,886
16,332
55,121
23,684
4,324
17,150
20,071
12,314
1,375
112
2,973
38,978
2,580
172
31,437
2,018
62,398
41,188
25,920
66,812
22,131
64,060
29,115
2,892
8,810
10,351
44,928
23,370
4,818
13,172
18,132
12,023
2,697
1,229
2,194
45,063
Total
630,607
537,510
1,404,964
1,236,007
Impairment charge on doubtful receivables
13. Operating expenses
a) Staff expenses
Salaries, allowances and other compensation
Social security costs
Pension costs:
defined contribution plans
Other post retirement benefits (Note 37)
b) Depreciation and amortisation
Depreciation of property and equipment (Note 27)
Amortisation of software and other intangibles (Note 26)
c) Other operating expenses
174
14. Income tax expense
Current income tax
Deferred income tax (Note 36)
2013
2012
94,687
(28,959)
71,451
(15,244)
65,728
56,207
The income tax rate applicable to the majority of income of the subsidiaries ranged from 25% to 45%. Further information about deferred
income tax is presented in Note 38. The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the
basic tax rate of the parent as follows:
Profit before tax
Tax calculated at local tax rates applicable to profits in the respective countries
Tax impact on income not subject to tax
Tax impact on expenses not deductible for tax purposes:
Utilisation of previously unrecognised tax losses
Others
Income tax expense
221,778
96,902
(16,731)
(25,388)
10,945
–
338,028
71,246
(9,619)
15,187
(21,107)
500
65,728
56,207
Under the Headquarters Agreement between Ecobank Transnational Incorporated (ETI) and the Republic of Togo signed in October 1985, ETI is
exempt from tax on all its income arising from operations in Togo.
15. Earnings per share
Basic
Basic earnings per share is calculated by dividing the net profit attributable to equity holders of the company by the weighted average
number of ordinary shares in issue outstanding during the year. Year ended 31 December
Profit attributable to equity holders of the Company from continuing operations
Profit attributable to equity holders of the Company from discontinued operations
Weighted average number of ordinary shares in issue (in thousands)
Basic earnings per share (expressed in US cents per share) from continuing operations
Basic earnings per share (expressed in US cents per share) from discontinued operations
2013
2012
102,932
246,311
(7,391)
3,432
17,212,153
14,705,322
0.60
1.67
(0.04)
0.02
175
15. Earnings per share (continued)
Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all
dilutive potential ordinary shares. The company has two categories of dilutive potential ordinary shares: convertible debts and share options
granted to employees.
The convertible debt is assumed to have been converted into ordinary shares, and the net profit is adjusted to eliminate the interest expense
less the tax effect. For the share options, a calculation is made to determine the number of shares that could have been acquired at fair value
(determined as the average annual market share price of the Company’s shares) based on the monetary value of the subscription rights
attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have
been issued assuming the exercise of the share options.
2013
2012
Profit attributable to equity holders of the company from continuing operations
Interest expense on dilutive convertible loans
102,932
22,368
246,311
37,929
Adjusted profit
125,300
284,240
Profit attributable to equity holders of the company from discontinued operations
Interest expense on dilutive convertible loans
(7,391)
–
3,432
–
Adjusted profit
(7,391)
3,432
Weighted average number of ordinary shares in issue (in thousands)
Adjustment for dilutive convertible loans
Adjustment for share option
17,212,153
5,325,753
86,973
14,705,322
7,432,653
7,685
Weighted average number of ordinary shares for diluted earnings per share (in thousands)
22,624,879
22,145,660
0.55
1.28
(0.03)
0.02
2013
2012
711,228
612,485
1,323,713
1,554,155
549,746
399,772
949,518
1,032,107
2,877,868
1,981,625
Dilutive earnings per share (expressed in US cents per share) from continuing operations
Dilutive earnings per share (expressed in US cents per share) from discontinued operations
16. Cash and balances with central banks
At 31 December
Cash in hand
Balances with central banks other than mandatory reserve deposits
Included in cash and cash equivalents (Note 42)
Mandatory reserve deposits with central banks
Mandatory reserve deposits are not available for use in the group’s day-to-day operations. Cash in hand and balances with central banks and
mandatory reserve deposits are non-interest-bearing.
176
17. Treasury bills and other eligible bills
At 31 December
Maturing within three monts (Note 42)
Maturing after three months
The movement in Treasury bills and other eligible bills may be summarised as follows:
At 1 January
Additions
Acquisition of subsidiaries
Disposals (sale and redemption)
Gains/(loss) from changes in fair value
Exchange differences
At 31 December
Current
Non current
2013
2012
308,953
818,974
398,366
427,517
1,127,927
825,883
825,883
11,048,636
–
(10,696,304)
(5,908)
(44,380)
745,943
2,311,833
53,097
(2,233,817)
(11,523)
(39,650)
1,127,927
825,883
967,590
160,337
752,873
73,010
1,127,927
825,883
Treasury bills and other eligible bills are debt securities issued by the government of various countries in which the Group operates.
18. Financial assets held for trading
At 31 December
2013
2012
• Government bonds
• Other debt securities
114,830
–
55,354
37,398
Total debt securities
114,830
92,752
87
–
87
102
–
102
Total financial assets held for trading
114,917
92,854
Current
Non current
113,724
1,193
92,752
102
114,917
92,854
Debt securities:
Equity securities
• Listed
• Unlisted
Total equity securities
177
19. Derivative financial instruments and trading liabilities
The Group uses the following derivative instruments for non-hedging purposes.
Currency forwards represents commitments to purchase foreign and domestic currency, including undelivered spot transactions. Foreign
currency and interest rate futures are contractual obligations to receive or pay a net amount based on changes in currency rates or interest
rates or buy or sell foreign currency or financial institution on a future date at a specified price. The credit risk is negligible, as futures contracts
are collateralised by cash or marketable securities, and changes in the futures contract value are settled daily with the exchange.
At 31 December 2013
Assets
Notional Amount
Assets
Liabilities
At 31 December 2012
Assets
Notional Amount
Assets
Liabilities
Derivatives
Currency forwards
Currency swaps
Options
373,791
–
188,732
1,525
–
139,821
1,454
–
–
27,697
–
193,046
113
35
143,269
94
35
–
Total
562,523
141,346
1,454
220,743
143,417
129
2013
2012
82,154
716,036
513,960
80,584
1,127,367
967,205
1,312,150
2,175,156
The Group has not designated at initial recognition any financial liability as at fair value through profit or loss.
All derivative financial instruments, other than the options, are current.
20. Loans and advances to banks
At 31 December
Items in course of collection from other banks
Deposits with other banks (Note 42)
Placements with other banks
All loans and advances to banks are current.
178
21. Loans and advances to customers
At 31 December
Corporate Bank
2013
2012
Domestic Bank
2013
2012
Total
2013
2012
a) Analysis by type:
• Overdrafts
• Credit cards
• Term loans
• Mortgage loans
• Others
1,378,066
–
4,986,705
–
20,264
1,094,835
–
3,447,256
–
229,927
1,225,803
7,131
4,200,334
191,467
–
1,224,900
11,345
3,695,033
144,122
–
2,603,869
7,131
9,187,039
191,467
20,264
2,319,735
11,345
7,142,289
144,122
229,927
Gross loans and advances
6,385,035
(89,573)
4,772,018
(46,112)
5,624,735
(498,592)
5,075,400
(360,361)
12,009,770
(588,165)
9,847,418
(406,473)
6,295,462
4,725,906
5,126,143
4,715,039
11,421,605
9,440,945
444,961
3,840,259
2,099,815
381,259
2,627,867
1,762,892
1,480,035
2,413,874
1,730,826
1,055,577
1,907,444
2,112,379
1,924,996
6,254,133
3,830,641
1,436,836
4,535,311
3,875,271
6,385,035
4,772,018
5,624,735
5,075,400
12,009,770
9,847,418
7,208,901
4,800,869
5,752,779
4,094,639
12,009,770
9,847,418
b) Analysis by security:
Secured against real estate
Otherwise secured
Unsecured
Current
Non current
Non-impaired
Impaired
6,307,773
77,262
4,714,210
57,808
4,957,425
667,310
4,585,155
490,245
11,265,198
744,572
9,299,365
548,053
6,385,035
4,772,018
5,624,735
5,075,400
12,009,770
9,847,418
179
c) Movements in loans and advances
Reconciliation of loans and advances
by class is as follows:
At 31 December 2012
Overdrafts
Corporate Bank
Term loans
At 1 January 2013
Disbursed during the year
Paid off during the year
Amounts written off as uncollectibles
Reclassification
Exchange difference
1,009,330
1,145,101
(856,285)
(16)
2,942
76,994
At 31 December 2013
Domestic Bank
Credit cards
Term loans
Total
Others
Overdrafts
3,532,760
3,224,338
(1,765,002)
(13,340)
15,779
(7,830)
229,927
47,398
(277,069)
–
18,372
1,636
1,224,900
413,562
(361,303)
(80,244)
91,342
(62,454)
11,345
625
(4,383)
–
–
(456)
3,695,033
5,568,271
(4,842,319)
(23,772)
(185,668)
(11,211)
144,122
50,294
(50,598)
–
57,233
(9,584)
9,847,417
10,449,589
(8,156,959)
(117,372)
–
(12,905)
1,378,066
4,986,705
20,264
1,225,803
7,131
4,200,334
191,467
12,009,770
Overdrafts
Corporate Bank
Term loans
Others
Overdrafts
Domestic Bank
Credit cards
Term loans
Mortgage
At 31 December 2012
Mortgage
Total
At 1 January 2012
Acquistion of subsidiaries
Disbursed during the year
Paid off during the year
Amounts written off as uncollectibles
Reclassification
Exchange difference
804,764
–
1,518,112
(1,252,765)
(7,111)
28,929
(82,599)
2,383,334
–
1,971,612
(914,512)
(312)
14,447
78,191
141,676
–
205,257
(100,209)
–
(21,584)
4,787
1,071,935
96,834
890,719
(703,602)
(44,137)
(28,611)
(58,238)
14,812
–
945
(4,383)
–
–
(29)
3,039,535
139,648
1,534,642
(972,346)
(22,335)
9,874
(33,985)
138,551
–
67,731
(61,153)
–
(3,055)
2,048
7,594,607
236,482
6,189,018
(4,008,970)
(73,895)
–
(89,823)
At 31 December 2012
1,009,330
3,532,760
229,927
1,224,900
11,345
3,695,033
144,122
9,847,418
180
d) Allowance for impairment
Reconciliation of allowance account for losses on loans and advances by class is as follows:
At 31 December 2013
Corporate Bank
Specific allowance for impairment
Overdrafts
Term loans
Others
Overdrafts
At 1 January 2013
Provisons no longer required
Loans written off during the year
Exchange difference
2,435
9,364
811
(3,008)
(16)
2,428
21,485
39,750
(474)
(11,718)
(13,340)
(2,094)
–
–
–
–
–
–
150,385
90,290
(2,722)
(25,621)
(80,244)
(33,208)
At 31 December 2013
12,014
33,609
–
98,880
Others
Overdrafts
At 31 December 2013
Collective allowance for impairment
Overdrafts
Corporate Bank
Term loans
Domestic Bank
Credit cards
Term loans
4,516
–
–
(4,114)
–
(165)
237
164,869
269,923
(10,974)
(19,894)
(23,772)
(24,442)
Total
Mortgage
8,950
2,636
7
(2,962)
–
(8,140)
355,710
491
Domestic Bank
Credit cards
Term loans
Mortgage
352,640
411,963
(13,352)
(67,317)
(117,372)
(65,621)
500,941
Total
At 1 January
Provisions no longer required (negative)
Reclassification
Exchange difference
4,622
4,274
(514)
(359)
237
17,570
15,247
(76)
2,088
831
–
30
–
–
1
8,525
12,973
(12,187)
(8)
(110)
–
67
(70)
–
70
22,820
39,727
(28,764)
(705)
(494)
At 31 December 2013
8,260
35,660
31
9,193
67
32,584
1,429
87,224
20,274
69,269
31
108,073
304
388,294
1,920
588,165
Others
Overdrafts
Domestic Bank
Credit cards
Term loans
Mortgage
40
–
–
–
(2,571)
–
2,531
106,102
9,383
113,113
(1,677)
(13,000)
(44,137)
(19,399)
8,973
–
–
–
(4,600)
–
143
–
150,385
4,516
Others
–
–
–
–
Overdrafts
–
8,525
–
–
–
8,525
–
–
158,910
4,516
Total allowance for impairment
At 31 December 2012
Specific allowance for impairment
Overdrafts
Corporate Bank
Term loans
At 1 January 2012
Acquistion of subsidiaries
Provisons no longer required
Loans written off during the year
Exchange difference
8,607
–
1,559
(15)
(4,328)
(7,111)
3,723
18,686
–
870
(1,457)
(2,492)
(312)
6,190
At 31 December 2012
2,435
21,485
At 31 December 2012
Collective allowance for impairment
At 1 January
Provisions no longer required (negative)
Reclassification
Exchange difference
At 31 December 2012
Total allowance for impairment
Corporate Bank
Term loans
–
17,570
–
–
–
4,622
17,570
Overdrafts
–
4,622
–
–
7,057
39,055
86,623
13,532
65,197
(27,987)
(35,043)
(22,335)
84,882
296
964
(337)
(13)
519
53,833
73,282
(41,948)
1,003
1,054
Total
5,637
–
–
–
(466)
–
3,779
234,668
22,915
180,739
(31,136)
(62,500)
(73,895)
81,849
164,869
8,950
352,640
Domestic Bank
Credit cards
Term loans
–
–
–
22,820
–
–
–
–
Mortgage
–
296
–
–
–
53,833
–
–
22,820
296
53,833
187,689
9,246
406,473
Total
181
21. Loans and advances to customers (continued)
At 31 December
Loans and advances to customers include finance lease receivables analysed below.
