Ecobank annual report 2006


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Ecobank annual report 2006

  1. 1. The Pan African Bank Ecobank Group
  2. 2. 2006 Annual Report Ecobank Network Countries in which Ecobank is currently present.
  3. 3. 1 The Pan African Bank Ecobank is the leading independent regional banking Group in West and Central Africa serving wholesale and retail customers. What is our investment proposition? We operate in emerging markets with good long term prospects. In all our markets, we are recognized as one of the leading banks and we have a growing presence in the investment banking sector. We are well placed to grow revenues and expand market share by combining a broad product offering with a growing regional presence. What do we do? Our business is providing wholesale, retail, investment and transaction banking products and services to governments and governmental agencies, multinationals, financial institutions, local companies, small, medium and micro enterprises, high net worth individuals and consumers in Africa. We currently operate in 18 countries in West and Central Africa. What is our strategy? Our goal is to create shareholder value. To achieve this, we aim to be the leader in regional banking in Africa. We have three strategic priorities at Group level: Achieve scale through acquisitions and organic growth ; Grow our business in existing markets and expand into new markets ; Deliver efficiency through operational and product excellence and customer service. We are creating value… In 2006, revenues grew by 47% to US$348 million ; Profit Before Tax grew by 75% to US$129 million ; Value Added totaled US$142 million. But there is still more to do. In this annual report we discuss our business, how it could generate more value for our shareholders, and what we are doing to make it happen.
  4. 4. 2 2006 Annual Report » Principal Subsidiaries and Offices » page . . . . . . . . . . 3 » Financial Highlights » page . . . . . . . . . . 4 » Chairman's Address » page . . . . . . . . . . 5 » Directors’ Report » page . . . . . . . . . . 8 » Board of Directors » page . . . . . . . . . 10 » Executive Management » page . . . . . . . . . 14 » Corporate Governance » page . . . . . . . . . 15 » Corporate Social Responsibility » page . . . . . . . . . 19 » Corporate Ethics & Transparency » page . . . . . . . . . 22 » Chief Executive Officer’s Review » page . . . . . . . . . 24 » Manifesto » page . . . . . . . . . 28 » Business and Financial Review » page . . . . . . . . . 29 » Directors' Responsibilities Statement » page . . . . . . . . . 36 » Report of Independent Auditors » page . . . . . . . . . 37 » Consolidated Income Statement » page . . . . . . . . . 38 » Consolidated Balance Sheet » page . . . . . . . . . 39 » Consolidated Statement of Changes in Equity » page . . . . . . . . . 40 » Consolidated Cash Flow Statement » page . . . . . . . . . 41 » Accounting Policies » page . . . . . . . . . 42 » Notes to the Consolidated Financial Statements » page . . . . . . . . . 60 » Five Year Financial Summary » page . . . . . . . . . 83 » Summary of Subsidiaries’ Financials » page . . . . . . . . . 84 » Shareholder Information » page . . . . . . . . . 84 Contents
  5. 5. 3 The Pan African Bank Principal Subsidiaries and Offices Group Office : 2, Avenue Sylvanus Olympio - BP 3261 - Lomé (TOGO) - Phone: (228) 221 03 03 / 221 31 68 - Fax: (228) 221 51 19 Benin Rue du Gouverneur Bayol 01 B.P. 1280 Cotonou - BENIN Phone: (229) 21 31 40 23 Fax: (229) 21 31 33 85 Burkina-Faso 633, Rue Ilboudo Waogyandé (ex Maurice Bishop) 01 B.P. 145, Ouagadougou 01 BURKINA-FASO Phone: (226) 50 328 328 Fax: (226) 50 318 981 Cameroon Boulevard de la Liberté B.P. 582 Douala - CAMEROUN Phone: (237) 343 82 50 / 54 343 84 88 / 89 Fax: (237) 343 86 09 Chad Avenue Charles de Gaulle N'Djamena TCHAD Phone: (235) 52 43 14 Fax: (235) 53 23 45 Cote d’Ivoire Immeuble Alliance Avenue Terrasson de Fougères 01 B.P. 4107 - Abidjan 01 CÔTE D’IVOIRE Phone: (225) 20 31 92 00 / 20 21 10 41 Fax: (225) 20 21 88 16 Ghana 19, Seventh Avenue Ridge West P.O. Box 16746 Accra North - GHANA Phone: (233) 21 68 11 66 / 67 Fax: (233) 21 68 04 28 Guinea Bissau Avenue Amilcar Cabral B.P. 126 Bissau - GUINÉE BISSAU Phone: (245) 72 53 194 Fax: (245) 20 73 63 Guinea Conakry Avenue de la République B.P. 5687 - Conakry GUINÉE Phone: (224) 30 45 57 77 / 30 45 57 60 Fax: (224) 30 45 42 41 Liberia Ashmun & Randall Street, P.O. Box 4825 1000 Monrovia 10 - LIBERIA Phone: (231) 4788834 / 4788838 4788833 Fax: (231) 22 70 29 Mali Place de la Nation Quartier du Fleuve B.P.E. 1272 Bamako - MALI Phone: (223) 270 06 00 Fax: (223) 223 33 05 Niger Angle Boulevard de la Liberté et Rue des Bâtisseurs, B.P. 13804 Niamey - NIGER Phone: (227) 20 73 71 81 Fax: (227) 20 73 72 03 / 04 Nigeria Plot 21, Ahmadu Bello Way P.O. Box 72688 - Victoria Island Lagos - NIGERIA Phone: (234) 1 2626638-44 / 2626710-17 Fax: (234) 1 2616568 Senegal 8, Avenue Léopold Sédar Senghor B.P. 9095 - Centre Douanes (CD) Dakar - SÉNÉGAL Phone: (221) 849 20 00 Fax: (221) 823 47 07 Sierra Leone 7, Lightfoot Boston Street P.O. Box 1007 - Freetown SIERRA LEONE Phone: (232) 22 33 01 / 76 88 23 65 Fax: (232) 50 51 10 165 Togo 20, Avenue Sylvanus Olympio B.P. 3302 Lomé TOGO Phone: (228) 221 72 14 Fax: (228) 221 42 37 eProcess International SA 20, Avenue Sylvanus Olympio B.P. 4385 Lomé TOGO Phone: (228) 222 23 70 Fax: (228) 222 24 34 Ecobank Development Corporation (EDC) 2, Avenue Sylvanus Olympio B.P. 3261 Lomé TOGO Phone: (228) 221 03 03 / 221 31 68 Fax: (228) 221 51 19 Ecobank Investment Corporation Immeuble Alliance, 4ème Etage Avenue Terrasson de Fougères 01 B.P. 4107 Abidjan 01 CÔTE D’IVOIRE Phone: (225) 20 21 10 44 / 20 31 92 24 Fax: (225) 20 21 10 46 EDC Stockbrokers Limited 19, Seventh Avenue Ridge West, P O Box 16746 Accra North GHANA Phone: (233) 21 25 17 23 / 21 25 17 24 Fax: (233) 21 25 17 34 ESL Securities Limited Plot 21, Ahmadu Bello Way P. O. Box 72688 Victoria Island Lagos – NIGERIA Phone: (234) 1 761 3833 / 761 3703 Fax: (234) 1 271 4860 ECV Servicos Financieros Agencia de Cambios 43 A Avenida Amilcar Cabral Praia Santiago - CABO VERDE Phone: (238) 261 78 56 Fax: (238) 261 78 60
  6. 6. 4 2006 Annual Report In thousands of US dollars, except per share, ratio and headcount data. At Year end 2006 2005 % Change Assets 3,503,739 2,199,230 59% Loans and advances to customers 1,919,366 1,022,140 88% Deposits from customers 2,500 178 1,532,478 63% Shareholders' equity 382,088 221,547 72% Total equity 482,315 303,879 59% Book value per share ($) 0.58 0.47* 25% Non - performing loans to total loans (%) 7.9 12.2 37% Headcount (number) 5,860 2,602 125% Branches and locations (number) 305 162 88% For the Year Revenues 348,464 236,351 47% Loan loss provision 13,091 14,898 12% Profit before tax 129,299 73,729 75% Profit after tax 86,365 50,939 70% Profit attributable 69,350 41,502 67% Basic earnings per share (cents) 13 11* 21% Diluted earning per share (cents) 13 11* 21% Dividend per share (cents) 3 2* Return on average equity (%) 23.0 23.8 (3%) Return on average assets (%) 3.0 2.5 22% Other Data Risk - based capital ratios (%): Total 19.0 21.7 Tier 1 19.0 21.7 Number of ordinary shares outstanding (Number in thousands) Average 518,963 373,545 As at 31 December 611,003 401,272 * Restated for 1 for 5 bonus share issue made in 2006 Financial Highlights
  7. 7. 5 The Pan African Bank Chairman’s Address This is my first address as Chairman and I am pleased to say that I am excited by the prospects for the Group. I strongly believe that we are entering a period of strong growth that will further fulfil the vision on which our institution was founded. 2006 was a year of change and progress. Significant steps were taken to reposition the Group for renewed growth and profitability. Financial Results Our 2006 results showed improvements in all key areas. Total assets grew by 59 per cent to US$3.5 billion and revenues increased by 47 per cent to US$348 million. Profit before tax was up 75 per cent to US$129 million. Return on average equity was 23 per cent as we increasingly put the capital raised last year to work. Strategy During 2006, a Group-wide strategic plan was adopted to transform Ecobank from a regional to a pan-African banking Group and from a largely wholesale to a more balanced wholesale and retail banking Group. Consequently, we are extending our footprint further into Central Africa and also into Eastern and Southern Africa. We are also building a strong retail banking business to complement our core wholesale business. In Nigeria, one of our largest markets, we moved to improve our market position and distribution by acquiring the branches and liabilities of one of the banks that failed to survive the industry consolidation. We opened a new subsidiary in Sierra Leone and expanded our network in the oil-rich countries of Central Africa, one of the fastest growing regions in the world, by acquiring the second largest bank in Chad. During the year, we also strengthened our total equity which now stands at US$482 million. Ecobank Ghana and Ecobank Nigeria were listed on their respective stock exchanges. Ecobank Transnational Incorporated, the parent Company of the Group also listed simultaneously on the 3 stock exchanges in the sub- region. This is the first ever regional listing in Africa. Corporate Governance Chief Philip C. Asiodu retired as Chairman of the Company at the last Annual General Meeting having reached the mandatory retirement age. Chief Asiodu contributed immensely to the progress of the Group through the years. We will miss his wise counsel and experience. We thank him immensely for his contribution to what Ecobank is today. We welcome the new members of the board who were appointed since the last shareholders meeting: Alhaji Isyaku Umar, Andre Siaka and Paolo Gomez. These are persons of immense local, regional and international experience who will enrich and strengthen the board. I believe they can count on your usual constructive support and co-operation. During the year, we also made changes to the executive management. Mr Offong Ambah joined the board as an executive director in addition to his current responsibilities as Managing Director of Ecobank Nigeria. Mrs Funke Osibodu, our former Managing Director in Nigeria resigned from the Group. We are grateful for her contribution to the development of Ecobank Nigeria and the Group. Corporate Social Responsibility Ecobank Foundation, our corporate philanthropic arm, donated to several activities in 2006. These included projects in Togo, Nigeria and Mali. The Foundation seeks to ensure that over time, its activities cover and are distributed among the countries in which Ecobank operates. Up to one percent of the Group profit after tax is made available to the Foundation for its activities and the Foundation is also free to source funding from other donors.
