Ecobank Ghana post stellar performance in 2023, but paid no dividends

Ecobank Ghana reported an all round stellar performance for the year 2023, but left shareholders disappointed for failing to pay dividends.

Board Chairman of the Bank, Sam Ashitey Adjei told shareholders at the hybrid (virtual and in person) Annual General Meeting that revenue soared by 79.4% to an impressive GHS5.3 billion due to the bank’s “resilient income-generating capabilities amidst challenging economic conditions.”

He said net interest income remained the main revenue driver, accounting for 66% of the total, adding that profit before tax for the period under review was GHS985.2 billion, while profit after tax was over GHS600 million.

The bank also saw a its total asset grow by almost 30% to GHS33.7 billion, while customer deposits also grew by 29% to GHS26.3 billion.

“Despite economic challenges, our net loan book stood at GHS9.5 billion, one of the largest in the industry,” the Board Chairman said. “Our capital adequacy ratio of 13.49% in December 2023 exceeded the regulatory requirement of 10%.”

No Dividend

In spite of all those strong and impressive numbers plus more the Board Chairman shared with shareholders, he announced to them that “in line with the Central Bank’s expectations on dividend payment and to ensure the continued sustainability of our business, we have elected not to pay a dividend for the calendar year under review.”

Sam Adjei explained that due to the challenges the financial sector faced in 2022, underpinned by the government’s debt exchange program and high inflation among other things, the bank’s capital was hard hit, and so with the central bank’s permission, the bank has had to retain the 2023 earnings to rebuild its capital.

He however assured shareholders that the board is working closely with management to role out strategies that will result in a long-term growth of the bank and result in the resumption of dividend payment “in the new future”.

This was where shareholders took turns to shower praises on the management and board of the bank for the impressive numbers, but also registered their disappointment in the failure to pay dividends while all other expenses of the bank went up during the year under review.

One shareholder noted that even though the board chairman claimed that the bank elected to retain the gains made in 2023 to boost the bank’s capital for long-term growth, cost of operations went up by 22.7% and of particular interest was the 37% increase in directors fees, and some 23% increase in staff expenses.

He also pointed out that the bank spent quite a substantial amount on corporate social responsibility (CSR) projects, all of which was taken from moneys which could have been reserved for shareholders, adding “I will write an opinion paper on CSR to the bank very soon.”

The shareholders noted that during that same year, Ecobank’s share price kept fluctuating so it was difficult to even sell them and make some profit, adding that the directors are paid to get shareholders value and not just equity, because “equity is not money.”

That shareholder said it is unfair for the bank to increase the remuneration of directors and staff and also have enough money to make other expenses and yet tell shareholders that “we cannot have a share of the cake.”

“I think you have kowtowed to regulatory capture and allowed the Bank of Ghana to cajole you into denying us dividends unfairly,” he said. “You have been able to retain up to GHS1.8 billion of the revenue made – part of that money should be for shareholders then you can reinvest the rest,” he said.

Another shareholders said seeking Bank of Ghana’s permission on whether to pay or not to pay dividends is “uncomfortable for us”, adding that he thinks Bank of Ghana should set parameters in advance and allow banks to pay dividends once they meet those parameters.

He also repeated that with over GHS600 million profit after tax plus GHS1.8 billion retained earnings, there is no justifiable reason why shareholders should be denied dividends.

One other shareholder specifically tasked the Board Chairman, who is a minority shareholder himself, to fight in the corner of shareholders to ensure that they are paid dividends.

A few other shareholders took turns to repeat similar sentiments while praising the bank for a stellar performance during the year under review.

Meanwhile, some directors of the bank also took turns to explain that the increase in directors fees and staff expenses was largely due to inflation, plus the fact that the bank needed to maintain a well motivated staff to drive the kind of stellar performance it reported.

Shareholders also raised concerns about the rising loan impairment, which the former Acting MD, Joana Mensah explained was due to challenges clients faced between 2022 and 2023. She however assured the shareholders that the bank is working with the clients to resolve the problem and the prospects are good.

“We have instituted an incentive package for clients who repay their loans expeditiously and it is working,” she said.

Meanwhile, during the year under review, Ecobank won at least 20 prestigious awards, including the CIMG Bank of the Year among others.

Source: TechFocus24