Gross investment in finance leases, receivable
Later than 1 year and no later than 5 years
Later than 5 years
2013
2012
Unearned future finance income on finance leases
58
2,450
–
2,508
(376)
13,927
72,584
–
86,511
(19,454)
Net investment in finance leases
2,132
67,057
The net investment in finance lease may be analysed as follows:
Later than 1 year and no later than 5 years
Later than 5 years
427
1,705
–
12,726
54,331
–
2,132
67,057
182
22. Investment securities
At 31 December
2013
2012
730,632
938,689
718,197
1,382,781
1,669,321
2,100,978
• listed
• unlisted
29,922
205,035
24,060
244,148
Total
234,957
268,208
1,904,278
2,369,186
Securities available-for-sale
Debt securities – at fair value:
• listed
• unlisted
Total
Equity securities – at fair value:
Total securities available-for-sale before impairment
Allowance for impairment
(10,789)
(37,438)
Total securities available-for-sale
1,893,489
2,331,748
Current
Non current
415,159
1,478,330
1,893,489
258,552
2,073,196
2,331,748
The movement in securities available-for-sale may be summarised as follows:
At 1 January
Additions
Acquisition of subsidiary
Disposals (sale and redemption)
Losses from impairment of available-for-sale equity securities
Gains/(loss) from changes in fair value
2,318,201
4,301,604
–
(4,591,754)
(1,581)
(46,578)
(86,403)
2,551,507
1,626,556
70
(1,747,571)
(4,284)
70,078
(178,156)
At 31 December
1,893,489
2,318,201
The Group has not reclassified any financial asset measured at amortised cost to fair value during the year.
(2012: nil)
The movement in impairment allowance on securities available-for-sale may be summarised as follows:
At 1 January
Additional provision
Reclassification
37,438
1,581
(19,355)
(8,875)
47,703
4,284
(12,926)
(1,623)
At 31 December
10,789
37,438
183
23. Pledged assets
At 31 December
Treasury bills
Government bonds
Pledged assets have been stated at fair values
Current
Non-current
2013
2012
880,495
254,939
246,267
453,787
1,135,434
700,054
942,105
193,329
477,415
222,639
1,135,434
700,054
2013
2012
24. Investment in associates
At 31 December
At 1 January
Additions
Disposal
Share of results
Reclassification
At 31 December 2013
7,530
–
–
16
13,714
733
3,436
4,451
–
(613)
–
256
21,993
7,530
At 31 December 2012
EB-ACCION
Ghana
EB-ACCION
Cameroon
SOFIPE
OLD
MUTUAL
Life
insurance
Current assets
Non-current assets
13,604
1,019
8,714
753
3,985
253
27,969
714
27,841
12,476
13,715
699
5,817
961
3,403
675
Total assets
14,623
9,467
4,238
28,682
40,318
14,414
6,778
4,078
Liabilities
11,006
7,410
1,636
12,532
8,672
10,772
5,214
1,116
Total Liabilities
11,006
7,410
1,636
12,532
8,672
10,772
5,214
1,116
–
–
5,105
326
Revenues
Profit after tax
7,145
470
2,461
(354)
655
(163)
2,997
(3,242)
OLD
MUTUAL
General
insurance
EB-ACCION
Ghana
EB-ACCION
Cameroon
SOFIPE
1,547
(1,196)
299
(251)
None of the associates are listed.
EB-ACCION
EB-ACCION
SOFIPE
OLD MUTUAL
Life insurance
OLD MUTUAL
General insurance
Country of
incorporation
Ghana
Cameroon
Burkina Faso
At 31 December 2012
Net assets of
Share Holding
associate (Direct and Indirect)
3,642
39.78%
1,564
47.00%
1,116
40.80%
Country of
incorporation
Ghana
Cameroon
Burkina Faso
At 31 December 2013
Net assets of
Share Holding
associate (Direct and Indirect)
3,617
39.78%
2,058
47.00%
2,602
40.80%
Nigeria
16,150
30.00%
Nigeria
31,646
30.00%
184
25. Other assets
At 31 December
Fees receivable
Accounts receivable
Prepayments
Sundry receivables
Impairment charges on receivable balances
Current
Non-current
2013
2012
13,401
463,274
160,907
108,980
12,088
348,500
240,114
31,853
746,562
632,555
(56,649)
(52,445)
689,913
580,110
657,632
32,281
518,325
61,785
689,913
580,110
The movement in impairment allowance on other assets may be summarised as follows:
1 January
Increase in impairment
Write-off
52,445
14,102
(9,898)
52,287
7,441
(7,283)
At 31 December
56,649
52,445
2013
2012
Goodwill
At 1 January
Acquisition of subsidiary
Adjustment
433,167
–
–
404,623
24,199
4,345
At 31 December
433,167
433,167
26. Intangible assets
Goodwill is tested annually for impairment, or more frequently when there are indications that impairment may have occurred. There was no
impairment identified in 2013 (2012: nil). The adjustment in 2012 was in relation to the revision of the provisional goodwill figure for Oceanic
Bank. The review and adjustment was completed within the 12 months period permitted by IFRS 3.
2013
Software costs
At 1 January
Purchase
Amortisation (Note 13)
2012
69,982
17,158
(24,519)
960
55,887
38,711
(25,050)
434
At 31 December
63,581
69,982
Total intangibles
496,748
503,149
Impairment testing for cash-generating units containing goodwill
185
For the purpose of impairment testing, goodwill acquired through business combinations is allocated to cash-generating units (CGUs). The
recoverable amounts of the CGUs have been determined based on the value-in-use calculations; using cash flow projections based on the
financial budgets approved by senior management covering a period of three years.
The goodwill is arising on acquisitions in the following subsidiaries:
At 31 December
Ecobank Nigeria (Oceanic Bank)
Ecobank Ghana (The Trust Bank)
Ecobank Rwanda
Ecobank Zimbabwe
Ecobank Chad
Ecobank Central Africa
Ecobank Burundi
Ecobank Sierra Leone (ProCredit)
Ecobank Malawi
Ecobank Burkina Faso
2013
2012
386,749
24,199
6,930
6,550
2,962
1,860
1,592
1,056
700
569
386,749
24,199
6,930
6,550
2,962
1,860
1,592
1,056
700
569
433,167
433,167
The calculation of value-in-use was based on the following key assumptions:
• the cash flows were projected based on the Bank’s approved budget. The cash flows were based on past experiences and were adjusted to
reflect expected future performances of the company putting into consideration the country’s gross domestic product. To test the sensitivity
of this assumption, with a stressed decrease in cashflows by 10%, the goodwill will not be impaired.
• a terminal growth rate of between 3% and 8.6% were applied in determining the terminal cash flows depending on the country the entity
is domiciled. To test the sensitivity of this assumption, with a stressed terminal growth rate of 0%, the goodwill will not be impaired.
• discount rates of 17.1% wase applied in determining the value in use, being the determined pre-tax cost of equity of a listed entity that
has a portfolio of assets similar in terms of service potential and risks. To test the sensitivity of this assumption, with a stressed increase in
discount rate by 10%, the goodwill will not be impaired.
• the Group expects that through this acquisition, it would create synergy that enhances its ability to tap into opportunities in the respective
countries where the entities are domiciled;
• The key assumptions described above may change as economic and market conditions change. The Group estimates that reasonably
possible changes in these assumptions would not cause the recoverable amount of either CGU to decline below the carrying amount.
186
27. Property and equipment
Motor
Vehicles
Land and
Buildings
Furniture and
Equipment
Installations
Construction
in progress
Total
At 1 January 2012
Cost or Valuation
Accumulated depreciation
86,207
65,629
567,780
89,698
422,562
283,534
97,019
43,457
129,116
–
1,302,684
482,318
Net book amount
20,578
478,082
139,028
53,562
129,116
820,366
Year ended December 2012
Opening net book amount
Acquisition of subsidiaries
Additions
Revaluation
Disposals – cost
Disposals – accumulated depreciation
Reclassifications – cost
Reclassifications – accumulated depreciation
Impairment charge
Depreciation charge
Exchange rate adjustments
20,578
500
29,130
–
(13,021)
8,254
–
–
–
(14,061)
(375)
478,082
88
25,565
(1,143)
(18,509)
3,387
13,515
2,456
(172)
(20,720)
(814)
139,028
3,131
69,222
–
(49,325)
49,722
1,418
–
–
(61,699)
(300)
53,562
–
11,071
–
(3,434)
2,404
2,217
(2,456)
–
(10,840)
7,013
129,116
1,522
25,147
–
(2,662)
–
(17,150)
–
–
–
1,869
820,366
5,241
160,135
(1,143)
(86,951)
63,767
–
–
(172)
(107,320)
7,393
Closing net book amount
31,005
481,735
151,197
59,537
137,842
861,316
104,530
73,525
588,175
106,440
499,320
348,123
114,336
54,799
137,842
–
1,444,203
582,886
Net book amount
31,005
481,735
151,197
59,537
137,842
861,316
Year ended December 2013
Opening net book amount
Additions
Revaluation
Disposals – cost
Disposals – accumulated depreciation
Reclassifications – cost
Reclassifications – accumulated depreciation
Depreciation charge
31,005
10,674
–
(6,349)
7,026
–
–
(10,933)
(477)
481,735
54,696
2,493
(15,639)
2,785
10,163
74
(19,434)
(7,316)
151,197
65,987
–
(12,936)
5,845
1,663
(415)
(65,812)
(2,068)
59,537
21,831
(13,344)
4,056
6,135
340
(14,200)
2,178
137,842
10,689
–
(8,167)
–
(17,961)
–
–
(756)
861,316
163,877
2,493
(56,435)
19,712
–
–
(110,379)
(8,439)
Closing net book amount
30,947
509,556
143,460
66,535
121,647
872,145
At 31 December 2013
Cost
105,139
74,192
631,401
121,845
544,746
401,286
132,660
66,125
121,647
–
1,535,593
663,448
30,947
509,556
143,460
66,535
121,647
872,145
Cost or Valuation
Net book amount
187
28. Investment properties
2013
2012
1 January
Additions
Fair value gains
Disposal
196,588
11,519
(8,472)
(32,252)
665
72,177
90,228
33,735
–
448
At 31 December
168,048
196,588
The following amounts have been recognised in the income statement:
Rental income
Direct operating expenses arising from investment properties that generate rental income
1,611
(539)
325
(80)
1,071
245
Investment properties are carried at fair value. The valuation of investment properties has been done using the level 2 technique (inputs
other than quoted prices that are observable for the asset or liability). The values have been derived using the sales comparison approach.