  8. 8. 6 2006 Annual Report We continue to contribute to the communities we operate in other important ways. We part-sponsored two of the African world Cup teams and contributed to the development of journalism talent on the continent. Through an alliance with one of the leading microfinance institutions in the world, we are supporting and promoting microfinance lending and actions to alleviate poverty in our countries. Our emphasis on developing our people and building diversity will hopefully create an increasing pool of talented African banking professionals that will support the development and integration of African economies. Several of our people have been recruited to run important government institutions and to manage other banks. Corporate Transparency Our policies require us to operate to international standards. We have often been at the forefront of implementing policies and procedures designed to ensure that we comply with anti-corruption, anti- money laundering, anti-terrorism and know-your- customer regulations in the countries in which we operate. Ecobank also maintains strong policies relating to transparency and business ethics, as we believe this positions and safeguards the Group’s reputation in the long-term. We are probably the only institution in the sub-region that reports in accordance with International Financial Reporting Standards. The consequences of this are that our results are more conservative and more transparent than those of other comparable institutions in the regions. You would also notice significant changes in the presentation and contents of our annual report. As part of our policy on corporate transparency, we have also significantly increased the level of disclosure in our annual reports and accounts in order to make them more relevant and meaningful to our shareholders whilst at the same time meeting the statutory reporting and disclosure requirement. We will continue to explore ways in which we can improve our reporting and disclosure so that shareholders, investors and customers are adequately informed about our strategy, performance, activities and businesses. People We continue to build capacity through external hires and internal development. Significant investment was made in strengthening our management team. We also refreshed the organizational structure to better address changing market conditions. Across the Group, several changes took places which were designed to promote talent and build a leadership team based on merit, diversity and depth. We believe the impact of these actions will increasingly show through in our performance. What Makes Ecobank Unique Ecobank is unique in many ways. Firstly, we have the most regional presence in West and Central Africa of any bank. This gives us greater insight and scope to serve our customers and exploit opportunities. Secondly, we have a unique regional identity based on our founding principles. We started as a regional bank from the onset with shareholders from over 14 countries. This regional identity, coupled with national representation in our local subsidiaries means that we are welcome in all our markets as a local bank that is part of a larger regional Group. Thirdly, we are building the leading regional bank brand as an independent banking Group focused on Africa. Ecobank is increasingly perceived as a model of the future integration of the African private sector. As a result, Ecobank is often welcome as a preferred partner by governments and the private sector. And fourthly, we are building a broad and deep pool of African talent and managers with the skills and experience to operate across different markets and cultures. This allows Ecobank to compete and succeed in some of the more challenging and difficult markets in our region. Above all, Ecobank has been successful because it is considered an independent regional institution belonging to no one country or interest Group. Each of our subsidiaries is viewed as a local bank, even though they belong to a larger Group. The regional strategy and independent status of Ecobank are fundamental to the founding principles of Ecobank and to our long-term success. Chairman’s Address (continued)
  9. 9. 7 The Pan African Bank The Future The growth of the economies of our sub-region continued with a positive growth trend. The World Bank estimates that Sub-Saharan economies will grow by 5.6% in 2007, one of the highest growth rates in the world. Clearly, as a commodity-rich region, our economies have benefited from the high prices for crude oil, gold, cocoa, coffee and other commodities. But we believe these results are a positive indication that African economies may now be pointing in the right direction. The other vital signs across the continent have also been positive with most civil and political unrests increasingly being resolved. The banking landscape is becoming more challenging. There is increasing interest and investment by international investors in African banks. There is renewed interest by international banks and banks from other parts of Africa. All these point to increased competition for customers and talent and a more challenging business environment in the future. Whilst 2006 was a year of significant progress for the Ecobank Group, it is fair to say that much remains to be done if we are to achieve our mission of building Ecobank into a world class African banking Group. Our priorities for the future are clear: deliver increased value to our stakeholders – shareholders, customers, employees and the communities in which we operate. Mandé Sidibé Chairman
  10. 10. 8 2006 Annual Report Principal Activity Ecobank Transnational Incorporated (ETI) the parent Company of the Ecobank Group is a bank holding Company. Its principal activity is the provision of banking and financial services through its subsidiaries and affiliates. It enjoys special fiscal, exchange control and legal rights under an agreement with the Government of Togo. A review of the business of the Group during the 2006 financial year and of likely future developments is contained in the Business and Financial Review section. Results The Group's net profit after tax was US$86 million. Net profit attributable to the Company was US$69 million. The details of the results for the year are set out in the consolidated profit and loss statement. The directors approved the financial statements of the Company and the Group for the year ended 31st December 2006 at the meeting of the Board held on 16th March 2007. Messrs Mandé Sidibé and Arnold Ekpe were authorized to sign the accounts on behalf of the Board. International Financial Reporting Standards (IFRS) The accounts of ETI and the Group are prepared in accordance with International Accounting Standard (IAS). These standards have been revised and are now referred to as the International Financial Reporting Standards (IFRS). Dividend The directors recommend the payment of 3 cents per ordinary share as total dividend based on the total number of shares outstanding as at 31st December 2006, which one cent per share has already been paid as interim dividend in January 2007. Capitalization Issue The directors propose a capitalization issue of one ordinary share for every ten ordinary shares. Capital At the general meeting of shareholders held on 23rd June 2006, the authorized capital of the Company was increased from two hundred (200) million dollars to one billion two hundred fifty million (1,250,000,000) dollars divided into 5,000,000,000 ordinary shares of 25 cents each. Of the 226.4 million rights issue shares approved by the EGM of 11th March 2005, 108.2 million shares remained unissued as at 1st January 2006. These shares were issued during the year through a private placement of 60.7 million shares and the conversion of convertible loans of US$38 million contracted during the year into 47.5 million shares at a price of $0.8 per share. Following the resolution of the general meeting at the EGM of 23rd June 2006 approving a capitalization issue of one ordinary share for every five ordinary shares held, 101.5 million shares were issued. The total numbers of issued shares outstanding as at 31st December 2006 therefore stood at 611 million. On 11th September, 2006 all the issued shares of the Company were listed simultaneously on the three stock exchanges of the West Africa sub-Region, namely, the Ghana Stock Exchange (GSE) the Nigerian Stock Exchange (NSE) and regional stock exchange of the UEMOA Zone, the Bourse Régionale des Valeurs Mobilières (BRVM), based in Abidjan, Côte d’Ivoire. Directors and Company Secretary The names of the directors of the Company and the name of the Company Secretary appear on pages 10 to 13 of this report. As at 31st December 2006, the Board was composed of fourteen (14) directors: eight (8) non executive directors and six (6) executive directors. Mr. Offong Ambah replaced Mrs Funke Osibodu as Regional Director for Nigeria and therefore was co-opted and subsequently approved by the general meeting of 23rd June 2006 as an executive director. Messrs Paolo Gomes, Andre Siaka and Isyaku Umar were co-opted as non-executive directors and, in accordance with the Articles of Association of the Company, would be submitted for the approval of the general meeting to be held in 2007. In accordance with the succession policy on the board, Chief Philip Asiodu retired as Chairman of the board in June 2006 after several years of distinguished service to the Group, being one of its founding shareholders. Mr. Mandé Sidibé was elected to replace him as Chairman for a three year term renewable once. The Board of Directors met eight (8) times during the year. The three (3) board committees, namely, the Governance Committee, the Audit and Compliance Committee and the Risk Committee met at various times during the year to deliberate on issues under their respective responsibilities. The ad hoc committee appointed in 2005 to handle the proposed combination with FirstBank Nigeria continued its work until the agreement with FBN elapsed in September 2006. Directors’ Report
