The pan-African bank’s thrilling turnaround and its five year growth strategy
On June 16, 2008, Ecobank Transnational Inc (ETI), a pan-African banking conglomerate with headquarters in Lome, Togo, arrived in Kenya with an ambitious growth plan for East Africa.
The multinational lender entered Kenya through the acquisition of a majority stake in East African Building Society (EABS), which was renamed Ecobank Kenya Limited.
The bank chose Kenya because it was the region’s financial hub and therefore a suitable entry point into the promising East African market.
Eight years later, Ecobank Kenya has established 29 branches in the country and has over 50,000 customers spread across the 47 counties including, Nairobi, Mombasa, Kisumu, Nakuru, Busia, Meru, Trans-Nzoia, Kisii and Kilifi. The branches are supported by 65 Automated Teller Machines (ATMs).
“We have also employed over 400 professionals in Kenya,” says Ecobank Kenya Managing Director Ehouman Kassi, who has since handed over the mantle to Samuel Ashitey Adjei, former MD of Ecobank Ghana.
The bank has also been busy building its asset base. As at December 31, 2015, Ecobank Kenya’s total asset value stood at Ksh52.4 billion (US$517.56 million).
However, it has not been an easy ride for the foreign lender. Kassi, now former Ecobank director, says due to a challenging business environment, the bank did not perform very well in the past few years.
In 2012, Ecobank Kenya registered a net loss of Ksh1 billion (US$9.88 million). It also recorded a loss of Ksh881 million (US$) in 2013 and made yet another loss in 2014.
“These years were generally characterised by a very difficult operating environment from high cost of funds to fluctuating interest rates that had a direct impact on our performance,” says Kassi.
Against the backdrop of massive losses, Ecobank Group was pushed to come to the aid of its Kenyan subsidiary. In 2014, the parent company pumped Ksh 4.3 billion (US$42.49 million) into Ecobank Kenya even as it continued with its regional operations and expansion drive.
“We are glad that we have strong backing from our parent company, which confirms the group’s focus on Kenya as its next growth frontier,” says Kassi.
The 2014 capital boost came at the right time as it helped improve the bank’s liquidity position.
Following the three consecutive years of losses, Ecobank Kenya finally made a turnaround in 2015.
“We reported a profit after tax of Kshs 90.3 million for the year, up by 78 per cent, compared to a loss before tax of Kshs499 million a year earlier,” says Kassi. But it took much more that the parent firm’s aid to achieve this.
Over the years, the lender has deliberately reduced its reliance on costly deposits, which has in turn reduced interest expenses, the interest payable on any type of borrowings – bonds, loans, convertible debt or lines of credit.
“The interest rates have since stabilised, which is good for the long term analysis of our performance,” says Kassi.
Similarly, the bank has improved its lending practices. This, Kassi says, has led to a healthier loan book and a low portfolio at risk (PAR).
As at last year, the bank’s liquidity ratio stood at 40 per cent above the CBK’s 20 per cent minimum statutory ratio, putting it in a better position to lend and grow interest income.
“We have equally reduced our non-performing loans and advances mainly by employing better debt recovery measures,” says Kassi.
Their net loans and advances to customers have also grown from Ksh22.9 billion (US$226.3 million) in 2014 to Ksh29.6 billion (US$223.34 million) in 2015.
In addition, the bank’s interest income has improved from Ksh2.9 billion (US$28.65 million) in 2014 to Ksh4.1billion (US$40.52 million) in 2015 while non-interest income has increased from Ksh1.1 billion to Ksh1.3 billion.
Overall, the improved performance has been attributed to increased revenue, tighter cost management, better loan monitoring and recovery efforts and improved efficiencies.
“We are optimistic of a more robust growth moving forward,” says the former MD.
Ecobank Group has already developed a five-year strategy that Kassi says will help the lender become more customer-centric and profitable.
The conglomerate last year appointed Ade Ayeyemi and tasked him with the responsibility of spearheading the bank’s revitalised growth strategy.
Ecobank also appointed Samuel Adjei to head the group’s operations in Central, Eastern and Southern Africa, consequently elevating Kenya to a position of leadership in the East Africa region and beyond.
“The plan is to make Ecobank Kenya the group leader in Central, Eastern and Southern Africa in the next five years,” says Kassi.
The five year strategy (2016-2020) also involves development of more products; equipping individuals with relevant skills to deal with the challenges of a growing business; better cost management strategies; and more strategic partnerships that focus on creating value for customers.
“Under the five-year plan, the bank has mapped available opportunities and repositioned itself to increase its market share, given its competitive advantage in the continent,” says Kassi.
The bank has opted to adopt the organic growth model where it will expand its business and grow market share by increasing output, customer base expansion and new product development as opposed to mergers and acquisitions.
Technology, Kassi says, will also play a significant role in the bank’s operations.
Additionally, Ecobank will be partnering with more like-minded stakeholders to co-develop products that will meet the needs of the growing East African market.