188
29. Held for sale and discontinued operations
The assets and liabilities of Union Bank of Cameroon (UBC) have been classified as held for sale in line with IFRS 5 (Non current assets held
for sale and discontinued operations). UBC was acquired as part of the Oceanic transaction in 2011 but was deemed as non-core to ETI’s
operations. Regulatory approval has been obtained for the sale and it is expected to be completed during 2014.
2013
2012
61,296
20,922
7,273
16,482
23,713
33
2,013
2,435
1,957
–
–
–
–
136,123
–
1,079
134,779
6,937
80
742
3,615
–
–
–
–
147,232
–
a) Assets classified as held for sale
Investment securities–available for sale
Intangible assets
Other assets
–
–
–
–
b) Liabilities classified as held for sale
Deposits from banks
Due to customers
Other liabilities
Current income tax liabilities
Retirement benefit obligation
–
c) Profit from discontinued operations
Revenue
Costs (including impairments)
Profit before tax of discontinued operations
Tax
Profit from discontinued operations after tax
(Loss)/gain on disposal
(Loss)/Profit from discontinued operations
Owners of the parent
Non controlling interests
10,443
(11,735)
(1,292)
1,330
38
(8,315)
(8,277)
22,755
(12,759)
9,996
(5,086)
4,910
–
4,910
(7,391)
(886)
3,432
1,478
(8,277)
4,910
189
d) Disposal of businesses
During the year, ETI sold majority interests in some Oceanic entities.These entities were acquired as part of the Oceanic transaction in 2011
but were deemed as non-core assets. Oceanic Life was disposed in January 2013, Oceanic Health in June 2013, Oceanic Insurance and Oceanic
Homes in November 2013.
Oceanic Life
Oceanic Health
Oceanic Insurance
Oceanic Homes
Total
Total assets
Cash and balances with Central Banks
Investment securities
Investment property
Intangible assets
Deferred income tax asset
Other assets
1,281
17,315
1,355
–
24
5,253
–
14
1,215
–
3,262
309
–
88
–
43
2
1,019
2,018
17,912
2,748
516
46
11,688
–
743
4,648
–
1,557
104
1,981
–
15,019
–
–
1,265
3,299
40,046
4,516
2,497
158
31,960
43
758
8,146
Total assets
26,456
4,723
40,318
19,925
91,422
Total liabilities
Deposits from banks
Current tax liability
Borrowings
Other liabilities
–
–
53
–
9,073
–
–
170
–
1,796
–
–
620
945
7,107
9,068
395
20
–
2,490
9,068
395
864
945
20,466
Total liabilities
9,126
1,966
8,672
11,974
31,738
17,330
13,900
5,957
2,757
2,229
117
31,646
18,100
7,757
7,951
3,308
–
59,684
37,537
13,832
(5,789)
(4,643)
(8,315)
Net assets at date of disposal
Net proceeds from disposal
Fair value of net assets retained
Profit/(loss) from disposal
Net cash inflow arising on disposal
Net proceeds from disposal
Cash and cash equivalents disposed
2,527
(410)
13,900
18,596
2,229
3,262
18,100
19,930
3,308
1,557
37,537
43,345
(4,696)
(1,033)
(1,830)
1,751
(5,807)
13,900
2,229
18,100
3,308
37,537
(18,596)
(3,262)
(19,930)
(1,557)
(43,345)
Cash flow:
• Cash inflow on disposal
of subsidiaries
• Cash outflow on disposal
of subsidiaries
190
30. Deposits from other banks
At 31 December
Operating accounts with banks
2013
2012
562,282
144,671
308,781
353,420
706,953
662,201
2013
2012
3,670,418
1,925,951
3,094,973
1,444,278
5,596,369
4,539,251
4,612,885
3,668,329
2,612,321
5,578,911
2,209,264
2,293,052
10,893,535
10,081,227
16,489,904
14,620,478
7,672,718
8,817,186
5,183,346
9,437,132
16,489,904
14,620,478
All deposits from banks are current and have variable interest rates.
31. Due to customers
At 31 December
Corporate Bank
• Current accounts
• Term deposits
Domestic Bank
• Current accounts
• Term deposits
• Savings deposits
Total
Current
Non current
Customer deposits carry variable interest rates.
At 31 December 2013
Corporate Bank
Current account
Term deposits
At 1 January
Additions
Acquisition of
subsidiaries
Withdrawals
Reclassification
Exchange difference
–
(2,228,043)
16,646
(59,033)
At 31 December 2013
3,670,418
At 31 December 2012
3,094,973
2,845,875
1,444,278
702,479
–
(215,485)
–
(5,321)
Current account
Domestic Bank
Term deposits
Savings
5,578,911
7,277,060
2,209,264
1,573,389
2,293,052
700,748
–
(8,112,678)
(16,646)
(113,763)
–
(83,809)
–
(30,515)
Total
–
(320,348)
–
(61,131)
1,925,951
4,612,884
3,668,329
2,612,321
Corporate Bank
Current account
Term deposits
Current account
Domestic Bank
Term deposits
Savings
4,810,067
11,887,285
1,774,811
605,896
2,026,034
625,552
At 1 January
Additions
Acquisition of
subsidiaries
Withdrawals
Reclassification
Exchange difference
2,325,410
4,441,451
74,948
(3,715,001)
(26,980)
(4,855)
At 31 December 2012
3,094,973
1,140,173
521,513
39,603
(288,487)
2,736
28,740
1,444,278
81,986
(11,097,495)
(147,774)
44,842
5,578,911
14,143
(408,691)
171,864
51,241
2,209,264
14,620,478
13,099,551
–
(10,960,363)
–
(269,763)
16,489,903
Total
–
(424,921)
154
66,233
2,293,052
12,076,495
18,081,697
210,680
(15,934,595)
–
186,201
14,620,478
191
32. Other deposits
At 31 December
Other money-market deposits
Certificates of deposits
2013
2012
677,628
332
369,077
283
677,960
369,360
2013
2012
281,090
109,794
82,320
35,077
282,263
11,393
17,678
114,716
203,336
2,016
–
3,893
2,107
8,348
8,083
19,332
6,383
2,949
2,900
45,000
20,000
44,727
277,355
109,606
50,480
30,688
281,180
24,459
27,807
98,112
230,285
2,313
46,745
5,348
596
6,791
12,402
–
–
–
–
–
–
35,516
1,303,406
1,239,683
61,384
1,242,022
57,463
1,182,220
1,303,406
1,239,683
All certificate of deposits are current and have variable interest rates.
33. Borrowed funds
At 31 December
a
b
c
d
e
f
g
h
i
j
k
l
m
n
o
Nedbank
4% Convertible preference shares
Proparco
Opec Fund for International Development
Bank of Industry of Nigeria
Central Bank of Nigeria
Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V (FMO)
European Investment Bank
International Finance Corporation
Social Security and National Insurance Trust
Banque Centrale des Etats de l’Afrique de L’Ouest (BCEAO)
Banque Ouest-Africaine de Dévelopment (BOAD)
Societe Mamadou Dalaba
Atlantic Coast Regional Fund (ACRF)
Societe de Promotion et Participation pour la Coopération Economique (PROPARCO)
Caisse Régionale de Refinancement Hypothécaire (CRRH)
Export Development Investment Fund (EDIF) Ghana
Advanced Finance and Investment Group (AFIG) Rwanda
East African Development Bank (EADB) Kenya
Standard Chartered Bank, Nigeria
Keystone Bank, Nigeria
Other loans
Current
Non current
a) NEDBANK loan is a convertible loan to ETI. It is repayable at once, at the end of 2014 if the share subscription option is not exercised.
b) In 2011, ETI issued 1.07 billion units of convertible, redeemable and cumulative preference shares to the shareholders of Oceanic Bank
International Limited at US$0.1032 per share. Dividend is payable on the preference shares at the higher of 4% per annum and proposed
ordinary dividend per share.
c) PROPARCO, the Development Financial Institution arm of the French Development Agency (AFD), provided a 7-year loan facility to ETI.
d) Opec Fund for International Development (OFID) Loan is a convertible and subordinated loan repayable in seven (7) equal semi-annual
installments starting from 2016. The subsidiaries that benefitted from this loan are: Ecobank Senegal, Cameroon, Kenya and Côte d’Ivoire.
e) The Bank of Industry (BOI) loan to Oceanic Bank is for on-lending to customers in the manufacturing sector with a maximum tenure of 15
years. The facility is 15 years.
f) Central Bank of Nigeria loan represents 7-year intervention funds for on-lending to a customer of the Bank in the agricultural sector. The
funds are administered at a maximum interest rate of 9% per annum.
192
33. Borrowed funds (continued)
g) Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V (FMO) loan to ETI is repayable over five (5) years in twenty (20)
equal quarterly instalments from 2010-2015. Interest rate is based on 3 month LIBOR rate plus margin of 4.0% payable quarterly.
h) European Investment Bank (I) Loan is repayable in ten equal semi-annual instalments which started from 2010. Interest is payable
semi-annually at an annual rate of 2.4% plus 6 month LIBOR. European Investment Bank (II) Loan is a convertible and subordinated loan
repayable in ten equal semi-annual instalments which started from 2010. The subsidiaries that benefitted from this loan are: Ecobank
Burkina, Côte d’Ivoire, DR Congo, Ghana, Guinea Bissau, Mali, Rwanda, Chad, Senegal, Togo, Uganda, and Zambia.
i) International Finance Corporation (IFC) Loan is a convertible and subordinated loan repayble in thirteen (13) equal semi-annual
installments starting from 2015. The subsidiaries that benefitted from this loan are: Ecobank Benin, Burkina, Guinea Bissau, Mali, Niger,
Senegal, Togo, Gambia, Ghana, Sierra Leone, Cameroun, Central African Republic, Chad, Rwanda, and Nigeria. There were other IFC
loans to Ecobank Nigeria and Ecobank Ghana expiring on 2013 and 2015 respectively and attracting interest rates of LIBOR+2.75% and
LIBOR+3% respectivley.
j) Atlantic Cost Regional Fund (ACRF) to Ecobank Chad, Ecobank Liberia and Ecobank Rwanda are convertible loans expiring in 2015.
k) PROPARCO loan to Ecobank Kenya was a 5-year term loan maturing in 2015 with a rate of LIBOR + 7%.
l) Caisse Régionale de Refinancement Hypothécaire loan to Ecobank Côte d’Ivoire is maturing in 2022 with a rate of 6%.
m) The loan from Standard Chartered Bank Nigeria was obtained by Bewcastle Limited (a subsidiary of ETI) for a tenor of 36 months with
interest rate at 90day LIBOR plus 7%.
n) The loan from Keystone Bank Nigeria was obtained by Bewcastle Limited (a subsidiary of ETI) for a tenor of 36 months with interest rate
at 90day LIBOR plus 7%.
o) The Group also received other loans in several of our subsidiaries with interest ranging between 3% and 5% with maximum maturity of
10 years.
