Uncategorized

CEO of Ecobank emphasizes $400M fundraising as a chance for growth

As Ecobank Transnational Incorporated approaches its 40th anniversary, the banking group, which has the most extensive presence in West and Central Africa, is navigating a vastly transformed landscape compared to when it first welcomed customers in Lomé, Togo, in 1985. The banking industry, now heavily influenced by technology and catering to a new breed of customer, demands a different approach from its service providers. This shift comes on top of the global and public upheavals witnessed over the past decade, which have posed significant challenges for financial institutions alongside other economic entities.

In spite of these formidable challenges, the bank’s recent bond issuance proved to be a success, with strong oversubscription rates suggesting that the market views the bank favorably. “We approached the market with a target of $350m,” shares Jeremy Awori regarding the bond issuance, which marked the bank’s first since 2021. While there were initial concerns about the timing, Awori expresses confidence in the bank’s trajectory. “We were clear about our strategy and the narrative we presented. We weren’t in a precarious position, so we felt comfortable proceeding with the transaction.”

Ultimately, the markets demonstrated an enthusiastic vote of confidence, offering $900m, from which the bank accepted $400m at a rate of 10.125%, with repayment due by October 15, 2029. Awori is pleased with the rates achieved.

“A few years ago, we issued a Eurobond, and the spreads over SOFR [the secured overnight financing rate, which is a broad measure of the cost of borrowing cash] for this issuance were nearly 100 basis points lower, which is a positive sign since ultimately, it’s all about your spread over SOFR.”

“The primary takeaway from the roadshow was their appreciation of our strategy. They recognize the growth opportunities we have ahead and, in assessing our management team—from myself to the CFO and the governance, risk, and compliance officer—they gained confidence in our capabilities,” he remarks.

Growth opportunities

In light of the current unpredictable landscape, it’s no surprise that Awori takes pride in the successful fundraising efforts. Following the pandemic and the disruptions in supply chains, coupled with the ongoing conflicts in Ukraine and the Middle East, many investors have shifted their capital from emerging markets to safer havens in developed regions. This has been particularly significant as central banks in these markets have raised rates to combat surging inflation. In Africa, concerns regarding debt sustainability, currency fluctuations, and regional instability exacerbate negative perceptions regarding the continent’s economic viability.

With inflation abating and interest rates returning to levels seen prior to 2021, investment opportunities in frontier markets may once again attract interest. Securing capital will continue to hinge on the presence of a solid strategy that promises growth. Awori asserts that Ecobank is well-positioned for this. He emphasizes that the bank’s priority is to optimize returns through strategic capital deployment, concentrating on growth, returns, and transformation. While resources were historically allocated to yield steady returns, the market—and Ecobank by extension—now leans toward a more agile and adaptable approach, reallocating capital across business sectors to seize lucrative opportunities.

“This is reflected in our results. Our return on tangible equity stands at nearly 33%, which is a remarkable performance by any standard. We’re witnessing growth even amidst challenging conditions,” he asserts.

As part of its growth strategy, Awori mentions the bank’s endeavor to expand into new segments, especially within the consumer and SME markets, where it currently holds a smaller market share and identifies significant growth potential.

“There are substantial opportunities within the corporate investment banking realm; be it cash management, payments, trade finance, syndications, advisory, or treasury services,” he clarifies. However, with a shifting consumer base increasingly comprised of young, tech-savvy individuals desiring services that align with their lifestyle preferences, Ecobank recognizes the need to adapt to meet these demands.

“Our younger clients want the convenience of banking on the go. They require card products, savings options, investment vehicles, and credit solutions such as mortgages and personal loans. Many of them are also entrepreneurs,” he highlights.

A fundamental element of this strategy lies in the bank’s centralized IT system, which allows customers to access the same level of service at any of its over 1,600 branches across 35 African countries.

“We’re increasingly observing our customers’ mobility. For many banks, switching from one country to another leads to disconnection; they only recognize you as a client at your original branch. In contrast, we possess the capability to have our staff assist you, regardless of where your initial branch is located,” he explains.

The bank is also optimistic about growth within its payments segment, capitalizing on its extensive IT infrastructure and broad reach.

“Our network now enables real-time payments from users’ phones. You can transfer money from [Kenyan] shillings to [Zambian] kwacha or kwacha to [Ghanaian] cedi without hassle. This is a unique feature of our API,” Awori elaborates.

He notes that this emphasis on growth is already yielding results.

“We’re infusing capital into this segment and optimizing our returns. We’re increasing our fee income alongside interest income, and I’m thrilled to see more customers joining us and engaging in more transactions. Ultimately, we aim to be the preferred banking partner for our clients.”

In November 2024, ETI, the bank’s parent company, secured an agreement with Nium, a leader in real-time cross-border payment systems, to incorporate Nium’s payment infrastructure into its operations. This integration will provide faster, more effective international payment services to customers, reducing processing times and allowing seamless transactions in over 220 markets, including more than 100 countries. For Nium, partnering with Ecobank opens doors to 35 new markets all at once.