  11. 11. 9 The Pan African Bank Corporate governance and compliance The Company maintains corporate policies and standards designed to encourage good and transparent corporate governance, avoid potential conflicts of interest and promote ethical business practices. See pages 15 to 18 for details. The board has adopted the International Finance Corporation (IFC) Corporate Governance principles and methodology in 2005 to guide the composition and terms of reference of both the board and its committees. Subsidiaries As at the end of 2006, Ecobank had operations in 15 countries namely Benin, Burkina Faso, Cape Verde, Cameroon, Chad, Côte d'Ivoire, Ghana, Guinea, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone and Togo. During 2006, work commenced to secure operational licenses in Guinea Bissau and Sao Tome & Principe and to acquire a bank in the Central Africa Republic all of which were realized at the beginning of 2007 thus bringing the total number of countries in which the Group has operations to 18. Our investment banking subsidiary, Ecobank Development Corporation (EDC), expanded its activities and presence during the year and its management was strengthened. All the stock market and brokerage activities within the Group were effectively transferred to EDC and the EDC name adopted for all our stockbrokerage units in the three capital centres of the region namely, Abidjan, Accra and Lagos. eProcess International SA, our shared services subsidiary was also strengthened to play a more strategic role in improving efficiency and reducing operational costs. Ecobank Transnational Incorporated has a majority equity interest in all its subsidiaries, and provides them with management, operational, technical, training, business development and advisory services. Post Balance Sheet Events There were no post balance sheet events that could materially affect either the reported state of affairs of the Company as at 31st December 2006 or the profit for the year ended on the same date which have not been adequately provided for or disclosed. Responsibilities of Directors The Board of Directors is responsible for the preparation of the financial statements which give a true and fair view of the state of affairs of the Company at the end of the financial period and of the results for that period. These responsibilities include ensuring that: adequate internal control procedures are instituted to safeguard assets, prevent and detect fraud and other irregularities; proper accounting records are maintained; applicable accounting standards are followed; suitable accounting policies are used and consistently applied; the financial statements are prepared on the going concern basis unless it is inappropriate to presume that the Company will continue in business. Independent External Auditors The joint auditors, PricewaterhouseCoopers, Lagos, Nigeria and PricewaterhouseCoopers, Abidjan, Côte d'Ivoire have indicated their willingness to continue in office. A resolution will be presented to authorize the directors to determine their remuneration. 16th March 2007 16th March 2007. By order of the Board, Company Secretary Samuel K Ayim
  12. 12. 10 2006 Annual Report Board of Directors Mandé Sidibé Chairman Arnold Ekpe Group Chief Executive Officer Christian N. Adovelande Oba A. Otudeko J. Kofi BucknorKolapo A. Lawson Evelyne Tall*Andre Siaka Albert K. Essien* Patrick Akinwuntan* Isyaku UmarPaolo Gomes Offong Ambah* Christophe J. Lawson* * Executive Directors
  13. 13. 11 The Pan African Bank Board of Directors The Company has a fourteen-member Board of Directors, which oversees and directs the senior team that manages the Group. The Board of the Company is made up of six executive members and eight non-executive members coming mostly from West and Central Africa, all of them are distinguished businessmen and professionals. Mandé Sidibé (Chairman) Mandé Sidibé is a former Prime Minister of the Republic of Mali. Before that, he was special advisor to the President of the Republic of Mali. He is a former Director of Société Malienne de Financement (SOMAFI). He served with the Central Bank of West African States (BCEAO) in various capacities including Director of BCEAO-Mali and special advisor to the governor of BCEAO. He also worked for the International Monetary Fund (IMF) in many capacities including divisional head, Africa Department-IMF and as principal economist, Africa Department. Arnold Ekpe Arnold Ekpe returned as the Company Group Chief Executive Officer in 2005. He was the Group Chief Executive Officer from 1996 to 2001 when he left to join United Bank for Africa, one of the top three banks in Nigeria as Chief Executive Officer from 2002 until 2004. He has over 26 years of African and international banking experience having also worked in Europe, South Africa and West Africa for Citibank and First Chicago. He was Vice President and Head of Africa trade and corporate finance for Sub-Sahara Africa for Citibank. He executed landmark trade and corporate finance deals in West and Southern Africa. Mr. Ekpe holds degrees in mechanical engineering (1st class honours) and Business Administration from Manchester University and Manchester Business School respectively. Christian N. Adovelande Christian Adovelande is the President of the ECOWAS Bank for Investment and Development (EBID) Group. He was Chairman/Managing Director of Cauris Management SA and managing Director of Cauris Investissement SA, a regional venture capital Company based in Lomé, Togo. He was Company Secretary and acting general manager for the Africa Private Investment Guarantee Fund (Fonds GARI S.A.) and also held a number of key positions at the West African Development Bank (BOAD). He represents EBID on the Board of Directors. Oba A. Otudeko Ayoola Oba Otudeko is Chairman of several companies in Nigeria and abroad including Honeywell Group Limited, the Nigeria Stock Exchange, Pivot Engineering Company Limited, Honeywell Flour Mills Limited, Broadview Engineering Company Limited, Fan Milk Plc and Pavillon Technologies Limited. He is also a Director of the First Bank of Nigeria Plc, Guinness Nigeria Plc, British American Tobacco (Nigeria) Plc and several Chambers of Commerce. He is Chairman of the Nigerian-South African Chamber of Commerce. He is a Director of several overseas companies including Delmar Overseas Limited. He is a member, Regional Advisory Board of the London Business School and chancellor of the Olabisi Onabanjo University, the State University of Ogun State, Nigeria. He is a former board member, Central Bank of Nigeria (1990 to 1997), a former chairman of the National Maritime Authority Nigeria, a former member of the Constituent Assembly, Nigeria 1988 to 1989 and member of the National Economic Summit Group. He holds the national merit award of Officer of the Federal Republic of Nigeria (OFR). Mr. Otudeko is a chartered accountant and a chartered banker.
  14. 14. 12 2006 Annual Report Board of Directors (continued) Paolo Gomes Paulo Gomes was an Executive Director of the World Bank Group (Washington D.C.) from 1998 to 2006. From 1995 to 1998, he worked for the Ministry of Finance, Planning and Trade of Guinea Bissau where he was a Principal Advisor, Director of Strategic Planning, Public Investment and Debt. In 1996, he was Assistant to the Director for Business Development of Monitor Company in Boston, USA; and in 1997, he was the Assistant to the Executive Director of Citizen Energy Corporation, still in Boston, USA. Mr Gomes holds a Certificate in Political Studies from “Institut d’Etudes Politiques” of Paris, France, a BA in Economic and International Trade from “Institut d’Etudes Libres de Relations Internationales” of Paris, France, and also a Masters with honours in Economic Policy and Management, from Kennedy School of Government, in Cambridge, USA. Kolapo A. Lawson Kolapo Lawson is the Chief Executive Officer of a diversified industrial and trading Group with operations in the United Kingdom and across West Africa. He is the Chairman of Polfa Nigeria and Director of two publicly quoted companies: Beta Glass PIc. and Pharma-Deko PIc. He was a Director of Ecobank Nigeria from 1989 to 1997 and of Ecobank Togo from 1990 to 1993. Mr. Lawson has a degree in Economics and is a fellow of the Institute of Chartered Accountants in England and Wales and of the Institute of Chartered Accountants of Nigeria. Isyaku Umar Isyaku Umar started his career with UAC of Nigeria from 1972 to 1976, he was employed in the Kano State Government and was at various times Secretary of the Draught Relief Committee, Principal Private Secretary to the Military Governor. Following that, he became the General Manager of Mai-Naisara and Sons Ltd from 1977 to 1979 and the Managing Director of Tofa General Enterprises Ltd. from 1979 to date. Mr Umar holds a B. Sc. Social Sciences, Economics from the University of Pittsburgh, and a Masters of Public Administration from USA. J. Kofi Bucknor Kofi Bucknor is a principal of Kingdom Zephyr Africa Management Company and the Chief Executive Officer of J. Kofi Bucknor & Associates in Ghana. He is an advisor to Prince Alwaleed Bin TalaI Bin Abdulaziz Al Saud of Saudi Arabia. He is a former Chairman of the Ghana Stock Exchange and he served as Managing Director of CAL Merchant Bank in Ghana, Executive Director, Corporate Finance, at Lehman Brothers in London, treasurer of the African Development Bank in Abidjan, Côte d'Ivoire and Vice- President of Chemical Banking, New York. Andre Siaka André Siaka is the Chief Executive Officer of Cameroon Brewery Limited since 1988. Before that, he worked with “Société Générale” in Paris. Mr Siaka is a qualified as Engineer from “Ecole Polytechnique” de Paris, France. Evelyne Tall Evelyne Tall is Regional Head for the UEMOA Zone (Benin, Burkina Faso, Côte d'Ivoire, Guinea Bissau, Mali, Nigeria, Senegal and Togo) and Cape Verde. She started her banking career in 1981 with Citibank in Dakar, Senegal where she worked in various areas, including credit, financial institutions, liability management and finally with the regional financial institutions unit. She left Citibank to join Ecobank Mali as Deputy-Managing Director in 1998, and was made Managing Director in 2000. The same year, she was transferred to Ecobank Senegal as Managing Director. She was appointed Regional Head of the UEMOA Zone in October 2005. Mrs Tall holds a Bachelor’s degree in English from the University of Dakar, Senegal and a diploma in International Trade/Distribution and Marketing from « Ecole d’Administration et de Direction des Affaires» of Paris, France.