Analysis of the convertible loans
The convertible loans are presented in the consolidated statement of financial position as follows:
Name of Institution
Contract interest rate
European Investment Bank (II)
NEDBANK
Preference share
4.267% + 6 months Libor
8% +6 months Libor
4%
Effective interest rate
Tenor (Years)
Face value
Amount
5.43%
6.53%
8.78%
5.43%
5.43%
7
8
7
3
5
68,205
30,000
75,180
285,000
110,071
68,252
30,598
67,962
281,090
109,794
568,456
557,696
At 31 December
2013
2012
Initial recognition:
• Face value of convertible bond issued
• Equity conversion component net of deferred tax liability (Note 40)
568,456
(25,635)
562,856
(25,501)
Liability component
The convertible bond is presented in the statement of financial position as follows:
Liability component
Interest expense
Interest paid
542,821
537,355
544,634
31,780
(18,718)
537,670
7,834
(871)
Liability component at 31 December
557,696
544,634
Interest on the convertible loan is calculated on the effective yield basis by applying the effective interest rate for an equivalent nonconvertible loan to the liability component of the convertible loan and for the year ended 31 December 2013 amounted to US$38.02million
(2012: $31.7million). The actual interest paid in 2013 was US$37.5 million (2012: $29.9million).
193
33. Borrowed funds (continued)
At 31 December
2013
2012
68,252
30,598
138,063
67,861
30,526
130,821
236,913
229,208
2013
2012
44,993
1,676
646,700
45,246
52,151
135,332
36,126
6,112
457,511
70,678
85,469
76,763
926,098
732,659
2013
2012
At 1 January
Additional provisions charged to income statement
Provision no longer required
Utilised during year
26,040
13,319
(388)
(4,618)
(5,842)
11,210
14,887
(199)
(3,480)
3,622
At 31 December
28,511
26,040
Summary of subordinated loans
European Investment Bank (II)
34. Other liabilities
At 31 December
Accrued income
Unclaimed dividend
Accruals
Obligations under customers’ letters of credit
Bankers draft
Others
Other liabilities are expected to be settled within no more than 12 months after the reporting date.
35. Provisions
Other provisions represent amounts provided for in respect of various litigations pending in court. Based on professional advice, the amounts
for pending litigations have been set aside to cover the expected losses to the Group on the determination of these litigations.
194
36. Deferred income taxes
Deferred income taxes are calculated using the enacted tax rate of each subsidiary.
The movement on the deferred income tax account is as follows:
2013
2012
At 1 January
Income statement charge
Available-for-sale securities (directly in OCI):
(35,463)
(28,959)
(35,424)
(15,244)
• fair value remeasurement
• transfer to net profit
Revaluation of property and equipment (directly in OCI)
(11,801)
–
517
(4,769)
42,999
(9)
34
(27,819)
At 31 December
(80,475)
(35,463)
6,675
2,693
30,408
3,813
861
6,832
11,633
30,296
4,175
5,347
44,450
58,283
51
25,587
1,637
26,725
60
16
17,035
51,636
280
4,799
181
42,125
122,747
93,746
18,622
25,829
8,747
49,535
44,451
58,282
25,164
97,583
21,197
72,547
122,747
93,744
Deferred income tax assets and liabilities are attributable to the following items:
Accelerated tax depreciation
Available-for-sale securities
Revaluation of property and equipment
Provision for loan impairment (recovery)
Other temporary differences
Pensions and other post retirement benefits
Provisions for loan impairment
Other provisions
Tax loss carried forward
On untilised capital allowances
On revaluation PPE
On Impairment of assets
18,075
24,406
3,880
Deferred tax liabilities
• To be recovered within 12 months
• To be recovered after more than 12 months
Deferred tax assets
• To be recovered within 12 months
• To be recovered after more than 12 months
The deferred tax charge in the income statement comprises the following temporary differences:
Accelerated tax depreciation
Provision for loan impairment (recovery)
Pensions and other post retirement benefits
Allowances for loan losses
Other provisions
(157)
(362)
229
(20,788)
(1,456)
(4,486)
(1,939)
(4,736)
4,175
(216)
(1,951)
10,479
10,955
(33,950)
(28,959)
(15,244)
195
36. Deferred income taxes (continued)
Deferred income tax assets are recognised for tax losses carried forward only to the extent that realisation of the related tax benefit is
probable.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred income taxes related to the same fiscal authority.
Income tax effects relating to components of other comprehensive income:
2013
Fair value gains/loss on available for sale
Revaluation gains/loss on property and equipment
2012
Gross
(52,486)
2,493
Tax
11,801
(517)
Net
(40,685)
1,976
Gross
58,506
(1,143)
Tax
(42,990)
(34)
Net
15,516
(1,177)
(49,993)
11,284
(38,709)
57,363
(43,024)
14,339
196
37. Retirement benefit obligations
At 31 December
2013
2012
Amounts recognised in the statement of financial position:
Other post retirement benefits
8,019
7,220
43,798
(45,017)
38,473
(36,499)
(1,219)
9,238
974
5,246
Liability in the statement of financial position
8,019
7,220
Income tax effects relating to components of other comprehensive income
Current service cost
Net interest cost
4,022
232
2,287
40
Total included in staff costs
4,254
2,327
The movement in benefit obligation is reconciled as follows:
At 1 January
Current service cost
Net interest cost
Benefits paid
Contributions to the scheme
43,719
4,022
232
(2,901)
7,923
41
21,966
2,287
40
(853)
16,404
3,875
At 31 December
53,036
43,719
The movement in the fair value of the plan assets for the year is as follows:
At 1 January
Return on plan assets
Contributions to the scheme
Benefits paid
36,499
3,254
7,923
(2,901)
241
18,789
954
16,404
(853)
1,205
At 31 December
45,017
36,499
The expected return on plan assets is determined by considering the expected returns
available on the assets underlying the current investment policy.
The principal assumptions used for the subsidiaries operating in the UEMOA region were as follows:
Discount rate
Expected return on plan assets
Future salary increases
3%
1.8%
2%
3%
1.8%
2%
The principal assumptions used for the employees of Ecobank Nigeria Plc were as follows:
Discount rate
Expected return on plan assets
13%
9%
5%
14%
9%
5%
3%
0%
3%
0%
Other post-retirement benefits
Apart from the pension schemes, the Group operates a post employment gratuity payment scheme. The
method of accounting and the frequency of valuations are as described in Note 2.22.
The Group operates a post employment gratuity payment scheme. The amounts recognised in the statement of
financial position are as follows:
Present value of funded obligations
Fair value of plan assets
Present value of unfunded obligations
The principal assumptions used for the employees of Ecobank Transnational Incorporated were as follows:
Discount rate
197
38. Contingent liabilities and commitments
a) Legal proceeding
There were a number of legal proceedings outstanding against the Group at 31 December 2013. No provision has been made as professional
advice indicates that it is unlikely that any significant loss will arise.
b) Capital commitments
At 31 December 2013, the Group had capital commitments of $28.2m (2012: $28.2m) in respect of buildings and equipment purchases. The
Group’s management is confident that future net revenues and funding will be sufficient to cover this commitment.
c) Loan commitments, guarantee and other financial facilities
At 31 December 2013 the Group had contractual amounts of the off-statement of financial position financial instruments that commit it to
extend credit to customers guarantees and other facilities are as follows:
Acceptances
Guaranteed commercial papers
Documentary and commercial letters of credit
Performance bond, guarantees and indemnities
Loan commitments
2013
2012
–
295,415
1,761,659
2,498,855
293,909
7,107
186,396
1,494,695
1,536,737
338,143
4,849,838
3,563,078
39. Share capital
At 1 January 2012
No of shares (‘000)
Ordinary shares
Share premium
Treasury shares
Total
12,837,153
320,928
759,258
–
1,080,186
109,372
–
–
240,625
(7,883)
–
–
–
(13,299)
17,028,399
430,300
992,000
(13,299)
–
–
–
–
–
–
–
–
–
17,028,399
430,300
992,000
Proceeds from share subscription:
Treasury shares
4,375,000
–
(183,754)
349,997
(7,883)
(13,299)
1,409,001
Proceeds from share subscription:
Treasury shares
At 31 December 2013
–
–
–
(13,299)
–
–
–
1,409,001
The total authorised number of ordinary shares at year end was 50 billion (2012: 50 billion) with a par value of US$0.025 per share (2012:
US$0.025 per share).
Total issued shares as of 31 December 2013 were 17.2 billion. The adjustment for treasury shares in 2012 and 2013 on consolidation resulted
in the share count of 17.0 billion shares. The treasury shares were ETI shares held by a subsidiaries within the Group as at year end.
198
39. Share capital (continued)
Share options
The Group offers share option to certain employees with more than three years’ service. Options are conditional on the employee completing
three year’s service (the vesting period). The options are exercisable starting three years from the grant date. The Group has no legal or
constructive obligation to repurchase or settle the options in cash.
Movement in the number of share options outstanding are as follows:
2013
2012
At 1 January
Granted
Exercised
Lapsed
442,070
–
–
(19,950)
245,997
219,000
–
(22,927)
At 31 December
422,120
442,070
The range of exercise price of outstanding shares as at 31 December 2013 is 6 cents to 8 cents while the weighted average remaining life of
the outstanding shares as at 31 December 2013 is 3 years.
Employee share options were granted on 1 January 2007 at a price of US$ 0.08 (restated for share splits) per share and options may be
exercised prior to the tenth anniversary of the grant, no later than 31 December 2016. New employee share options totalling 119 million
shares were granted on 1 January 2012 with same terms as the previous scheme. Additional share options totalling 100 million shares were
also granted on 16 July 2012 with a contractuallife of 5 years.
The number of shares outstanding at the end of the year was as follows:
At 31 December
Expiry date:
2016
2017
2013
2012
000
000
322,120
100,000
342,070
100,000
422,120
442,070
For the general employees share option plan, options may be exercised prior to the tenth anniversary of the grant, no later than 31 December
2016.
Measurement of fair values – share options
The fair value of services received in return for share options granted is based on the fair value of share options granted, measured using
the Black-Scholes formula. The service and non-market performance conditions attached to the transactions were not taken into account in
measuring fair value.The inputs used in the measurement of the fair values at grant date of the equity-settled share-based payment plans
were as follows.
Fair value of share options and assumptions
Fair value at grant date (US$)
Share price at grant date (US$)
Exercise price (US$)
Expected volatility
Expected life (number of years)
Expected dividends
Risk-free interest rate
The expected volatility is based on both historical average share price.
2006 scheme
2011 scheme
2012 scheme
0.056
–
0.012
0.229
0.08
2.68%
7
10%
4.68%
0.067
0.08
2.25%
7
10%
0.89%
0.063
0.06
0.75%
4
6%
11.8%
199
40. Retained earnings and other reserves
At 31 December
Retained earnings
Other reserves
2013
2012
574,768
(47,333)
630,192
(33,005)
527,435
597,187
Movements in retained earnings were as follows:
At 1 January
Net profit for year
Adjustments to opening retained earnings
Dividend
Reclassification of share option reserve
Transfer to general banking reserve
Gain on shares held in Ecobank Ghana used as purchase consideration
630,192
95,541
–
(68,879)
–
(24,913)
(57,172)
–
315,209
249,743
44,715
(55,612)
181
(22,791)
(3,748)
102,495
At 31 December
574,768
630,192
117,399
185,270
(41,027)
25,635
65,601
14,056
(414,267)
92,486
128,098
(342)
25,501
63,624
14,056
(356,428)
(47,333)
(33,005)
92,486
–
–
24,913
68,676
1,200
(181)
22,791
a) Retained earnings
b) Other Reserves
General banking reserve
Statutory reserve
Revaluation reserve – Available-for-sale investments
Convertible bond – equity component
Revaluation reserve – property and equipment
Share option reserve
Translation reserve
Movements in the other reserves were as follows:
i) General banking reserve
At 1 January
Increase in share option reserve
Reclassification of lapsed share option
Transfer from retained earnings
At 31 December
117,399
92,486
At 1 January
Transfer from retained earnings
128,098
57,172
124,350
3,748
At 31 December
185,270
128,098
The general banking reserve represents transfers from retained earnings for unforeseeable risks and future losses.