Technology focus

In June 2023, Ecobank also became one of the pioneer participants in the Pan African Payment and Settlement Systems, a collaborative initiative between the African Export-Import Bank and the African Continental Free Trade Area aimed at facilitating cross-border payments across the continent to enhance intra-African trade. Awori indicates that these partnerships underscore the bank’s commitment to digital payment solutions.

“We aspire to establish ourselves as a leading player in payments across the continent,” he asserts.

The bank’s emphasis on technology illustrates Awori’s vision for the future of banking, where technology is crucial not only to financial service delivery but also to shaping the nature of those services.

“Customer service and experience will become key differentiators. Understanding our customers is critical because, while many can provide an app or card, the real question is whether those solutions function as needed, when needed. Do they cater to your specific needs at that exact moment?”

This necessitates utilizing data and analytics to better comprehend customer behavior and even predict when they might require a service, enabling a more intuitive banking experience. Moreover, Awori emphasizes that the pace of change is set to accelerate.

“The speed at which businesses are evolving is remarkable. One can observe substantial growth in companies, which can equally vanish in an instant… The changes that once unfolded over eight years are now happening within a span of four months. Consequently, leadership in today’s environment demands a new approach to managing and embracing change.”

Awori also foresees a transformation in the competitive landscape, where traditional banks will face competition not only from each other but also from nimble fintech startups vying for market share. According to him, this trend will lead to more specialized providers targeting specific market segments. “You could see firms dedicated solely to bancassurance or telecom companies focusing exclusively on mobile wallets. There will be organizations specializing in credit for SMEs, among other verticals. This means both traditional banks and niche players will coexist with distinct roles,” he predicts.

This evolution signals a call to action for banks as they seek to remain relevant and safeguard their financial health. Awori believes there is ample opportunity for banks to maintain their standing. “We must explore avenues for partnerships,” he suggests, identifying major deals as a critical area where banks can collaborate effectively.

“There are numerous opportunities to syndicate with others, particularly for significant projects, as no single bank may have the capacity to finance multi-billion dollar deals.”

In sectors like climate finance, sustainability, and agriculture, Awori anticipates collaborative opportunities among banks.

Economic headwinds

Nevertheless, even the best strategies can be disrupted by external factors, and the current climate presents its own set of challenges. Concerns regarding fiscal fragility and policy inconsistency linger across various regions of the continent. Awori asserts that Ecobank’s diverse presence enables it to uphold its commitments even amid these difficulties.

“We are a long-term stakeholder and do not withdraw when obstacles arise. Our strategic focus remains on the regions we want to operate in and our approach to these markets is well defined.”

On the global stage, the impending Trump administration may solicit a harsh trade confrontation with China, potentially disrupting global commerce, with African economies likely to bear some impact. Should this, or any other scenarios, lead to sustained high interest rates, Awori indicates that Ecobank will endeavor to maintain competitive rates.

“We must cultivate the right partnerships and risk sharing to ensure our services remain affordable. Contrary to some perceptions, our aim is not to maximize pricing excessively.”

A crucial aspect of this strategy involves minimizing costs, an area where Awori emphasizes the bank’s focus.

“In my perspective, we must consistently strive for greater efficiency. There are many preventable costs that can be eliminated, freeing up resources that can be redirected toward new business growth opportunities rather than solely reinvesting in profits.”

Technology plays a vital role in this realm, enabling banks to accomplish to deliver significantly more with fewer resources.

“We are in an era now where technology enables radically different approaches in terms of analytics, models, and processes, which is anticipated to dramatically transform the banking landscape over the next five to ten years. Routine tasks will increasingly be automated, while value-added functions will necessitate human input.”

Awori’s confidence in his projections is bolstered by notable achievements already evident.

“For instance, when I joined, we had 15 or 16 business units where the return on equity exceeded the cost of equity. Today, that figure has risen to 26, possibly 27. This reflects the reality of a returns-oriented business.”

Mission to transform

Ultimately, the aim is to revolutionize the bank, not just through process enhancements but also by fostering an ongoing improvement in its workplace culture.

“This involves rethinking how we function. You can observe transformations in our brand, customer experience, and the simplification of customer journeys.”

The bank has established transformation offices to keep progress on track and ensure effective execution. However, the success of this initiative may ultimately depend on the individuals involved in driving it.

“By 2030, we will have a significantly younger workforce. Adapting to their working styles, motivational factors, and engagement strategies will be essential. Sticking with outdated practices will hinder our ability to attract top talent,” he points out.

In a competitive talent landscape where many global firms strive for local expertise, Ecobank’s ability to attract and retain the best talent could be pivotal in defining its future.

Leave a Reply

Your email address will not be published. Required fields are marked *