  15. 15. 13 The Pan African Bank Offong Ambah Offong Ambah is the Managing Director of Ecobank Nigeria and Regional Head for Nigeria. Between 1985 and 1991 he worked with International Merchant Bank and City Trust Merchant Bank in Nigeria. In 1991 started work with Ecobank. He became a General Manager of Ecobank Nigeria and worked in the Treasury, Corporate Finance, Credit and Retail Banking departments. In 1999, he was transferred to Liberia to set up Ecobank Liberia as Managing Director. He left the Ecobank Group in 2002 for United Bank for Africa PLC where he worked as Executive Director. He left UBA in 2005 and was appointed Interim Chairman of the Interim Board of directors of Allstates Trust Bank by the Central Bank of Nigeria. In March 2006, he returned to Ecobank Group as Managing Director of Ecobank Nigeria and Regional Head of the Nigeria Zone. Mr. Ambah holds a BSc Economics from the University of Lagos and a MSc Economics from the University of Ibadan, Nigeria. Albert Kobina Essien, Albert Essien is Regional Head for the WAMZ (Ghana, Guinea, Liberia, Sierra Leone and Gambia). He started his banking career in 1986 with the National Investment Bank in Accra, Ghana. He joined the Corporate Banking Department of Ecobank Ghana in 1990. In 1997, he became Country Risk Manager. He was appointed Deputy-Managing Director in 2001 and became Managing Director in December 2002. He was appointed Regional Head of the WAMZ in October 2005. Mr Essien holds a B.A. (Hons) in Economics (1979) from the University of Ghana, Legon, Ghana. Patrick Akinwuntan Patrick Akinwuntan is Executive Director in charge of Operations, Technology & Retail Bank. He is also the Managing Director of eProcess. He joined Ecobank in 1996 as Head of Commercial Banking and Western Zone II of Ecobank Nigeria. He then held the following positions in the Group: Group Financial Controller, Executive Director (Consumer and Commercial Banking) at Ecobank Nigeria. Before Ecobank, he worked for Ernst and Young, Manufacturers Merchant Bank, and Springfountain Management Consultants in Lagos. Mr. Akinwuntan holds a Master’s Degree in Business Administration (Finance) and is a Fellow of the Institute of Chartered Accountants of Nigeria (FCA) and an associate of the Institute of Taxation (ACTI). Christophe Jocktane-Lawson Christophe Jocktane-Lawson is Executive Director in charge of Corporate Development & Wholesale Bank. He started his banking career in 1985 with Citibank in Libreville, Gabon; he worked in various capacities as a Management Associate, Relationship Manager, Private Sector Head, Public Sector Head, Branch Manager, Corporate Bank Group Head, Risk Manager, and Deputy General Manager. He left Citibank and joined Ecobank Benin as General Manager in 2000. He later became the Deputy- Managing Director and then Managing Director in 2002. Mr Jocktane-Lawson holds a Master’s degree in Finance from Institut d’études Politiques of Paris, France and Bachelor’s degree in Economics from “Université Paris XIII”, France.
  16. 16. 14 2006 Annual Report Executive Management (as at 31 January 2007) Group Executive Management Arnold Ekpe Group Chief Executive Officer Evelyne Tall Regional Head, UEMOA Albert Essien Regional Head, WAMZ Abou Kabassi Regional Head, CEMAC Offong Ambah Regional Head, Nigeria Christophe Jocktane-Lawson Head, Corporate Development & Wholesale Bank Patrick Akinwuntan Head, Operations, Technology & Retail Bank Antoine Kayembe Nzongola Group Chief Risk Officer Laurence do Rego Group Chief Financial Officer Robert Kwami Group Chief Audit & Compliance Officer Ronke Wilson Group Chief Human Resources Officer Samuel Ayim Company Secretary / Group Chief Legal Officer Country Heads Cheick Travaly Benin Aboubacar Youssoufou Burkina Faso Abou Kabassi Cameroon Abdel Kader Lawani Cape Verde Kerim Mahamat Ali Chad Martin Djedjes Côte d’Ivoire Samuel Ashitey Adjei Ghana Anasthasie Darboux Guinea Bissau Assiongbon Ekué Guinea Conakry Esijolone Okorodudu Liberia Yves Coffi Quam-Dessou Mali Charles Daboiko Niger Offong Ambah Nigeria Ehouman Kassi Senegal Karen Akiwumi-Tanoh Sierra-Leone Roger Dah-Achinanon Togo Specialized Subsidiaries Patrick Akinwuntan eProcess International SA (Togo) Michael Ashong Ecobank Development Corporation (Togo) Mahama Iddrissu Ecobank Stockbrokers Limited (Ghana) Tunde Ayeni ESL Securities Limited (Nigeria) Adonis Séka Ecobank Investment Corporation (Côte d'Ivoire)
  17. 17. 15 The Pan African Bank Commitment to Corporate Governance The Ecobank Group is committed to ensuring good corporate governance. The Group believes that good corporate governance enhances shareholder value. Ecobank has been a pioneer in West African banking in institutionalizing corporate governance principles as part of the Group’s corporate culture. To this end Ecobank aims at complying with best international practices on corporate governance. Adherence to corporate governance principles is articulated in a number of corporate documents. The Articles of Association of the Company and those of its subsidiaries define the respective roles of management, the board of directors and shareholders (including the protection of minority rights) in the administration of the Group. The Group has standard written rules for the internal operation of the boards of directors, a corporate governance charter, a code of conduct for directors and rules on business ethics for staff, all of which aim at ensuring transparency and accountability within the Group. The board of directors has adopted the IFC principles and methodology on corporate governance to guide its corporate governance framework. The Group’s governance practices are also guided by the Basle Committee standards on corporate governance. In 2006, the board formally adopted the IFC’s suggested definition of an independent director for application throughout the Group. The Board also adopted the following criteria for the appointment of non-executive directors. Independence – Although not all non-executive directors need to meet the independent director definition referred to above, all directors should be capable of exercising independent judgment and decision-taking. Demonstrated business acumen – Strong business experience and a proven understanding of corporate and business processes through a successful track record and a strong reputation in the business community. Leadership and Board Experience – A recognized ability to add value and display leadership at board level and an ability to assert balanced and constructive views at board level. Special Technical Skills or Expertise – Experience in banking (particularly retail banking but also commercial and/or investment banking), accounting, and/or law and expertise not readily available to the executive team would be valuable especially if this professional experience is in emerging markets. Integrity – High level of integrity and professional and personal ethics and values consistent with those of the Company. Character – Strength of character and ability and willingness to challenge and probe; sound business judgment; strong interpersonal skills; and the ability to listen carefully and communicate with clarity, objectivity and brevity. Time Commitment – Sufficient time to effectively carry out duties of a non-executive director. Additional Considerations – Importance of bringing more diversity to the board in terms of age, gender, demographics, etc. Guided by the Code on Non-Executive Directors of the National Association of Corporate Directors (NACD) of the United States of America, the board adopted standard evaluations tools to help assess the performance of the board as a whole as well as that of individual directors. Governance Structure within the Ecobank Group The Ecobank Group corporate governance documents outline corporate governance policies and clarify governance structures throughout the Group. The key principles underlying the Group's governance structure are as follows: The parent company acts as a "strategic architect" with limited involvement in operational management and decision making at subsidiaries level. It sets the overall strategy and direction of the Group, develops policies and procedures and monitors them through reviews and audits to ensure compliance not only with Group strategy, policies and procedures but also with local laws and regulations. Corporate Governance
  18. 18. 16 2006 Annual Report Operational decision-making is individualized and maintained at a level, as close as possible to required action and customers. Individual accountability and responsibility are institutionalized and embedded through empowerment and the granting of relevant levels of authority. Coordination at the corporate centre and Group level is achieved through high levels of interaction between parent company and its subsidiaries as well as amongst subsidiaries at board and executive management levels. Clear terms of reference and accountability are laid out for committees at board and executive levels. There is effective communication and information sharing outside of meetings. The Group operates an ‘open-door’ policy. The following are the governance units within the Group: The Company Board of Directors Country Board of Directors Group Executive Management Committee Country Executive Management Committee Annual Country Heads Meeting. Appropriate sub-committees are also set up, either on a permanent or ad hoc basis to handle issues as they arise. A brief overview of the roles and responsibilities of each of the governance units is provided in the following paragraphs. Board of Directors The Company Board of Directors is elected by, and accountable to, the Company's shareholders for the proper and effective administration of the Ecobank Group. Their primary responsibility is to foster the long-term success of the Company, consistent with its fiduciary responsibility to the shareholders. The Group’s governance charter requires the Board of Directors to be guided by the following principles: Clear delineation and segregation of responsibilities between executive management and board to ensure non interference of the board in the operational management of the Group ; Objective judgment on corporate affairs independent of executive management ; Actions on a fully informed basis, in good faith, with due diligence and care and in the best interest of the Group and its shareholders ; Compliance with applicable laws and regulations in line with Group strategy and direction ; Local legislation to prevail in the event of any conflict between Group policies and local laws ; Transparency and avoidance of conflict of interest between directors and the business of the Ecobank Group ; Full disclosure of accurate, adequate and timely information regarding personal interests of directors. The board recently approved the enlargement of its membership to include five additional executive directors. With the retirement of the former Chairman, Chief Philip C Asiodu and co-option of three new non- executive directors, the membership of the Board is now fourteen, comprising six executive and eight non- executive directors (refer to pages 10 to 13). The board has a policy of ensuring that there are more non- executive directors than executives on the board. The board has three committees, namely, the Governance Committee, the Audit and Compliance Committee and the Risk Committee. The current composition and terms of reference of the committees are summarized below: Governance Committee Composition In 2006, the Committee comprised of four members (the Board Chairman (for the time being), the Chief Executive Officer and two non executive directors – Messrs Christian Adovelande and Oba Otudeko). The Company Secretary is the secretary to the Committee. Responsibilities Formulates, reviews and generally ensures implementation of policies applicable to all units of the Group and ensure good governance throughout the Group ; Manages the relationship between the Company and its shareholders and subsidiaries, including relationships with the boards of subsidiaries ; Corporate Governance (continued)
  19. 19. 17 The Pan African Bank Formulates new and reviews existing Group- wide policies including organizational structure ; Handles relationship with regulators and third parties ; Manages board affairs in between the meetings of the board or when the board is not sitting ; Recommends the appointment of executive and non-executive directors ; Reviews the human resources strategy and policies of the Group and the remuneration of senior executives. Audit and Compliance Committee Composition Membership in 2006 was composed of two non- executive directors (Messrs Mandé Sidibé and Kofi Bucknor) and two shareholders (Social Security and National Insurance Trust of Ghana represented by its General Manager, Finance, Mr. Kwasi Boatin; and Mr. Ayi A. Amavi) with the Chief Executive Officer in attendance, where appropriate. All members have business knowledge and skills and familiarity with accounting practices and concepts. The Group Chief Audit and Compliance Officer and the Group Chief Financial Officer serve as the secretaries to the committee. Responsibilities Reviews internal controls including financial and business controls ; Reviews internal audit function and audit activities ; Facilitates dialogue between auditors and management regarding outcomes of audit reviews ; Makes proposals with regard to external auditors and their remuneration ; Works with external auditors to review annual financial statements before full board approval ; Ensure compliance with all applicable laws, regulations and operating standards. Risk Committee Composition Composed of four members in 2006, namely, Messrs Kolapo Lawson, as Chairman, Christian Adovelande, Kofi Bucknor and the Group Chief Executive Officer. Members have good knowledge of business, finance, banking, general management and credit. The Group Chief Risk Officer serves as Secretary to the Committee Responsibilities Participates in the determination and definition of policies and guidelines for the approval of credit, operational, market/price and other risks within the Group; defining acceptable risks and risk acceptance criteria ; Sets and reviews credit approval limits for management ; Reviews and ratifies operational and credit policy changes initiated by management ; Ensures compliance with the bank's credit policies and statutory requirements prescribed by the regulatory or supervisory authorities ; Reviews periodic credit portfolio reports and assesses portfolio performance ; Reviews all other risks i.e. technology, market, insurance, reputation, regulations, etc. Country Boards of Directors Ecobank subsidiaries operate as separate legal entities in their respective countries. The Company is the majority shareholder in all the subsidiaries but host country citizens and institutions are typically investors in the local subsidiaries. Each subsidiary has a board of directors, the majority of whom are non- executive directors. The Group Governance Charter requires that country boards be guided by same governance principles as the Company. As a rule, but subject to local regulations and the size of the board, the boards of directors of subsidiaries have the same number of committees as the Company.