General banking reserves can only be distributed following approval by the shareholders in general meeting.
ii) Statutory reserve
Statutory reserves represents accumulated transfers from retained earnings in accordance with relevant local
banking legislation. These reserves are not distributable.
200
40. Retained earnings and other reserves (continued)
2013
2012
iii) Revaluation reserves – Available-for-sale
At 1 January
Net (loss)/gains transferred to comprehensive income
Less deferred tax
Net gain/loss from changes in fair value (Notes 17 and 22)
Deferred income taxes (Note 36)
(342)
–
–
(52,486)
11,801
(15,858)
(49)
9
58,555
(42,999)
At 31 December
(41,027)
(342)
The revaluation reserve shows the effects from the fair value measurement
of available-for-sale investment securities after deduction of deferred taxes.
iv) Convertible bond - equity component
Movement in equity component of convertibles were as follows:
At 1 January
Arising during the year
25,501
134
25,501
–
At 31 December
25,635
25,501
At 1 January
Net gains/(losses) from changes in fair value
Deferred income taxes
63,624
2,493
(517)
64,801
(1,143)
(34)
At 31 December
65,601
63,624
At 1 January
Currency translation difference arising during the year
(356,428)
(57,839)
(322,717)
(33,711)
At 31 December
(414,267)
(356,428)
The equity component of the convertible bond is computed as a residual amount
after determining the loan amount using the market rate of an equivalent loan.
v) Revaluation Reserve – property and equipment
vi) Translation reserve
41. Dividends per share
Final dividends are not accounted for until they have been ratified at the Annual General Meeting. At the forthcoming annual general
meeting, no dividend in respect of 2013 is to be proposed.
201
42. Cash and cash equivalents
For the purposes of statement of cash flows, cash and cash equivalents comprise the following balances with less than three months maturity.
2013
Cash and balances with central banks (Note 16)
Treasury Bills and other eligible bills (Note 17)
Deposits with other banks (Note 20)
Deposits from other banks (Note 30)
2012
1,323,713
308,953
716,036
(706,953)
949,521
398,366
1,127,367
(662,201)
1,641,749
1,813,053
43. Group entities
a) Significant subsidiaries
Country of incorporation
Ecobank Nigeria Limited
Ecobank Ghana Limited
Ecobank Côte d’Ivoire
Ecobank Burkina
Ecobank Senegal
Ecobank Benin
Ecobank Cameroon
Ecobank Mali
Ecobank Togo
Ownership interests
2013
Nigeria
Ghana
Côte d’Ivoire
Burkina Faso
Senegal
Benin
Cameroon
Mali
Togo
100%
69%
96%
85%
80%
79%
80%
93%
82%
2012
100%
69%
96%
85%
80%
79%
80%
93%
82%
b) Non-controlling interests in subsidiaries
The following table summarises the information relating to the Group’s subsidiary that has material non-controlling interests (NCI), before any
intra-group eliminations
Entity
NCI percentage
Period
Ecobank Ghana
Ecobank Senegal
Ecobank Benin
31%
2013
31%
2012
20%
2013
20%
2012
21%
2013
21%
2012
983,910
228,919
970,442
1,501,977
425,824
2,183,271
740,065
171,651
906,676
1,298,394
278,109
1,818,391
573,489
171,923
286,781
712,437
256,073
1,032,193
453,350
97,656
235,381
575,177
393,334
786,387
575,746
89,321
279,198
677,476
207,490
944,265
464,593
61,245
307,956
583,543
199,277
833,794
Carrying amount of NCI
678,342
564,974
201,794
153,739
201,034
177,515
Operating income
Profit before tax
Profit after tax
Total comprehensive income
295,605
134,302
95,515
90,775
229,431
101,418
72,192
64,370
66,759
10,898
9,020
7,647
52,397
8,218
9,471
11,028
62,972
20,475
15,648
15,760
50,941
12,488
10,173
10,748
29,677
22,430
1,763
1,852
3,332
2,166
87,990
(101,829)
(40,162)
144,485
(105,794)
55,422
149,668
(78,727)
9,895
145,370
(61,762)
(48,353)
80,182
(29,432)
(11,706)
37,525
(9,118)
(22,932)
(54,002)
94,113
80,837
35,254
39,044
5,475
Other assets
Other liabilities
Net assets
Profit allocated to NCI
Cashflows from operating activities
Cashflows from investing activities
Cashflows from financing activities
Net increase/(decrease)
in cash and cash equivalents
202
c) Significant restrictions
The Group does not have significant restrictions on its ability to access or use its assets and settle its liabilities other than those resulting from
the supervisory frameworks within which banking subsidiaries operate. The supervisory frameworks require banking subsidiaries to keep
certain levels of regulatory capital and liquid assets, limit their exposure to other parts of the Group and comply with other ratios.
d) Involvement with unconsolidated structured entities
The table below describes the structured entities in which the Group does not hold an interest but is a sponsor. The Group considers itself a
sponsor of a structured entity when it facilitates the establishment of the structured entity. These entities were not consolidated in 2013.
Name
Type of structured entity
Nature and purpose
Singularity Africa PCC
(incorporated in Mauritius in 2013)
Asset-backed structured entity
Creative Africa B.V.
(incorporated in Netherlands in 2013)
FCP UEMOA DIVERSIFIE
(incorporated in Côte d’Ivoire in 2007)
FCP UEMOA RENDEMENT
(incorporated in Côte d’Ivoire in 2007)
Investment held by the Group
a) Provide investors with an exposure
to a referenced asset such as a debt
instrument
b) Generate fees for agent activities
and funding for the Group’s lending
activities.
None
None
None
None
The table below sets out information for 2013 in respect of structured entities that the Group sponsors, but which the Group does not
have an interest.
Asset-backed structured entities
FCP UEMOA DIVERSIFIE
Fee income earned from asset-backed structured entities
*Carrying amount of assets transferred by third parties to
conduit vehicle
Carrying amount of the financing received from unrelated
third parties
FCP UEMOA
RENDEMENT
13,261
3,942
Singularity Africa PCC
Creative Africa B.V.
5,249
872
82,152
88,525
63,673
65,473
The carrying value is stated at book value (costs less impairment)
The Group does not have any exposure to any loss arising from these structured entities.
44. Related party transactions
The related party is the key management personnel, their related companies and close family relations. The key management personnel
included directors (executive and non-executive),and other members of the Group Executive Committee.
A number of banking transactions are entered into with related parties in the normal course of business and at commercial terms. These
transactions include loans, deposits, and foreign currency transactions. The volumes of related party transactions, outstanding balances at the
year end, and relating expense and income for the year as follows:
Loans and advances to related parties
Loans outstanding at 1 January
Loans issued during the year
Loan repayments during the year
Exchange difference
Loans outstanding at 31 December
Interest income earned
Directors and key management personnel
2013
2012
3,568
20,889
(7,074)
(16,674)
Related companies
2013
2012
8,260
992
(5,733)
49
134,412
112,960
(219,161)
(12,116)
27,898
106,225
(2,060)
2,349
709
3,568
16,095
134,412
35
47
288
5,959
No provisions have been recognised in respect of loans given to related parties (2012: nil). The loans issued to executive directors during the year and related companies controlled by directors were given on commercial terms and
market rates.
203
44. Related party transactions (continued)
Deposits from related parties
Directors and key management personnel
2013
2012
Deposits at 1 January
Deposits received during the year
Deposits repaid during the year
Exchange difference
Deposits at 31 December
Interest expense on deposits
Related companies
2013
2012
14,504
212
(12,730)
(920)
37,917
4,241
(3,822)
(23,832)
11,378
4,165
(10,414)
(4,067)
98,557
8,135
1,818
(97,132)
1,066
14,504
1,062
11,378
16
12
16
155
2013
Directors’ remuneration
Total remuneration of the non-executive directors
1,652
Related party credits
During the period the Group through its subsidiaries granted various credit facilities to directors and companies whose directors are also
directors of ETI at rates and terms comparable to other facilities in the Group’s portfolio. An aggregate of US$16.8 million was outstanding on
these facilities at the end of the reporting period. The status of performance of each facility is as shown below:
Name of company/
individual
Relationship
Type
Status
Nature of security
Amount
Evelyne Tall
Eddy Ogbogu
Brasserie du Cameroun
BIDC
Director
Director
Director related
Director related
Term loan
Term loan
Term loan
Bonds
Non-impaired
Non-impaired
Non-impaired
Non-impaired
Legal mortgage
Legal mortgage
Unsecured
Unsecured
249
460
4,206
11,889
16,804
204
45. Prior period corresponding balances
Certain prior period balances have been reclassified in line with IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors, to
reflect current period presentation due to the following reasons:
Note
Reported 2012
US$’000
IFRS 5 discontinuing
operations
Restated 2012
US$’000
Interest income
Interest expense
Net interest income
a
a
1,356,967
(501,954)
855,013
(8,881)
2,558
(6,323)
Insurance premium income
Insurance premium ceded to reinsurers
Net insurance premium
a
a
7,826
(1,792)
6,034
(7,826)
1,792
(6,034)
a
a
524,632
(28,214)
496,418
(9,404)
1,405
(7,999)
515,228
(26,809)
488,419
b
b
a
a
a,b,c
10,574
2,362
256,388
(3,570)
127,658
393,412
(10,574)
(2,362)
(681)
(709)
13,804
(522)
–
–
255,707
(4,279)
141,462
392,890
Lease income
Dividend income
Net trading income
Other income
Operating income before impairment loss
Impairment losses for loans and advances
1,750,877
a
c
(140,936)
–
(140,936)
Operating income after impairment loss
Insurance benefits
Insurance claims and loss adjustment expenses
Insurance claims and loss adjustments recovered from insurers
Investment contract benefits
Expenses for acquisition of insurance and investment contracts
Staff expenses
a
a
a
a
a
a
a
a,c
(20,878)
(6,974)
(7,441)
(14,415)
1,348,086
(499,396)
848,690
–
–
–
1,729,999
(147,910)
(7,441)
(155,351)
1,609,941
(35,293)
1,574,648
(4,194)
2,148
–
(204)
(577,571)
(132,369)
(549,114)
(1,261,304)
–
4,194
(2,148)
–
204
10,107
1,337
11,604
25,298
–
–
–
–
–
(567,464)
(131,032)
(537,510)
(1,236,006)
Operating profit
348,637
(9,995)
338,642
Share of (loss)/profit of associates
Profit before income tax from continuing operations
Income tax expense
(613)
348,024
(61,292)
–
(9,995)
5,085
(613)
338,029
(56,207)
286,732
–
286,732
(4,910)
4,910
0
281,822
4,910
286,732
a
Profit for the year from discontinuing operations
Profit for the year
• Profit for the year from discontinuing operations
Non-controlling interests (total)
• Profit for the year from discontinuing operations
–
249,743
246,311
3,432
–
246,311
3,432
249,743
36,989
35,511
1,478
–
35,511
1,478
36,989
286,732
–
286,732
205
a) As required by IFRS 5 (Non-current Assets Held for sale and Discontinued Operations ), when amounts relating to discontinued operations
are seperately presented, the comparative figures for prior periods are also re-presented, so that the disclosures relate to all operations
that have been discontinued by the end of the reporting period for the latest period presented.
Hence, the 2012 numbers relating to the discontinued operations and held for sale (disclosed in Note 27) have been reclassified from the
individual income statement lines to a seperate line ‘Profit/loss from discontinued operations’:
b) This relates to the reclassification of lease and dividend income to ‘other operating income’ line.
c) This relates to the reclassification of impairment on other financial assets from ‘other operating expenses’ line to ‘impairment’ line and
reclassification of profiton disposal of property and equipment from ‘other operating expenses’ to ‘other operating income’.
