Ecobank parent firm injects Sh4.3bn into loss-making Kenyan subsidiary

Corporate News

An Ecobank branch in Nairobi. The bank has received a capital injection of Sh4.3 billion. PHOTO | FILE  NATION MEDIA GROUP

By GEORGE NGIGI, gngigi@ke.nationmedia.com

In Summary

• Ecobank entered the Kenyan market in 2008 through the acquisition of East Africa Building Society.
• It reported profit in the first three years driven by writing back debts previously written off as it cleaned its loan book, before it was weighed down by a raise in interest rates in 2011 that saw its cost of funds shoot up.

Ecobank Kenya has received a cash injection of Sh4.3 billion from its parent company as it seeks to dig itself out of loss making.

The Togo-based lender recorded a 59 per cent improvement on its bottom line, but remained rooted in the red with losses of Sh320 million last year compared to Sh881 million the previous year.

“To support the bank’s business growth objectives in Kenya, the parent company injected an additional capital investment of Sh4.325 billion in November 2014,” said the bank's chief executive Ehouman Kassi.

Ecobank relied on growth in non-interest income, of 60 per cent to Sh1.2 billion, to chalk the improved performance.

“This is due to an increase in trade finance incomes and loan related fees,” said Mr Kassi.

Net interest income recorded a 10 per cent growth to Sh997 following expansion of both its loan book and deposit base. Its loan book grew to Sh23 billion from Sh18.5 billion while its customer savings increased to Sh32.4 billion from Sh25.3 billion.

The lender has posted losses in the past three years despite capital injections by the group, which boasts of being among the largest banks on the continent.

Ecobank Transnational operates in 36 African countries, has licensed operations in Paris and representative offices in Beijing, Dubai, Johannesburg, London and Luanda.

In 2012, the parent injected Sh2 billion before pumping in an additional Sh4.3 billion last year.

It has earmarked another Sh4 billion to invest in the country. The bank entered the Kenyan market in 2008 through the acquisition of East Africa Building Society.

It reported profit in the first three years driven by writing back debts previously written off as it cleaned its loan book, before it was weighed down by a raise in interest rates in 2011 that saw its cost of funds shoot up.