  20. 20. 18 2006 Annual Report Corporate Governance (continued) The boards of directors of the subsidiaries are accountable to the subsidiaries' shareholders for the proper and effective administration of the subsidiary in line with the overall Group direction and strategy. These boards also have statutory obligations based on company and banking laws in the respective countries. In the event of any conflict between the Company and local laws, the local legislation prevails. Group Executive Management Committee The Group Executive Management Committee is comprised of the Group Chief Executive Officer, the regional and Group business heads and Group functional heads, currently a total of thirteen members. They are responsible for the operational management of the Group and its subsidiaries. The Group Executive Management Committee is responsible to the board and plays an important role in the Company’s corporate governance structure. The Committee manages the broad strategic and policy direction of the Group, submits them to the board for approval where necessary, and oversees their implementation. The Committee has decision- making powers in specific areas of Group management. In particular, the committee works with and assists the Chief Executive Officer to: Define and develop Group strategy ; Confirm alignment of individual subsidiaries' plans with overall Group strategy ; Track and manage strategic and business performance against plan ; Implement Group policy and decisions ; Make recommendations on various issues relating to staff ; Track and monitor progress and accomplishments on major Group initiatives and projects at affiliate level ; Recommend opening or closing of subsidiaries ; Articulate appropriate response to environmental factors, regulations, government policies competition and other such issues across the Group ; Articulate policies for advancing Group objectives ; Make important decisions in areas where delegation of authority is granted to the committee. Country Executive Management The Country Executive Management Committee consists of the country head, and other senior executive members of each subsidiary. In addition to the day-to-day management of the subsidiary’s operations, the role of a country's Executive Management Committee includes the following: Managing the strategic objectives of the country's operation in line with Group strategy ; Defining overall business goals and objectives for the country’s operation ; Ensuring alignment of operating plans with overall Group strategy ; Approving business unit direction and strategies ; Making decisions on operating plans and budgets ; Reviewing the financial reporting and control framework ; Tracking and managing country strategic and business performance against plan ; Tracking and monitoring progress and accomplishments on major initiatives and projects at country level ; Articulating appropriate response to environmental factors, regulation, government policies, competition and other such issues in the country ; Articulating policies for advancing business objectives in the country ; Advising the Company on adaptation of overall strategy to the specificities of the local environment ; Advising on local laws and regulation impacting on Group policies. Annual Country Heads Meeting The Annual Country Heads Meeting is an annual meeting of all Managing Directors and Group Functional Heads across the Group, to review and reflect on Group strategy and policies. The meeting plays a key role in facilitating the harmonization and integration of the Group strategy. Its role includes: Sharing and disseminating information, experiences and best practices across the Group ; Initiating policies that encourage integration and promote the 'One-bank concept' ; Promoting integration and standardization of Group policies and procedures ; Promoting and monitoring compliance with Group operational standards ; Contributing to the formulation of Group policies.
  21. 21. 19 The Pan African Bank Introduction The main purpose of this section is to illustrate the diversity and wide range of corporate social responsibility and sustainability policies and projects launched and supported by Ecobank Corporate social responsibility refers to the contribution by businesses to sustainable development. It covers a company’s participation in fields such as human rights, human resources, relations with clients, suppliers and other stakeholders, corporate governance, environment and contribution to the community and the society in general. It is increasingly viewed as a strategic issue to ensure the development of a sustainable world and to enhance business competitiveness. It is high on the priority list of a number of international organizations and investors who seek to increase business awareness and involvement . Ecobank’s Commitment We are committed to ensuring that we remain a Group that cares about the impact it has on society. Ecobank has a long history of commitment to the communities in which it operates. Contributing to the improvement of living conditions through financing individuals and businesses, supporting local communities and local economic development, building greater social and human capital are all an integral part of our foundation and identity. Economic Performance Revenues generated in 2006 were over US$348 million. In generating these revenues, we made loans and provided assistance of over US$1.8 billion to governments and government agencies, companies, small and medium scale enterprises, microfinance institutions and individuals of over US$128 million. We collectively paid over US$42 million in taxes to governments in West and Central Africa, making us one of the largest tax payers and thus contributing to economic development and social welfare. Ecobank Foundation Ecobank Foundation a social responsibility initiative started operations in 2005. It is through the Foundation that Ecobank drives its corporate social responsibility to support community and social development in a sustainable manner. Up to one percent of the Group’s profit after tax may be donated to Ecobank Foundation for funding projects and supporting communities in countries where Ecobank is present. Ecobank Foundation has thus far made donations amounting to over US$650 thousand and has supported twelve (12) projects in three (3) countries. The Foundation focuses on projects in the areas of: Education, Health, Culture and Research. In addition to funding from Ecobank, the Foundation may also seek funding from third parties to support its activities. Human Capital Ecobank employs over 5,860 people across 305 branches, offices and kiosks. We estimate that we directly support up to 5 times our number of employees or over 29,000 people. Through our contractors, suppliers and distributors, we believe we directly and indirectly provide employment to a much larger number of people across West and Central Africa. Ecobank also gives training opportunities to about 200 University undergraduates and high school leavers across the Group. Our human development programmes are also training an increasing number of professionals not only in the banking sector but also in related areas such as technology, telecommunications and technology-enabled processes. Corporate Social Responsibility & Sustainability
  22. 22. 20 2006 Annual Report Corporate Social Responsibility & Sustainability (continued) Environment and Safety As a banking Group, Ecobank finances projects across many sectors. In financing projects, Ecobank adheres to the IFC environmental Code. Accordingly, projects that we finance are screened to ensure that they do not unduly damage the environment and do not pose a safety hazard. Ecobank is currently reviewing the Equator Principles to fully evaluate its applicability to its activities. Ecobank as a matter of policy does not finance projects involving arms and gambling or projects whose impact on the individual or the environment are generally considered to be unacceptable. As a bank, Ecobank’s internal activities do not typically have an adverse impact on the environment when compared with other industries. Nonetheless, we are actively considering ways to improve our environmental responsibility and minimize adverse impact on the environment. These include ways in which we can reduce energy usage, paper usage and carbon dioxide emissions. We anticipate that further investments in technology and the increasing adoption of remote contact technology such as video conferencing will reduce the need for road and air travel and their adverse environmental effects while saving the Group significantly in transportation costs. Microfinance and Poverty Alleviation Ecobank has partnered with Accion International, one of the leading microfinance institutions in the world to establish microfinance institutions in countries where Ecobank operates. Under this arrangement, the parties are working to launch microfinance banks in Ghana and Nigeria in 2007. These institutions will target loans to the poorer segment of the society. Ecobank also finances existing microfinance institutions through providing lines of credit. These relations are evolving into alliances where they also distribute simple banking products such as savings accounts and money transfer products. Ecobank’s strategy in the microfinance sector is not to actively compete with microfinance institutions but rather to support them and partner with them to reach those customers that would typically not come into an Ecobank branch. Education, Employment and Health Through the Ecobank Foundation, we provided computers and learning aids to communities in Chad and in Mali. Through our internal and external training and development programmes, we are increasing the banking talent pool in West and Central Africa. In Nigeria, Ecobank partnered with the National Aids Awareness Campaign to open centres in universities to educate the youths on Aids. Currently the bank operates 7 centres across Nigeria. Diversity Ecobank, by virtue of its spread, is one of the most diversified groups in Africa in terms of its people. Ecobank also has a policy of ensuring diversity in its employee talent pool without compromising the quality of its staff. Regular reports are presented and monitored to ensure adherence to policy. Employees come from over 16 nationalities and communicate in English and French which are the official languages of the institution. In terms of gender diversity, 40 per cent of the employees are female and the balance male. In terms of representation at the management level, 75 out of 257 management staff are female. 3 out of 16 country managing directors are female and one out of five of our executive directors is also female. The Group has employees with physical disability across its network. 2.2 per cent of the staff are over 50 years old and 86 per cent of staff are under 40 years.