46. Major business acquisitions
On 1 January 2012, ETI obtained control of The Trust Bank Ghana Limited (TTB) by acquiring 61% equity interest in the company. The
remaining equity interest of 39% were acquired in piecemeal and were completed during January 2012. The consideration for the purchase
was by way of a share swap in exchange for shares in Ecobank Ghana. As a result of the acquisition, the Group is expected to increase its
market share in Ghana. It also expects to reduce costs through economies of scale. The goodwill of $24.2 million arising from the acquisition
is attributable to acquired customer base and economies of scale expected from combining the operations of the TTB and Ecobank Ghana.
The details of the fair value of the assets and liabilities acquired and goodwill arising from both acquisitions are as follows:
The Trust Bank (TTB)
Fair values on date of
Acquiree’s previous
Acquisition
carrying value
1 January 2012
31 December 2011
Cash and cash equivalent
Property, plant and equipment
Other assets
Deposit from banks
Deposit from customers
Other liabilities
119,245
213,566
70
5,241
26,422
(25,212)
(210,680)
(15,767)
(25,396)
119,245
213,566
70
5,241
26,422
(25,212)
(210,680)
(15,767)
(25,396)
Net assets acquired
87,489
87,489
Cost of acquisition
Non-controlling interest
Total identifiable net assets
77,690
33,998
87,489
Goodwill
24,199
Cost of acquisition (discharged by cash)
Cash and cash equivalents in subsidiaries acquired
–
119,245
Net cash flow
119,245
The operations of TTB have been combined with that of Ecobank Ghana. The revenue included in the consolidated statement of
comprehensive income since 1 January 2012 contributed by the enlarged Ecobank Ghana was $229 million. The enlarged Bank also
contributed profit of $101 million over the same period.
There were no business combinations in 2013.
47. Events after reporting date
In February 2014, Ecobank Transnational Incorporated (ETI) and ProCredit Holding Germany (PCH) announced that they are in discussions with
the view to ETI acquiring a majority stake in PCH’s Mozambican subsidiary – Banco ProCredit Mozambique (PCM). ETI has formally expressed
an interest in purchasing Banco ProCredit in Mozambique by acquiring the shares currently held by ProCredit Holding and DOEN Foundation,
representing 96% of Banco ProCredit’s total capital. The transaction is subject to the approval of the regulatory authorities in Mozambique.
206
Five-year summary financials
At the year end
Total assets
Total equity
For the year
Revenue
Profit before tax
Profit after tax
Profit attributable to owners of the parent
2013
2012
2011
2010
2009
22,532,453
11,421,605
16,489,904
2,134,648
19,939,383
9,440,945
14,620,478
2,173,917
17,161,912
7,359,940
12,076,495
1,459,336
10,466,871
5,264,184
7,924,585
1,292,610
9,006,523
4,766,197
6,472,459
1,235,565
2,003,456
221,778
147,773
95,541
1,729,999
338,029
286,732
249,743
1,195,628
277,422
206,840
182,207
899,643
169,026
131,819
112,716
873,318
101,066
64,600
51,075
Earnings per share – basic (cents)
Earnings per share – diluted (cents)
Dividend per share (cents)
Return on average equity (%)
Return on average assets (%)
Cost-to-income ratio (%)
* Results for 2012 and 2013 are shown for continuing operations
0.60
0.55
–
1.67
1.28
0.40
1.76
1.55
0.40
1.14
1.13
0.40
0.58
0.57
0.30
6.9
0.73
70.1
15.8
1.55
71.4
15.9
1.50
69.6
10.4
1.40
69.9
5.6
0.70
72.4
207
Income statement
2013
2012
Interest income
Finance cost
17,321
(64,515)
19,679
(64,067)
Net interest income
(47,194)
(44,388)
Fees and commission income
Fees and commission expense
41,838
(748)
38,706
(798)
41,090
37,908
114,817
3,245
(26,765)
(6,837)
(32,122)
(47,017)
(6,773)
103,873
85,923
(25,333)
(5,370)
(29,188)
–
(713)
Dividend income
Personnel expense
Depreciation and amortization expense
Other operating expense
Provision for doubtful receivable
Foreign exchange translation gain
(Loss)/Profit for the year
(7,556)
122,712
Statement of comprehensive income
2013
2012
(Loss)/Profit for the year
(7,556)
122,712
Items that will be reclassified to profit or loss
Fair valuation gain/(loss) on available-for-sale securities (net of tax)
10,075
(28,497)
Other comprehensive income/(expense) for the year
10,075
(28,497)
2,519
94,215
Other comprehensive income:
208
Statement of financial position
2013
2012
Assets
Investment in securities: available-for-sale
Other assets
Investment properties
Investment in subsidiaries
Intangible assets
Property, plant and equipment
292,698
111,226
129,171
36,600
14,354
2,281,515
721
59,459
298,242
101,141
113,099
37,500
789
2,228,926
1,369
62,982
Total assets
2,925,744
2,844,048
906,872
310,304
5,388
1,170
757,996
313,236
4,313
267
1,223,734
1,075,812
430,300
992,000
177,878
101,832
430,300
992,000
272,720
73,216
Total equity
1,702,010
1,768,236
2,925,744
2,844,048
Liabilities
Borrowed funds
Other liabilities
Provision
Total liabilities
Equity
Share capital
Share premium
Retained earnings
Other reserves
209
Statement of changes in equity
Share capital
Share premium
Retained
earnings
Other reserves
Total
320,928
759,258
113,800
89,838
1,283,824
Profit for the year 2012
Net unrealized loss on available-for-sale investments
–
–
–
122,712
–
–
(28,497)
122,712
(28,497)
–
–
122,712
(28,497)
94,215
(55,612)
1,200
–
102,495
–
350,000
(7,883)
(3)
At 01 January 2012
Share option granted
Share option lapsed
Gain on partial disposal of investment in subsidiaries
Proceeds from issue of shares
–
–
–
–
–
109,375
–
(3)
–
–
–
–
–
240,625
(7,883)
–
(55,612)
–
181
102,495
(10,856)
–
–
–
–
1,200
(181)
–
10,856
–
–
–
430,300
992,000
272,720
73,216
Profit for the year
Equity component of convertible loan issued during the period
Net unrealized gain on available-for-sale investments
–
–
–
–
–
–
(7,556)
–
–
–
134
10,075
(7,556)
134
10,075
–
–
(7,556)
10,209
2,653
–
–
–
–
(68,879)
(18,407)
–
18,407
(68,879)
–
430,300
992,000
At 31 December 2013
177,878
101,832
1,768,236
1,702,010
210
Statement of cash flows
2013
2012
Cash flows from operating activities
Profit for the year
Adjustment for non cash items:
Interest income
Finance cost
Income on AMCON bonds
Dividend income
Fair value gain on investment property
Gain on disposal of property plant and equipment
Loss on disposal of investment in subsidiary
Gain on disposal of investment property
Gain on disposal of available for sale investment securities
Share option granted
Amortization of government grant
Provision for doubtful receivables
Foreign exchange loss on retirement benefit obligation
Current service cost and interest on benefit obligation
Net cash used in operating activities before changes in working capital
(7,556)
122,712
(17,257)
64,515
–
(114,817)
(600)
(21 )
1,815
(1,300)
(28)
–
6,837
(192)
47,017
195
880
(20,512)
(19,679)
64,067
(72,359)
(103,873)
(13,346)
(26)
–
–
4,090
1,200
5,370
(192)
–
–
614
(11,422)
(55,694)
16,515
(21,786)
(50,616)
13,803
(23,467)
(62,349)
17,742
(5,010)
(15,749)
(126,084)
(92,461)
114,817
(2,725)
80
2,800
–
(108,255)
37,538
157
(1,559)
103,873
(9,189)
37
–
3,326
(459,109)
–
53,203
(58)
42,853
(307,917)
165,264
(44,654)
–
–
–
(68,879)
85,906
(79,544)
350,000
(3)
(5,383)
(55,612)
51,731
295,364
(31,500)
(105,014)
Cash and cash equivalents at the beginning of the year
50,351
155,365
Cash and cash equivalents at end of the year
18,851
50,351
Interest paid
Interest received
Addition to loans and advances
Changes in working capital
• net increase in other assets
• net increase in other liabilities
Net cash used in operating activities
Cash flows from investing activities
Dividend received
Purchase of property, plant and equipment and intangible assets
Proceeds from the sale of property, plant and equipment
Proceeds from disposal of investment property
Proceeds from repayment of loans to subsidiaries
Addition to investment in subsidiaries
Proceeds from sale of investment in subsidiaries
Proceeds from sale of AFS investment
Additions to investment in associates
Net cash generated from/(used in) investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowed funds
Proceeds from share issue
Dividends paid
Net cash generated from financing activities
Net decrease in cash and cash equivalents
211
Index to notes to the consolidated financial statements
Note
Description
Page
1
General information
133
2
Summary of significant accounting policies
133
3
Financial risk management
148
4
Critical accounting estimates, and judgements in applying accounting policies
165
5
Segment Analysis
166
6
Net interest income
171
7
171
8
Net trading income
171
9
Net gain from investment securities
172
10
172
11
172
12
173
13
Operating expenses
173
14
Income tax expense
174
15
Earnings per share
174
16
175
17
176
18
176
19
Derivative financial instruments and trading liabilities
177
20
177
21
178
22
182
23
Pledged assets
183
24
183
25
Other assets
184
26
Intangible assets
184
27
186
28
Investment property
187
29
Held for sale and discontinued operations
188
30
190
31
Due to customers
190
32
Other deposits
191
33
Borrowed funds
191
34
Other liabilities
193
35
Provisions
193
36
Deferred income taxes
194
37
196
38
Contingent liabilities and commitments
197
39
Share capital
197
40
Retained earnings and other reserves
199
41
Dividends per share
200
42
Cash and cash equivalents
201
43
Group entities
201
44
Related party transactions
202
45
Prior period corresponding balances
204
46
Major business acquisitions
205
47
Events after reporting date
205
212
ETI, the parent company of the Group, acts
as the strategic controller for the Group and
its subsidiaries.
Our head office complex, the pan-African
Centre in Lomé, Togo, includes the Ecobank
Learning Centre, a training facility used by
our businesses across the continent.
Ecobank’s head office in Lomé, Togo.
213
214
Executive management
Group Executive Management
Albert Essien
Evelyne Tall
Eddy Ogbogu
Deputy Group Chief Executive Officer,
Laurence do Rego
Patrick Akinwuntan
Group Executive Director, Finance
Country Heads (African banking subsidiaries)
Roger Dah-Achinanon
Jean-Baptiste Siate
Nadeem Cabral De Almada
Benin
Gabon
Sao Tome and Principe
Cheick Travaly
Marème Mbaye Ndiaye
Yves Coffi Quam-Dessou
Burkina Faso
Gambia
Senegal
Alassane Sissoko
Samuel Adjei
Clement Dodoo
Burundi
Ghana
Sierra Leone
Moustapha Fall
Adama Sene Cissé
Robert Wabbi
Cameroon
Guinea-Bissau
South Sudan
Jose Mendes
Moukaram Chanou
Enoch Osei-Sarfo
Cape Verde
Guinea (Conakry)
Tanzania
Stephane Doukoure
Ehouman Kassi
Didier Correa
Central African Republic
Kenya
Togo
Mahamat Ali Kerim
Kola Adeleke
Michael Monari
Chad
Liberia
Uganda
Lazare Noulekou
Charles Asiedu
Jolone Okorodudu
Congo (Brazzaville)
Malawi
Zambia
Serge Ackre
Coumba Sidibé Touré
Daniel Sackey
Congo (Democratic Republic)
Mali
Zimbabwe
Charles Daboiko
Ibrahim Aboubakar Bagarama
Côte d’Ivoire
Niger
Alfred Kasongo
Jibril Aku
Equitorial Guinea
Nigeria
Gilles Guérard
Rwanda
215
Heads of Representative Offices and Paris Subsidiary
Albert Essien
South Africa
(Johannesburg)
Baba Jahate
Angola
(Luanda)
James R Kanagwa
Ethiopia
(Addis Ababa)
Christophe Jocktane-Lawson
France
(Paris)
Jaimal Shergill
United Arab Emirates
(Dubai)
Monica Xiaoning LU
China
(Beijing)
David Pitts
United Kingdom
(London)
Disclaimer
This annual report or any extract thereof including its abridged version could or may contain forward looking statements that are based on
current expectations or beliefs, as well as assumptions about future events.
