Magazine article New African

Ade Ayeyemi, CEO, Ecobank the Future Is Cashless

Magazine article New African

Ade Ayeyemi, CEO, Ecobank the Future Is Cashless

Article excerpt

In a recent panel on the sidelines of the World Economic Forum on Africa, Senegal's President Macky Sail called Ecobank 'our bank'. The bank was founded to encourage regional integration. Today, it has the largest footprint of any bank in Africa, and is still a rare 'pan-African conglomerate'. As such, its success, for symbolical reasons, is importantforthe continent. Lastyearthe bank posted itsfirst loss in many years, followingan $800m impairment charge in Nigeria. Nevertheless, the bank has performed strongly across its other markets and its CEO, Ade Ayeyemi (pictured, right), is confident that it will perform well in 2017. In this exclusive interview with New African he puts the record straight and talks up the opportunity presented by financial inclusion and how regulators have supported the bank's experimental approach with technology.

In the latest annual report you spoke of the "frustrating reality of poor financial performance" following the loss in 2016 although you have made a profit so far this year. So, what happened last year?

You will see that on a pre-impairment basis the bank made a profit of about $733m. If you look at that on a constant dollar basis [taking into account currency devaluations] our performance would have been in the region of $800m.

The reason I used the words 'frustrating reality' is because of the impairment we took. It's frustrating because the people that worked [across our other units] in 2016 actually did create value. If we had taken the same level of impairment as our competitors, we would have been the most profitable bank on the Nigerian Stock Exchange.

Still, an impairment of $800m is a lot of money lost. It's a very high amount; we don't deal with it casually. We were very deliberate. But we also want to have a transparent book; we want to have a book that reflects reality. We work in an economy where there was an economic contraction last year. In Europe when there were contractions, Deutsche Bank made a loss two years in a row, as did Credit Suisse; last year Standard Chartered made a loss.

We are not saying this is 'usual', nor do we want to be in that camp --but when you are dealing with a problem, it's always better to recognise a problem properly and to reset the bank to be able to move forward.

I heard that the shareholders weren't necessarily in agreement, or didn't necessarily approve a capital-raising exercise, but I saw that you recently issued a convertible bondfor $400m ... Again, I don't deal with rumours. We said we are going to raise a convertible bond for $400m, and we've already preplaced $300m of this with existing shareholders, and that we are going to get shareholder approval in an EGM that is coming up in June.

So the shareholders are supportive? The shareholders are supportive because at the end of the day, do we need the money to protect the firm? Yes. And the shareholders understand that. Now, not every shareholder will participate because everybody is looking at the investment case differently, but broadly we will get the support of the shareholders.

When we last spoke you mentioned that the objective is to have 100m customers by 2020; but your peers in the industry generate 70% of their revenue and profit-from institutional clients. Does that mean you're going to be primarily a retail institution ? We have a society in which a large number of households are not banked. In the advanced economies, banks generate a large proportion of their profits from that area.

In addition, the various donor flows to our continent are directed ultimately to individual beneficiaries; but what is happening today is that the flow goes to a central place, then the cash is distributed to the various beneficiaries.

Consider the transaction costs and look at the risk embedded in doing that. With our model, the donors can actually transfer the money directly to the ultimate beneficiary without going through intermediaries. …

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