Ecobank may stop rapid expansion strategy

 

Pan-African lender, Ecobank Transnational Incorporated, is planning to wind down its strategy of rapid expansion across Africa and focus on existing businesses, especially in Nigeria, Ghana, Angola and Kenya, its Chief Executive Officer, Mr. Albert Essien, has said.

Essien said he aimed to expand existing businesses and make them more efficient, and thus more profitable.

The bank is one of the most prominent financial institutions in sub-Saharan Africa and has a presence in nearly 40 countries.

“These four countries together are very important to the future growth and earnings of the Ecobank group,” he told Reuters, adding that the era of expanding the bank’s geographic reach was nearly over.

Nigeria and the West Africa region accounted for 60 per cent of revenue in the first half of 2014, Ecobank said in a results presentation, adding that its business was roughly equally split between retail and investment banking.

The bank will review how it pursues its growth strategy in November and decide at that point the amount of capital it needs to raise, Essien said according to Reuters.

South Africa’s Nedbank last week said it would acquire a 20 per cent stake in Ecobank for $493m in cash, ending months of speculation it could walk away from the deal over governance concerns.

Qatar National Bank last month became the top shareholder in the bank with over 23 per cent, although it is due to pare that back to 20 per cent.

Both companies have said they see Ecobank as a vehicle for their plans to expand on a continent that has seen rapid economic growth in recent years.

QNB says it wants to become the largest bank in the Middle East and Africa by 2017. At the moment it is the second-biggest by assets, behind South Africa’s Standard Bank.

Essien said QNB did not want to be a passive investor and had requested a seat on the board of Ecobank, formally known as Ecobank Transnational Incorporated. Nedbank will have a seat on the board as part of its equity stake deal.

Some analysts question whether the two institutions will have competing visions for Ecobank’s management, or even become rivals.

Essien said the Qatar bank and Nedbank had a compatible vision for Ecobank and could work together.

“I am very, very optimistic that these two institutions, who are strong institutions and also have good corporate governance, will be able to work together with the Ecobank group,” Essien said by telephone from London, according to gulfnews.com.

“Nedbank would also be quite a strong player in Africa. So I think there is room (for the banks to work together). I even think that by so doing, one could cement a relationship between Nedbank and QNB, so Nedbank could perhaps also have a conduit to the Gulf through QNB,” he said.

Essien became CEO in March when his predecessor was forced to step down after a long-running crisis over governance. Those issues are now largely resolved following reforms to the board and the implementation of a 51-point action plan, he said.

The chief executive reaches the bank’s statutory retirement age next year and is due to step down, probably around the time of the shareholder meeting in mid-2015.

Essien said he would not seek an extension to his tenure and that the board would soon commence a formal search process for a successor.