These forward looking statements involve known and unknown risks, uncertainties and other important factors that could in future cause
actual results, performance or achievements of the Group to be materially different from those expressed or implied in the forward looking
statements.
These forward looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward looking
statements often use words such as “anticipate”, “target”, “expect”, “estimate”, “intend”, “plan”, “goal”, “believe”, “will”, “may”, “should”,
“would”, “could” or other words of similar meaning.
Such forward looking statements are based on assumptions regarding the Group’s present and future business strategies and the environment
in which the Group will operate in the future.
The Group expressly disclaims any obligation or undertaking to release any updates or revisions to any forward looking statements contained
herein to reflect any change in the Group’s expectations with regard thereto or any change in events, conditions or circumstances on which
any such statement is based.
Ecobank has made every effort to ensure the accuracy of the information contained in this annual report relating to such forward looking
statements and believes such information is reliable but does not warrant its completeness or accuracy. The Company shall not be held liable
for errors of fact or opinion connected to such forward looking statements. This however does not exclude or restrict any duty or liability that
Ecobank has to its customers under any regulatory system.
216
Ordinary shareholding structure
As at 31 December 2013, ETI had authorized share capital of 50,000,000,000 ordinary shares with a par value of US$0.025 per share.
Distribution of shareholdings
Share range
Number of shareholders
% of shareholders
Number of shares held
% shareholding
1 - 1,000
1,001 - 10,000
10,001 - 100,000
100,001 - 1,000,000
1,000,001 - 10,000,000
10,000,001 - 100,000,000
100,000,001 - 1,000,000,000
1,000,000,001 and above
500,573
129,341
17,733
2,545
435
78
15
4
76.93%
19.88%
2.73%
0.39%
0.07%
0.01%
0.00%
0.00%
155,225,978
411,267,193
503,970,908
760,041,803
1,177,281,821
2,291,972,365
4,953,661,624
6,958,730,516
0.90%
2.39%
2.93%
4.42%
6.84%
13.32%
28.78%
40.43%
Total
650,724
100%
17,212,152,208
100%
Top 10 shareholders as at 31 December 2013
Shareholders
Government Employees Pension Fund (PIC)
Asset Management Corporation of Nigeria
Stanbic Nominees Nigeria Ltd/C002 - Main
The International Finance Corporation
Stanbic Nominees Nigeria Ltd/C014 - Trad
IFC Capitalization (Equity) Fund, L.P.
Stanbic Nominees Nigeria Ltd/C005 - Main
Africa Capitalization Fund Ltd (IFC)
SCGN/Pictet re Latitude Zero Financial Inv. Fund
Total of top 10 ordinary shareholders
% of total
3,125,000,000
1,402,674,653
1,250,000,000
1,181,055,863
895,958,412
600,539,475
596,590,900
576,510,526
340,909,100
319,148,936
18.16%
8.15%
7.26%
6.86%
5.21%
3.49%
3.47%
3.35%
1.98%
1.85%
10,288,387,865
59.77%
Substantial interests as at 31 December 2013
The following shareholders had a beneficial ownership of greater than 5% in Ecobank.
Shareholders
Government Employees Pension Fund (PIC)
The International Finance Corporation
JP Morgan Bank Luxembourg
% of total
3,125,000,000
1,798,016,891
1,621,788,812
1,421,622,661
895,958,412
18.16%
10.45%
9.42%
7.26%
5.21%
217
ETI shares are listed on three stock exchanges under the ISIN TG000A1JS796 and are fungible between the three exchanges.
ETI Shares by listing venue as at 31 December 2013
Shares
Nigeria Stock Exchange (NSE)
Ghana Stock Exchange (GSE)
Bourse Régionale des Valeurs Mobilières (BRVM)
12,871,160,587
2,755,639,474
1,585,352,147
Total
17,212,152,208
Major shareholders
PIC (GEPF)
18.2%
AMCON
10.4%
IFC Managed Funds 7.2%
IFC Direct*
6.9%
SSNIT
5.2%
Free Float
52.1%
* total direct and indirect ownership
of IFC is 9.4%
Dilutive securities
The Group has a number of dilutive securities, as outlined below.
Convertibles
IFC, EIB and OFID hold a total of approximately US$175 million of convertibles, which are exchangeable into ordinary shares at market-related
prices.
Nedbank
Nedbank Group holds a US$285 million loan with subscription rights into 2,478 million shares (equivalent to a proforma 12.6% stake based
on the December 2013 shares in issue).
Nedbank Group also has the right to purchase additional shares at a market-based price to reach a proforma ownership of 20% in ETI.
Share options
There are options outstanding to staff and management in respect of 422 million shares.
Ordinary share dividend history
Financial Year
2006
2007
2008
2009
2010
2011
2012
2013
Dividend per ordinary share (US$ cents)
Total dividend (US$ thousands)
3.0
2.0
0.2
0.3
0.4
0.4
0.4
–
18,355
26,940
17,500
29,744
39,653
51,349
68,849
–
218
Nigeria
ETI Share price relative to NSE Index: 2013
NGN
20
18
16
14
12
10
J
F
M
A
M
ETI share price
J
J
A
S
O
N
D
NSE Index (rebased)
Source: Bloomberg
Nigeria: Summary of trading
Quarter
Volume (shares)
Jan-Mar
Apr-Jun
Jul-Sep
Oct-Dec
847,787,490
724,815,227
396,446,565
848,948,251
11,268,966,427
11,052,620,183
5,707,920,924
12,079,585,947
13,673,992
11,690,568
6,194,478
13,692,714
181,757,523
178,268,067
89,186,264
194,832,031
2,817,997,533
40,109,093,481
11,312,938
161,010,972
Total/average
Source: Bloomberg
Value (NGN) Average daily volume (shares)
Average daily value (NGN)
219
Ghana
ETI Share price relative to GSE Index: 2013
0.30
GHS
0.25
0.20
0.15
0.10
J
F
M
A
M
ETI share price
J
J
A
S
O
N
D
GSE Index (rebased)
Source: Bloomberg
Ghana: Summary of trading
Quarter
Volume (shares)
Jan-Mar
Apr-Jun
Jul-Sep
Oct-Dec
5,277,520
6,312,324
3,839,079
5,408,296
867,030
1,105,247
755,975
972,669
87,959
101,812
60,938
98,333
14,451
17,827
12,000
17,685
20,837,219
3,700,921
87,260
15,490
Total/average
Source: Bloomberg
Value (GHS) Average daily volume (shares)
Average daily value (GHS)
220
Côte d’Ivoire
ETI Share price relative to BRVM Index: 2013
80
XOF
70
60
50
40
30
J
F
M
A
M
ETI share price
J
J
A
S
O
N
D
BRVM Index (rebased)
Source: Bloomberg
Côte d’Ivoire: Summary of trading
Quarter
Volume (shares)
Jan-Mar
Apr-Jun
Jul-Sep
Oct-Dec
16,050,390
11,375,408
10,564,821
26,155,433
818,431,517
648,468,373
583,985,215
1,349,907,783
254,768
186,482
179,065
421,862
12,990,976
10,630,629
9,898,054
21,772,706
Total/average
64,146,052
3,400,792,888
260,544
13,823,092
Source: Bloomberg
Value (XOF) Average daily volume (shares)
Average daily value (XOF)
221
Preference shareholding structure
As part of the consideration for the Oceanic Bank acquisition in 2011, Ecobank issued participating cumulative convertible preference shares.
The key terms and holdings are outlined below.
Issue date
31 October 2011
Nº outstanding
1,066,580,478
Issue price
$0.1032
Dividends
Higher of 4% of issue price or dividend paid on ordinary shares. Paid in priority to dividends on ordinary and cumulative shares.
Dividends will be paid in US$.
Voting
No voting rights attached.
Liquidation
In the event of liquidation, dissolution or winding up of the Company, the holders of preference shares shall enjoy priority of
repayment before the holders of ordinary shares and shall receive, an amount payable in cash equal to the issue price plus any
dividend that has not been declared or that has been declared but which remains unpaid
Conversion
Holders have the right, exercisable between 3rd and 5th anniversaries of issue date to convert into ordinary shares at the rate of
0.76923 ordinary shares to each preference share, all or part of such preference shares into ordinary shares of the Company, such
ordinary shares to rank pari passu with, and have the same rights as, all other ordinary shares of the Company.
Redemption
At any time after the 5th anniversary of issue, ETI has a right to redeem the preference shares into ordinary shares if not already
converted. This right extends into perpetuity. The redemption price shall be a 6% premium to the issue price, i.e. $0.1094.
The preference shares are not listed on an exchange.
Share Range
Number of shareholders
% of shareholders
% Shareholding
1 – 1,000
1,001 – 10,000
10,001 – 100,000
100,001 – 1,000,000
1,000,001 – 10,000,000
10,000,001 – 100,000,000
100,000,001 – 500,000,000
500,000,001 – 1,000,000,000
386,516
23,894
2,093
198
19
5
1
1
93.65%
5.79%
0.50%
0.05%
0.00%
0.00%
0.00%
0.00%
43,128,129
57,459,809
49,333,079
51,839,077
72,962,737
68,399,089
132,415,381
590,352,295
4.05%
5.39%
4.63%
4.86%
6.85%
6.42%
12.43%
55.39%
Total
412,727
100%
1,065,889,596
100%
Top 10 preference shareholders
Shareholders
% of total
Fcust/AMCON/C-ibru & others*
Ibru V, Oboden
Bayelsa State Min. of Finance Incorp.
Ministry of Finance Incorporated
Ibru Obaro, s e
F/am/ocbk/Falcon Securities Ltd*
Ethos Capital VGP (Jersey) Ltd
Fcust/AMCON/bfcl assets & sec.Trad.Stock*
Old Mutual Life Assurance
590,352,295
132,415,381
21,846,830
13,377,632
11,492,074
10,923,647
10,758,906
9,637,150
8,774,000
8,300,605
55.39%
12.42%
2.05%
1.26%
1.08%
1.02%
1.01%
0.90%
0.82%
0.78%
Total of top 10
817,878,520
76.73%
Total number of preference shares
*Beneficial ownership is AMCON
1,065,889,596
222
Shareholder contacts
Questions about your shares?
To buy or sell shares in ETI
Other investor queries
Please contact the Registrars for queries
about:
• Missing dividends
• Lost share certificates
• Estate questions
• Address change to the share register
• Having dividends paid directly into
bank accounts
• Eliminating duplicate mailings of
shareholder materials
• Uncashed dividend cheques.
