Ecobank is undervalued but its Nigeria business continues to lag 

The banking group’s net revenue surpassed the $2.0 billion mark for the first time since 2015, increasing by 11% or 31% at constant currency to reach $2.1 billion in 2023.

This growth was particularly driven by the higher interest rate environment, especially in Anglophone West Africa (AWA) and Nigeria. 

Commenting on the result, Jeremy Awori, CEO of Ecobank Group, attributed the encouraging results to a re-energized commitment to putting customers first, revenue diversification, growth, and low-cost deposit mobilisation.  

He highlighted the bank’s proactive approach to disciplined cost management, aimed at eliminating unproductive and wasteful costs and redirecting savings into investments in marketing and branding, sales capabilities, and technology to drive future returns. 

Reflecting these efforts, the bank recorded a 20% year-on-year growth in pre-tax profit to $150.148 million (up 249% to N201.459 billion) in Q1 2024.

This represents more than half of the 2023 full-year figure, suggesting that Ecobank is likely to exceed its 2023 performance in 2024.  

However, amidst the group’s impressive performance, Ecobank’s Nigeria business has continued to trail behind other geographic regions.  

In the 2023 FY, the Nigeria business accounted for only 11% ($234 million) of the group’s net revenue, lower than the 12% contribution in 2022.

This trend continued in Q1 2024, contributing 8% ($36 million) to the group’s net revenue, the least among the regions  

Also, despite the higher interest rate environment in Nigeria, Ecobank Nigeria generated the least net interest income of $137.792 million among all regions and contributed only 4.6% to the Group’s pre-tax profit. This figure further declined to 2.47% in Q1 2024.  

Overall, a breakdown of the PBT shows that Nigeria’s business contributed only 4.57%, while Francophone West Africa (UEMOA), Anglophone West Africa (AWA) and Central Eastern and Southern Africa (CESA) contributed 54.77%, 38.49% and 49.31% respectively.  

Despite the fluctuating performance in certain regions, the Pan African lender remains a formidable presence as one of the largest banking groups on the continent, outside South Africa, with total assets of $26.526 billion or N34.572 trillion as of Q1 2024, and subsidiaries spanning 33 Sub-Saharan Africa (SSA).  

This year the share price has maintained a bullish trend, recording a marginal H1 2024 year-to-date gain of 1.58%.

This is particularly noteworthy given the overall bearish stance of the banking sector, which has seen an average year-to-date loss of 2.55% in H1 2024 compared to a Q1 2024 average year-to-date gain of 19%.  

Nigeria’s market is the largest in Sub-Saharan Africa and should hold the future potential for the Group. So, the need to focus on growing revenue, cost efficiency and digital payment systems should be highly prioritized.  

Nigeria’s market is the largest in Sub-Saharan Africa and should hold the future potential for the Group. So, the need to focus on growing revenue, cost efficiency and digital payment systems should be highly prioritized.  

Ecobank is currently attractively priced with several key valuation metrics indicating potential undervaluation.  

However, a thorough analysis of market conditions, industry trends, and risk factors is essential before making investment decisions.