  23. 23. 21 The Pan African Bank Application of Technology Ecobank has been at the forefront of the adoption of technology. The Group has a policy of “One Person, One PC” whereby all employees across the Group are entitled to a PC or a laptop for undertaking their job. In addition, Ecobank operates a regional telecommunications network that provides most of its telecommunications and technology needs, including telecommunications linkages, shared gateways, internet and email services. The widespread adoption of technology and telecommunications has been critical to the successful development and expansion of the Group. The Group is currently implementing the first shared services centre in West Africa that would consolidate and centralize many of the activities and services currently being carried out across the many subsidiaries of the Group. Sports Ecobank supports sports in many ways. Through our various subsidiaries we donate to sporting activities in the communities in which we operate. In addition, some of our subsidiaries have sports teams that compete an participate in local sporting activities. In 2006, Ecobank was one of the largest contributors to the African world cup teams. We acted as official bankers and co-sponsored the Ghanaian and Togolese teams to the world cup Indicator 2006 2005 %Change Revenues (US$‘000) 348,464 236,351 47 Corporate Tax (US$‘000) 42,934 22,790 88 Return on Average Equity (%) 23 23.8 (3) Efficiency Ratio (%) 59 63 (6) Earnings per share (cents) 13 11 18 Return on Average Assets (%) 3.0 2.5 20 Capital Adequacy (%) 19.0 21.7 (12) Employees 5,860 2,602 125 % female staff 40 38 5 % female staff at executive level 25 22 14 Investment in training and development (US$‘000) 2,921 2,165 20 Corporate social respons. Expenditure (US$‘000) 654 710 (8) Key Sustainability Indicators
  24. 24. 22 2006 Annual Report Ecobank Group has codified policies on corporate ethics which applies to directors and employees across the Group. These policies are regularly reviewed to ensure that they are in line with international practice. Code of Conduct for Directors Directors across the Group are required to sign a code of conduct that enjoins them to adhere to certain principles of the Group. This is in addition to any local rules or codes governing directors’ conduct. The code of conduct covers issues such as ; Fiduciary responsibility: Directors are required to act in the best interest of the Company and in protection of shareholder interests, to act to preserve the assets of the Company and further its business interests; and to recognize the interest of other stakeholders such as employees, customers and the communities in which we operate. Conflict of interest: To avoid of conflict of interest in dealing with the Company, Directors may not utilize their position on the board to their advantage. A director must obtain the approval and consent of the board where there is a potential area of conflict of interest and must disclose all material facts related thereto. Directors must also disclose any direct or indirect interest in any loans, contracts or credit facilities granted by any Company in the Group. Confidentiality: Directors are required to observe the utmost confidentiality with respect to information relating to the Company including information relating to personnel, transactions and other matters relating to the operations of the Company. Attendance at Meetings: Directors are required to endeavour to attend all board meetings and to conduct themselves in a manner that will foster the smooth running of the board of directors. Non Interference: Directors may not interfere in the day to day running of the Company and to maintain the utmost dignity in their dealings with management and employees of the Company. Directors are enjoined to exercise independent judgment in evaluating management and their actions. Disclosure of any information that may affect the director’s relationship with the Group. Insider Dealings: A director may not utilize information obtained in his capacity as director to enrich himself through advantageous acquisition of shares or other securities issued or to be issued by the Company. Rules of Business Ethics All employees of the Group are required to sign and adhere to the Group rules on doing business. These rules require all employees to conduct themselves in a manner that is in the overall interest of the Group. Violation of the rules of business ethics may result in sanctions, including dismissal. Compliance: All employees must comply with local laws and regulations in the conduct of their duties as well as the Company’s internal policies and procedures. They must also endeavour to promote a culture of compliance. Confidentiality: All employees must avoid intentional or unintentional disclosure of sensitive or confidential information to unauthorized persons. Sensitive information include information relating to customers of the Group, trade secrets, non-public information, information arising from our dealing with governments, regulators or vendors/suppliers and any information that is potentially prejudicial to the Group. Conflict of Interest: Employees must avoid circumstances in which their personal interest conflicts or may appear to conflict with the interest of Ecobank or its customers. Corporate Ethics & Transparency
  25. 25. 23 The Pan African Bank Reporting of Violations: An employee who suspects a possible violation of a law, regulation or our rules of business ethics is encouraged to report such violations to his/her supervisor. Employees are expected to be responsible in reporting such possible violations. Ecobank also has in place a whistleblower policy where employees may anonymously report incidents or situations that are damaging or potentially damaging to the institution. This facility is maintained through an independent international third party to ensure its effectiveness and to protect the identity of any whistleblower. Know-Your Customer: The Ecobank Group Anti-Money Laundering and Anti- Terrorism Policy requires all staff to know the customers who do business with bank. Detail information requirements are provided which should be updated regularly to reflect the changing status of the customer. Reports of suspicious transactions are required to be made and followed up. Ecobank cooperates with regulatory and security authorities to fight against illegal financial transactions. Transparency We are implementing our policy on transparency by increasing the level of disclosure in our annual reports and accounts. This is designed to ensure that our stakeholders, employees, shareholders, regulators, customers and the market at large are adequately informed on developments in Ecobank. Accordingly, we have provided supplemental information on our directors and senior management, information relating to the remuneration of our directors, information on director related loans, disclosure on other aspects of the bank’s activities relating to corporate governance and corporate social responsibility and sustainability.
  26. 26. 24 2006 Annual Report Chief Executive Officer’s Review We had a very good year in 2006 but we have the potential to do much better. We grew assets by 59 per cent to US$3.5 billion, increased revenues by 47 per cent to US$348 million and pre-tax profits rose by 75 per cent to US$129 million. We increased market share in many of our markets and extended our market reach in West and Central Africa. We are addressing our weak position in the Nigerian market, one of the largest, most competitive and fastest growing markets in Africa. We are investing in our people to improve customer service and sales. We are investing in technology to enhance efficiency and reduce costs. And we are rolling out new products to sustain market competitiveness and create new market opportunities. The benefits of these actions are already becoming evident in this year’s results. We recognize that our future success will come not only from playing to our strength as the leading independent regional bank brand but also in addressing our areas of weakness. Financial Results In 2006, we increased revenues by 47 per cent to US$348 million. This was as a result of significant growth in business volumes, a positive exchange rate movement, an acquisition in Nigeria and a growth in fees and commissions. Our business in UEMOA and CEMAC regions benefited from a positive exchange rate fluctuation. The 11 per cent increase in the Euro to US dollar rate improved reported revenues by US$7 million. On the other hand, a weak local currency in Guinea depressed revenues by US$5 million. Overall, profit before tax grew by 75 per cent to US$129 million. This was a respectable performance compared to the previous year and given the increased competition in all our markets. Operating margins improved even as we have been investing heavily in expanding our distribution channels and in technology. We added 143 new branches and offices during the year and invested over US$9 million in upgrading our technology. At the same time, we invested over US$30 million in providing additional capital to our existing subsidiaries and in acquiring a bank in Chad. Despite these, our value added rose by 61 per cent to US$142 million. Review of 2006 The major development in 2006 was the listing of Ecobank Transnational Incorporated on the three stock exchanges in the sub-region namely the Bourse Régionale des valeurs Mobilières in Abidjan, the Ghana Stock exchange in Accra and the Nigeria Stock Exchange in Lagos. This landmark event was the first ever triple listing in Africa. In addition, two of our major subsidiaries, namely Ecobank Nigeria and Ecobank Ghana were listed in 2006. Again, this is designed to enhance shareholder value by providing a market-related and efficient basis for valuing the Ecobank Group and minimizing any discount due to our holding Company structure. We also took a number of steps to deepen and grow the Ecobank franchise through organic growth and by acquisitions. We extended our reach in West Africa by opening a new subsidiary in Sierra Leone and later in Guinea Bissau early in 2007.
  27. 27. 25 The Pan African Bank We grew our Nigerian business by the acquisition of the branches and deposit liabilities of All States Trust Bank, one of the banks that did not survive the consolidation of the industry. In Central Africa , we increased our network to three countries by the acquisition of majority interests in BIAT, the second largest bank in Chad and early in 2007 in BICA, the largest bank in Central Africa Republic of which regulatory approval is pending. We expanded our distribution by increasing the number of branches and offices from 162 to 305; introduced 109 ATMs; 58 kiosks and over 500 direct sales agents. We raised US$87 million in additional capital to strengthen our capital base and to finance the growth of the Group. We launched a major microfinance initiative and partnered with ACCION to implement it across our network. Our Strategy In 2006, we held a Group-wide retreat in which we defined the strategic framework and targets to guide the collective efforts of the Group for the next three years. These strategic objectives will form the basis of all balanced scorecards not only for the leadership team but for all employees in the Group. These target and principles have been set out in a manifesto which will be made available in all branches and premises across the Group. Our core strategic objectives are to build scale through acquisitions and organic growth; grow our customer base, products , distribution and markets; achieve efficiency and reduce costs through operational and product excellence; and deliver superior shareholder returns. Our priorities for the plan period cover: Building Financial Strength: Strengthening our capital base to support the growth of existing businesses, expansion into new markets and the ability to withstand unexpected market developments. We intend to raise additional equity and long-term capital from the local, regional and international markets and to maintain a conservative capital adequacy ratio. Focusing on Operational Excellence: To improve efficiency and better manage costs, we are investing in improving our technology, processes and systems. Work has already commenced on significant upgrades or replacements of our existing operating systems and an overhaul of our operating processes. This will involve standardization and centralization of our middle and back office operations in a shared services centre for the Group which is currently under construction along with back up and disaster recovery sites. Improving Our Business Mix: We are working to build a balanced business franchise that is diversified not only by geography but by products, customers and markets. We have commenced an aggressive push into the retail market and are investing in ATMs, POSs, kiosks and direct sales agents. Expanding Distribution: We will expand our distribution by expanding into new markets and deepening our presence in existing markets. We are also expanding our contact points by opening new branches, increasing the number of our sales people and entering into alliances to expand our reach. Building Capacity: With the increasing competitiveness in the banking sector, there is increasing competition for talent. We are investing in deepening our leadership pool through a combination of training, exposure to different operating environments and an attractive work environment along with a revamped recruitment and compensation system. Of increasing importance is the need to nurture a sales and customer service culture in our people to enhance our market competitiveness.