Nigeria
For other queries about investing in ETI
Registrars
Abidjan
EDC Investment Corporation
Immeuble Alliance, 4ème étage
Avenue Terrasson de Fougères
01 BP 4107 – Abidjan 01
Côte d’Ivoire
Tel: (225) 20 21 10 44
Fax: (225) 20 21 10 46
Contact: Jean-Noël Delafosse,
jdelafosse@ecobank.com
Accra
Ghana Commercial Bank Limited
Share Registry Department
Thorpe Road, High Street
P.O. Box 134, Accra – Ghana
Tel: (233) 0 302 668 656
Fax: (233) 0 302 668 712
Contact: Gladys Wuo Asare,
gwuo-asare@gcb.com.gh
Kojo Essel, kessel@gcb.com.gh
Lagos
EDC Securities Limited
154 Ikorodu Road
Onipanu Bus stop, Shomolu
Lagos – Nigeria
Tel: (234) 704 3721311
Contact:
EDCRegComplaints@ecobank.com
Prisca Enwe, penwe@ecobank.com
Mercy Onyejiuwa,
monyejiuwa@ecobank.com
EDC Securities Limited
19A Adeola Odeku Street
Victoria Island
Lagos, Nigeria
(234) 1 270 8955
(234) 1 271 3407
Contact: Josephine Onwubu,
jonwubu@ecobank.com
Côte d’Ivoire
Immeuble Alliance, Avenue
Terrasson de Fougères 01
BP 4107 Abidjan 01
Côte d’Ivoire
Tel: (225) 20 21 10 44
Fax: (225) 20 21 10 46
Contact: Brice Allet,
ballet@ecobank.com
Jean-Noel Delafosse,
jdelafosse@ecobank.com
Cameroon
2ème Etage, Immeuble ACTIVA
Rue Prince de Galles
Akwa, Douala – Cameroun
Tel: (237) 33 43 13 81
Contact: Adonis Seka,
aseka@ecobank.com
Ghana
EDC Stockbrokers Limited
5 Second Ridge Link
North Ridge, Accra – Ghana
Tel: (233) 302 25 17 20 – 3
Contact: Mahama Alhassan Iddrisu,
middrisu@ecobank.com
Investor Relations
Ecobank Transnational Incorporated
2365, Boulevard du Mono
B.P. 3261, Lomé – Togo
Tel: (228) 22 21 03 03
Fax: (228) 22 21 51 19
Contact: James Etherington, Ato Arku,
ir@ecobank.com
Company Secretary
Samuel K. Ayim
Group Office
Tel: (228) 22 21 03 03
(228) 22 21 31 68
Fax: (228) 22 21 51 19
Contact: sayim@ecobank.com
223
Holding company and subsidiaries
Headquarters:
Tel: (228) 22 21 03 03
(228) 22 21 31 68
Fax: (228) 22 21 51 19
1. Benin
Rue du Gouverneur Bayol
01 B.P. 1280, RP Cotonou – Benin
Tel: (229) 21 31 30 69
(229) 21 31 40 23
Fax: (229) 21 31 33 85
2. Burkina Faso
49, Rue de l’Hôtel de Ville
01 B.P. 145
Ouagadougou 01–Burkina Faso
Tel: (226) 50 33 33 33
(226) 50 49 64 00
Fax: (226) 50 31 89 81
3. Burundi
6, Rue de la Science
B.P. 270, Bujumbura – Burundi
Tel: (257) 22 20 8100
(257) 22 20 8200
(257) 22 20 8299
Fax: (257) 22 22 5437
4. Chad
Avenue Charles de Gaulle
B.P. 87, N’Djaména – Tchad
Tel: (235) 2252 43 14/21
Fax: (235) 2252 23 45
5. Cameroon
Boulevard de la Liberté
B.P. 582, Douala – Cameroun
Tel: (237) 33 43 82 51
(237) 33 43 84 88/89
Fax: (237) 33 43 86 09
6. Cape Verde
Avenida Cidade de Lisboa
CP 374C
Praia – Cabo Verde
Tel: (238) 260 36 60
Fax: (238) 261 82 50
7. Central African Republic
Place de la République
B.P. 910 Bangui – République
Centrafricaine
Tel: (236) 21 61 00 42
Fax: (236) 21 61 61 36
8. Congo
Immeuble de l’ARC, 3ème étage
Avenue du Camp
B.P. 2485, Brazzaville – Congo
Tel: (242) 06 621 08 08
(242) 05 778 79 08
9. Côte d’Ivoire
Immeuble Alliance
Avenue Terrasson de Fougères
01 B.P. 4107– Abidjan 01
Côte d’Ivoire
Tel: (225) 20 31 92 00
Fax: (225) 20 21 88 16
10. Democratic Republic
of the Congo
47, Avenue Ngongo Lutete
Gombe – RD Congo
B.P. 7515, Kinshasa
Tel: (243) 99 60 16 000
Fax: (243) 99 60 17 070
11. Equatorial Guinea
Avenida de la Independencia
APDO.268, Malabo –
Républica de Guinea Ecuatorial
Tel: (240) 333 098 271
(240) 555 300 203
21. Niger
Angle Boulevard de la Liberté
et Rue des Bâtisseurs
B.P.: 13804, Niamey – Niger
Tel: (227) 20 73 10 01 – 83
Fax: (227) 20 73 72 03 – 04
12. Gabon
214, Avenue Bouët
9 Étages, Montagne Sainte
B.P. 12111
Libreville – Gabon
Tel: (241) 01 76 20 71
(241) 01 76 20 73
Fax: (241) 01 76 20 75
22. Nigeria
Plot 21, Ahmadu Bello Way
P.O.: Box 72688, Victoria Island
Lagos – Nigeria
Tel: (234) 1 2710391–5
Fax: (234) 1 2710111
13. The Gambia
42 Kairaba Avenue
P.O. Box 3466
Serrekunda – The Gambia
Tel: (220) 439 90 31 – 33
Fax: (220) 439 90 34
14. Ghana
19 Seventh Avenue, Ridge West
P.O. Box AN 16746
Accra North – Ghana
Tel: (233) 302 68 11 46/8
Fax: (233) 302 68 04 28/37
15. Guinea (Conakry)
Immeuble Al Iman
Avenue de la République
B.P. 5687
Conakry – Guinée
Tel: (224) 63 70 14 34
(224) 63 70 14 35
Fax: (224) 30 45 42 41
16. Guinea-Bissau
Avenue Amilcar Cabral
B.P. 126, Bissau – Guinée-Bissau
Tel: (245) 320 73 60/61
Fax: (245) 320 73 63
17. Kenya
Ecobank Towers
Muindi Mbingu Street
P.O. Box 49584, Code 00100
Nairobi – Kenya
Tel: (254) 20 288 3000
/0719 098 000
Fax: (254) 20 224 9670
18. Liberia
Ashmun and Randall Street
P.O. Box 4825
1000 Monrovia 10 – Liberia
Tel: (231) 886 74 76 93
(231) 886 97 44 94
Fax: (231) 701 22 90
19. Malawi
Ecobank House
Corner Victoria Avenue and
Henderson Street, Private Bag 38
Chichiri, Blantyre 3 – Malawi
Tel: (265) 01 822 099/808/681
Fax: (265) 01 820 583
20. Mali
Place de la Nation
Quartier du Fleuve
B.P. E1272
Bamako – Mali
Tel: (223) 20 70 06 00
Fax: (223) 20 23 33 05
23. Rwanda
Plot 314, Avenue de la Paix
P.O. Box 3268, Kigali – Rwanda
Tel: (250) 788 16 10 00
Fax: (250) 252 50132
24. São Tomé and Príncipe
Edifício HB, Travessa do Pelourinho
C.P. 316
São Tomé – São Tomé e Príncipe
Tel: (239) 222 21 41
(239) 222 50 02
Fax: (239) 222 26 72
25. Senegal
Km 5 Avenue Cheikh Anta DIOP
B.P. 9095, Centre Douanes
Dakar – Sénégal
Tel: (221) 33 859 99 99
Fax: (221) 33 859 99 98
26. Sierra Leone
7 Lightfoot Boston Street
P.O. Box 1007
Freetown – Sierra Leone
Tel: (232) 22 221 704
(232) 22 227 801
Fax: (232) 22 290 450
27. South Sudan
Koita Complex, Ministries Road,
P.O. Box 150, Juba
South Sudan
Tel: (211) 954 018018
(211) 955 541683
28. Tanzania
Karimjee Jivanjee Building
Plot Nº 19, Sokoine Drive
P.O. Box 20500
Dar es Salaam – Tanzania
Tel: (255) 22 213 7447
(255) 22 212 5592
(255) 22 212 5594
Fax: (255) 22 213 7446
29. Togo
20, Avenue Sylvanus Olympio
B.P. 3302
Lomé – Togo
Tel: (228) 22 21 72 14
Fax: (228) 22 21 42 37
30. Uganda
Plot 4, Parliament Avenue
P.O. Box 7368
Kampala – Uganda
Tel: (256) 417 700 100
Fax: (256) 312 266 079
31. Zambia
22768 Thabo Mbeki Road
P.O. Box 30705
Lusaka – Zambia
Tel: (260) 211 250 056 – 7
(260) 211 250 202 – 4
(260) 211 367 390
Fax: (260) 211 250 171
32. Zimbabwe
Block A, Sam Levy’s Office Park
2 Piers Road
P.O. Box BW1464, Borrowdale
Harare – Zimbabwe
Tel: (263 – 4) 851644-9
Fax: (263 – 4) 852632
(263 – 4) 851630-9
33. EBI SA Groupe Ecobank
Les Collines de l’Arche
Immeuble Concorde F
76 route de la Demi-Lune
92057 Paris La Défense Cedex France
Tel: (33) 1 70 92 21 00
Fax: (33) 1 70 92 20 90
34. EBI SA Representative Office
2nd Floor, 20 Old Broad Street
London EC2N 1DP, United Kingdom
Tel: +44 (0)20 3582 8820
Fax: +44 (0)20 7382 0671
35. Ecobank Office in China
Representative Office
Suite 611, Taikang International Tower
2 Wudinghou, Financial Street
Xicheng District, 100033
Beijing, China
Tel: (8610) 66 29 00 98
Fax: (8610) 66 29 00 98
36. Ecobank Office in South Africa
4 Sandown Valley Crescent
4th Floor, Sandton 2196
Johannesburg – South Africa
Tel: (27) 11 783 6197 – 6431/6391
Fax: (27) 11 783 6852
37. Ecobank Office in Dubai
Level 26d, Jumeirah Emirates Towers
Shaikh Zayed Road, P.O. Box: 29926
Dubai – UAE
Tel: (971) 4 327 6996
Fax: (971) 4 327 6990
38. Ecobank Office in Angola
Rua Joaquim Kapango Nº31
Ingombota-Luanda
C.P 25, Luanda – Angola
Tel: (244) 938 910 345
39. Ecobank Office in Ethiopia
Gerdi Rd Yerer Ber Area,
SAMI Building, 6th Floor 602A
Addis Ababa, Ethiopia
Tel: (251) 934 169 784 (Cell)
(251) 116 291 101
Fax: (251) 116 291 425
eProcess International SA
B.P. 4385, Lomé –Togo
Tel: (228) 22 22 23 70
Fax: (228) 22 22 24 34
224
Customer contact centres
Services:
For all enquiries, kindly email or call one of our
Contact Centers listed below:
Balance enquiry
• Account balance
• Transaction confirmations
• Transfer confirmations
Card services
• Card activation for online transaction
• Pin resets
• Card blocking
Complaints
All countries:
ecobankenquiries@ecobank.com
Ghana
Please dial:
Toll free (Ghana only):
(233) 302 21 39 99
3225
(MTN, Airtel, Vodafone)
• ATM complaints
Nigeria
• Card complaints
Please dial:
Toll free (Nigeria only):
(234) 700 500 0000
0800 326 2265
• Transaction complaints
• Service/product delivery delays
• Staff attitude
General enquiries
• Information on Ecobank services/products
• Interest/exchange rates
Kenya
Please dial:
Toll free (Kenya only):
(254) 20 288 3000
(254) 71 909 8000
0800 221 221 8
(free from landlines)
• Directions to ATMs/branches
• Account opening requirements
Côte d’Ivoire
• Branch contacts
Please dial:
Toll free (Côte d’Ivoire only):
• Fees and charges
(225) 22 40 02 00
800 800 88
(MTN, Orange, CITelecom,
Moov and Comium)
Cameroon
Please dial:
(237) 33 43 13 63

Ecobank - Performance / Reports

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