  28. 28. 26 2006 Annual Report Chief Executive’s Review (continued) Risk Management and Controls: As we grow our network, we are exposed to increased risks. We are taking steps to address this by investing in modern risk management tools that will enable us better manage and control the various risks we are exposed to. Nigeria: Nigeria represents the second largest and one of the fastest growing markets in Sub-Sahara Africa. Greater success in Nigeria will significantly affect the overall performance of the Group. Accordingly, we are taking steps to improve our competitiveness through organic growth and acquisitions. We acquired the branches and the deposit liabilities of one of the failed banks and are looking to acquire more to increase our distribution and market share. Our discussions with FirstBank of Nigeria were designed to move Ecobank to a leadership position in the Nigerian market Our Markets We operate in emerging African markets that offer excellent growth opportunities for efficient businesses. There are several reasons why we believe these markets are particularly attractive. Firstly, they are grossly underbanked compared with other emerging markets with further room for growth not only in product offerings but also in new markets and new customers. Secondly, some of these markets, especially the countries of Central Africa are experiencing significant economic growth from the discovery and production of crude oil. Thirdly, the reduction in civil and social unrest and the liberalization of many of these economies have rekindled interest and attracted new investments from international investors. Fourthly, there is a large untapped retail sector that is poorly serviced. Empirical data from the mobile telephone sector and the microfinance sectors suggest that with the appropriate strategy, there exists a large retail market to be tapped. The key to success in these markets is not dissimilar to what obtains in other markets. There is the need to build scale in distribution, in capital and in talent. We are addressing these challenges by raising additional capital, by opening new branches and offices and by recruiting, training and retaining talented people. Our operations are currently grouped into 4 regions covering West and Central Africa. These are discussed in more detail in the Business and Financial review section of this annual report. Execution In 2006, we further refined our business strategy and took several initiatives to accelerate the execution of the strategy. Key performance indicators were developed to track the key strategic goals of scale, growth, efficiency and shareholder value. We successfully completed most of the goals we outlined in the 2006 annual report and in some cases substantially exceeded our targets. Scale: We grew the size of the bank by over 59% to a balance sheet of US$3.5 billion. We ended the year with a market capitalisation of US$1.44 billion making us one of the top 10 banks in Sub-Sahara Africa ( excluding the Republic of South Africa ) in terms of size and market capitalisation. We also extended our geographical reach. In many of these markets, we saw a significant gain in market share arising from a more aggressive customer and deposit acquisition strategy and the opening of new branches. Growth: We grew gross revenues by 46% to US$419 million. Deposits grew by 88% to US$2.5 billion and profits grew by 75% to US$129 million. We grew our customer base by over 65% to half a million customers and the number of branches increased by 83% to 305. Through alliances and alternative channels, the number of customer contact points increased from 197 to 1,370. A significant part of this growth was due to the increasing success of our retail strategy.
  29. 29. 27 The Pan African Bank In terms of countries, we increased our country presence to 15 from 13 and to 18 early in 2007, further deepening our presence in West Africa and extending our network in Central Africa. We believe the full impact of our growth initiatives will begin to show in the second half of 2007. We also have identified professionals to drive our initiative to grow revenues in wholesale, retail, investment and transaction banking and have launched new products in cash management and trade that leverage on our unique regional presence. Our “Ecobank Everywhere” strategy has improved accessibility and reach, which together with a more outward focus, positions the Group to grow its core businesses. We not only offer our products through our branches and sales force but also through alliances, outsourcing and kiosks. Efficiency: Even as we grew the Group, our operating metrics remained stable and in some cases showed considerable improvement during the year under review. Operating losses measured as a percentage of profit before tax which improved to 3% from 4%. Our operating margin increased by 47% from US$236 million to US$348 million; the cost/income ratio improved slightly to 59% from 63%; and non- performing loans as a percentage of total loans improved from 13% to 8%. Improving efficiency, building operational excellence and improving customer service are prerequisites for achieving the strategic objectives of Ecobank. A complete review of our technology platform including the hardware, software and telecommunications was undertaken. As a result, the Group is now implementing a shared services centre that will include a data centre, call centre, shared gateways and other value-added services that are designed to improve efficiency and customer service. The Group is taking steps to centralize its middle and back office operations in a shared services centre. Work on this commenced in 2006 and when completed, should result in considerable costs savings and efficiency improvements. Service levels are being developed for all major operating processes in the Group and these are currently being rolled out. During 2006 we launched the ONEBANK project to further integrate our operations and activities across the countries in which we operate. In addition to the shared services centre (the first of its kind by a bank in West and Central Africa), this will include replacing our current technology platform ( hardware and software) with more powerful and more robust and scalable systems capable of meeting our growing needs in the medium term, upgrading and modernizing our processes and improving and further standardizing our physical and operating infrastructure such as our branches. Shareholder Value: Measured in terms of total shareholder returns ( capital gains plus income from dividends and other payouts), 2006 was a record year for our shareholders. The share price moved from 80 cents a share at the beginning of 2006 to 1 dollars a share. Along with a 1 for 5 bonus issue and a dividend of 3 cents a share, this gave a total return to shareholders of 59% for the year. This will be very difficult to match in the coming years. A focus on shareholder value and a consequence of our listing means that we will increasingly adopt a stock market approach in running the Company and responding to shareholder issues. In addition to changes to our management information and reporting system, we have set up an investor relations function that will focus on addressing the information and other needs of our shareholders in a timely and efficient manner. Conclusion We are confident we have the right strategy. Our focus going forward is on execution: building scale, growing the business, improving efficiency and delivering superior shareholder returns Arnold Ekpe Group Chief Executive Officer
  30. 30. 28 … Manifesto Building a world class African Banking Group Non-negotiables Key Measures GROWTH COMPLIANCE RISK MANAGEMENT Organic and by acquisitions Zero tolerance for non-compliance Effectively manage risks across our businesses PEOPLE STRENGTH Committed and productive work force BUSINESS GROWTH Grow revenues, customers and distribution OPERATIONAL EXCELLENCE To improve efficiency and reduce costs CUSTOMER SERVICE Efficient and convenient customer service FINANCIAL PERFORMANCE Superior financial performance FINANCIAL STRENGTH Adequate capital to support the business BALANCED BUSINESS MIX Across markets, customers and products BRAND DEVELOPMENT Position Ecobank as the leading bank brand in Africa PUTTING THE CUSTOMER FIRST Meeting customer needs promptly and accurately PERFORMANCE Continuously striving to do better PUTTING THE INSTITUTION FIRST Ecobank before personal and other interests SCALE Leading Bank in Middle Africa EFFICIENCY Operational and product excellence SHAREHOLDER VALUE Superior shareholder returns + + = …The Pan African Bank
  31. 31. 29 The Pan African Bank Business and Financial Review Financial Summary By all standards Ecobank delivered the strongest financial results in the history of the Group in 2006. Profit before tax increased by 75% to US$129.3 million. Profit after tax followed similar trend, growing by 70% to US$86.4 million. Profit attributable to equity shareholders also improved to US$69.4 million, representing growth rate of 67%. This offers improved earnings per share of 13 cents (2005: 11 cents). Recording a growth rate of 59% total assets of the Group increased to US$3.5 billion. Likewise almost all the ratios of the Group reported significant improvements. Cost-to-income ratio improved to 59% from previous year’s level of 63% as a result of strong growth in revenues. Despite increased capital and asset base, return on average equity and return on average assets were 3% (2005: 2.5%) and 23% (2005: 23.8%) respectively. Fig 1: Profit before tax (PBT) - Profit after tax (PAT) 2002 - 2006 (US$m) Key Factors impacting the Results Revenue Growth Operating income grew by 47% to US$348 million as a result of strong growth in net interest income and fees and commissions. Net interest income was up by 66% to US$181 million resulting from strong growth in loans and advances. Non interest revenue improved by 31% to US$167 million strongly influenced by 26% increase in fees and commissions and 22% increase in trading income. The ratio of non interest income to total income was 48% compared to 54% in 2005. Impairment Losses Despite significant increase in loans and advances, loan loss expense improved to US$13 million compared to US$15 million recorded in 2005. Ecobank Benin contributed US$5 million to this due to deterioration in exposures in cotton and construction industries. The improvement in loan loss expense was as a result of significant recoveries made in Ecobank Côte d’Ivoire and Ecobank Togo for credits which had earlier been fully provided for, as well as better risk management across the Group. Recovery efforts have been intensified and it is expected that substantial part of the provisioned amounts will be recovered in 2007. Operating Expenses Operating expenses increased by 39% to US$206 million compared to revenue growth of 47%, hence the improvement in efficiency ratio. Fig 2: Revenue and Operating Expenses 2002 - 2006 (US$m) Staff cost increased by 43% as a result of increase in staff numbers to support the increasing business volumes. Ecobank Nigeria increased its staff strength from under 1,000 to close to 3,000 to support extensive expansion in the branch network. Other operating expenses increased by 37% in line with growing business volumes, technology improvement and cost relating to aggressive retail strategy of the Group.
  32. 32. 30 2006 Annual Report Balance Sheet Growth Underlying the 59% growth in total assets was a significant growth recorded in deposits which also enabled the Group to increase its credit portfolio. Fig 3: Balance Sheet Growth 2002 - 2006 (US$b) Liquidity Customer deposits increased by 63% to US$2.5 billion representing 83% of total liabilities (2005: 81%) with 10.8% one month net liquidity gap (2005: 17.4%). Average deposits grew by 34.5% to US$2.0 billion. This strong deposit growth was aided by the Group’s aggressive retail strategy culminating into massive increase in branch network in all the banking subsidiaries, particularly Ecobank Nigeria. Risk Assets With increased product offerings in all our business segments, average loans and advances to customers grew to US$1.5 billion, representing an increase of 51% over 2005. The Group’s net loan loss expenses amounted to 0.9% of average loans compared to 1.5% in 2005. Capital During the year the Company continued its capital raising programme which began in 2005. Mainly from private placements, a total of US$87 million was raised primarily from international investors. This contributed strongly to increase in total equity from US$304 million to US$482 million, offering Tier one capital ratio of 19.0% (2005: 21.7%). This was the same as total capital ratio, well above target of 12%. Business Segments The Group continued to pursue diverse strategies in enhancing the performance of all its business segments, reflecting positively on performance. Retail Banking The Group’s retail banking business was structured to provide a range of products and services to meet the needs of clients in small and medium scale businesses as well as the micro finance sector. During the year, the Group launched a new retail strategy to leapfrog its performance in the segment. We focused on organic investments and acquisitions, resulting in addition of 143 branches and offices, most of which were in Nigeria. Branches and offices grew from 162 to 305. The Group continued to develop mutually beneficial relations with partners of common interest. Ecobank signed a partnership agreement with ACCION International to develop its micro finance business. The Group’s card programme continued to make more in roads in the West African sub region. Ecobank Nigeria, yet again, led the way in the card business in Nigeria. In addition to being the first bank to launch MasterCard in Nigeria, the subsidiary issued the first local currency credit card in West Africa under the name, Ecobank Naira Credit Card. Ecobank Ghana continued to pioneer the Visa Card business in Ghana. In the UEMOA Region, Ecobank Card maintained the market leader position. By close of the year over 156,000 (2005: 90,000) cards had been issued and over 100 (2005: 35) ATMs were in use. The Group is aware of some specific risks associated with this segment of the market. Therefore appropriate risks mitigation factors have been instituted to enable it enjoy the full benefits of the enormous potential the segment offers. Business and Financial Review (continued)
  33. 33. 31 The Pan African Bank Wholesale Banking Ecobank specializes in serving the public sector, multinational institutions, financial institutions and other major players in the private sector which constitute the wholesale banking segment of the market. Ecobank has particularly been competitive in serving this niche despite increasing competition for the small number of the clients. Investment Banking Our investment banking subsidiary, Ecobank Development Corporation (EDC) continued to offer its wholesale clients a range of investment banking capabilities in corporate and project finance, advisory services and asset management. EDC is represented in UEMOA, WAMZ and Nigeria. Plans are far advanced to create a similar vehicle in CEMAC Region to enable the subsidiary serve in all the markets in which Ecobank operates. Treasury Treasury and money market activities represented a significant part of the wholesale bank’s activities. Ecobank is a major player in the foreign exchange and money markets in the West African sub-region. The Group continued to leverage on its geographical spread in West and Central Africa in assisting clients’ cross-border transactions in the sub regions. Technology and Operations The Group continues to build a modern technology platform to facilitate speedy and cost effective service to its clients. eProcess International SA, the technology arm of the Group has achieved tremendous success in providing a shared gateway for our payment system and for our regional ATM network aimed at improving the efficiency of support for all our subsidiaries. In 2006, our planned shared services centre commenced operations in Accra, Ghana. By close of 2007 a number of operational activities across the Group will be centralized and processed at the Shared Service Centre. The full impact of this service, in the form of cost reduction, efficiency and speed, will be realized in the coming years. Regional Operations The Group is organized along geographical region to drive performance of the various subsidiaries. Contributions of the various regions to the Group’s profit before tax and assets are shown below: Fig 4: Contribution of Regions to Profit Before Tax Fig 5: Contribution of Regions to Assets
  34. 34. 32 2006 Annual Report Business and Financial Review (continued) UEMOA Region With 10 countries, the Union Economique et Monétaire Ouest Africaine (UEMOA) Zone has a population of 80 million with Gross Domestic Product (GDP) of US$43 billion. Ecobank increased its presence in the region by opening a new subsidiary in Guinea Bissau in January 2007. The region, which has 8 of the 16 banking subsidiaries, contributed 42% to the Group’s profit before tax, and 46% to assets. The continued turnaround of Ecobank Côte d’Ivoire’s business, despite continued political difficulties in the country, impacted positively on the region’s results. There were significant recoveries of previously provisioned loans in Ecobank Côte d’Ivoire and Ecobank Togo. On the other hand, Ecobank Benin contributed 38% to the Group’s loan loss expense due to deterioration in its exposures in cotton and construction industries. It is expected that greater part of this provision will be recovered in 2007. New regional and local banks continued their influx into UEMOA Region. However, Ecobank is well positioned to withstand the increasing competition. US$’000 Revenues 146,378 Profit Before Tax 57,855 Deposits 1,145,498 Shareholders' Funds 131,789 Total Assets 1,687,577 WAMZ Region The West Africa Monetary Zone (WAMZ) comprises six countries with total population of 39 million and a GDP of US$14 billion. In November 2006, Ecobank Sierra Leone commenced banking operations, bringing the total number of subsidiaries in the region to 4. Plans are far advanced to open a subsidiary in the only country in the region left to be covered, Gambia, in 2007. Despite continued depreciation of the Guinean franc against the US dollar, the WAMZ Region contributed 24% to the Group’s profit before tax with 17% of Group assets. Ecobank Ghana continued to be the main driver in this region, contributing 75% of the region’s pre tax profit. Ecobank Liberia is well positioned to take advantage of the restoration of democracy in Liberia and the subsequent inflow of economic aid to revamp the economy. This is evidenced by the increase in the subsidiary’s profit before tax from just US$10,000 in 2005 to US$2.5 million in 2006. US$’000 Revenues 71,426 Profit Before Tax 33,945 Deposits 457,856 Shareholders' Funds 68,155 Total Assets 618,596 CEMAC Region The Communauté Economique et Monétaire de l’Afrique Centrale (CEMAC) Region consists of six countries with a population of 38 million and a GDP of US$38 billion. Until November 2006, Ecobank’s representatiion in the CEMAC Region was only Ecobank Cameroon. The region contributed 3% to the Group’s profit before tax. With 8% of the Group’s assets, the Group’s expansion in the region has been through acquisition. In a bid to be an increasing beneficiary of the business opportunities in this oil and gas rich region, the Company acquired a 60% holding in Banque Internationale pour Afrique du Tchad (BIAT) in Chad in October 2006. The bank has been renamed as Ecobank Chad. In January 2007, the Company also acquired a 72% interest in Bank Internationale pour la Centrafrique (BICA), in Central Africa. It is expected that the impact of these acquisitions would be felt in the subsequent years by the region making increased contribution to the Group’s performance. A license was also obtained in February 2007 to open a new subsidiary in Sao Tome & Principe. US$’000 Revenues 15,326 Profit Before Tax 4,070 Deposits 238,683 Shareholders' Funds 21,569 Total Assets 285,916
  35. 35. 33 The Pan African Bank Nigeria With a population of over 130 million and a GDP of US$96 billion, Africa’s most populous country, Nigeria, consists of a region on its own. Ecobank Nigeria recorded the strongest growth in the Group by increasing its profit before tax by about three- fold to US$40 million. With this, the region contributed 29% of the Group’s profit before tax and 28% of the Group’s assets, making it the second highest contributor. One of the influential factors is the recapitalization of the subsidiary by close of 2005, first to meet the Central Bank minimum capital requirement, and second, to reposition the bank in the Nigerian market. Ecobank Nigeria combined acquisition and organic growth in its expansion programme in 2006. The subsidiary acquired over 60 branches of All States Trust Bank (ASTB) in Nigeria. In addition, Ecobank Nigeria increased its branch network across the country. With the full impact of the expansion programme the region is expected to take commanding lead in contribution to the Group’s performance. US$’000 Revenues 116,620 Profit Before Tax 40,296 Deposits 656,931 Shareholders' Funds 223,266 Total Assets 1,034,960 Risk Management Risk Management function in the Group covers all areas of risk including credit, price/market, interest rate, exchange rate, liquidity, operational risk and legal risk. The primary objective of the risk management function is to establish acceptable risk limits and thereafter to ensure that exposure to these risks stays within these limits. The operational, legal and regulatory risk management functions are intended to ensure adequacy as well as proper functioning of internal policies and procedures as well as compliance with prevailing laws and regulations. The ultimate responsibility for the effective management of risk lies with the Board of Directors both at the Group level and at the level of the operating subsidiaries. The Risk Committee of the board reviews and approves the risk management policies for the Group, subject to any local regulatory amendments, and reviews and monitors adherence to these policies. The Group manages risks through the implementation and monitoring of a rigorous system of policies and procedures, the enforcing of a detailed and timely reporting system, and internal risk review program which systematically audits operations in all countries. Each operating unit is periodically reviewed by a team of reviewers that includes representatives of all relevant functional units and consolidated into an Audit and Risk Reviews team. This team covers all relevant risks families, including strategic and franchise risk, legal and compliance risk, financial reporting risk, staffing and organizational risk, credit risk, market risk, operational risk, systems and technology risk, and country risk. Strategy in using Financial Instruments By its nature, the Group’s activities are principally related to the use of financial instruments. The Group accepts deposits from customers at both fixed and floating rates and for various periods and seeks to achieve interest margins commensurate with its objectives by investing these funds in higher yielding assets. The Group seeks to increase these margins by consolidating short-term funds and lending for variable periods at higher rates whilst maintaining sufficient liquidity to meet all claims that might fall due. The Group seeks to maintain interest margins that will enable to remain profitable after accounting for net provisions, through lending to commercial and retail borrowers with a range of credit standings. Such exposures involve not just on-balance sheet loans and advances but also off-balance commitments such as guarantees, letters of credit and performance and bonds. The Group also trades in financial instruments where it takes positions in government securities, money market and foreign exchange instruments to take advantage of short-term market movements in the financial markets, interest rate and commodity prices. The board places trading limits on the level of exposure that can be taken in relation to both overnight and intra day market positions. Foreign exchange and interest rate exposures associated with these instruments are normally offset by entering into counterbalancing positions, thereby controlling the variability in the net cash amounts required to liquidate market positions.