Ecobank’s record profit hides rising non-performing loans, poor asset quality

Despite posting record earnings, Ecobank Group’s 2025 performance reveals growing underlying risks, particularly around asset quality, Nigeria exposure, and rising impairment charges that could weigh on future profitability, according to the bank’s earnings report.

The bank reported a 21 percent year-on-year increase in profit before tax to $801 million, while profit attributable to shareholders rose 22 percent to $407 million. However, beneath the headline growth, credit risk pressures intensified significantly during the year.

A major concern is the sharp deterioration in asset quality. The group’s non-performing loan (NPL) ratio climbed to 9.4 percent from 6.7 percent, reflecting rising stress within its loan book. This was largely driven by Nigeria, where the bank took a more conservative stance by recognising problem loans as it exited regulatory forbearance.

“The non-performing loans (NPLs) ratio rose to 9.4% from 6.7%, mainly due to an increase in NPLs in Nigeria as part of prudent measures to exit the Central Bank of Nigeria’s (CBN) forbearance regime,” Ecobank said.

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This shift came at a cost. Impairment charges surged, with net charges on loans jumping to $582 million, more than triple the previous year’s level. Overall impairment charges rose 44 percent to $465 million, highlighting increasing credit risk across key portfolios, especially within corporate and investment banking.

In Nigeria, the situation is more fragile. While the bank met the Central Bank of Nigeria (CBN)’s N200 billion minimum capital requirement, its capital adequacy ratio remains below the regulatory threshold. Management has initiated a capital restoration plan, but this underscores lingering balance sheet vulnerabilities in one of its largest markets.

Profitability in Nigeria was already impacted, with the corporate and investment banking segment recording a pre-tax loss due to elevated loan loss provisions. This suggests that earnings from the region may remain under pressure in the near term.

Although Ecobank’s revenues grew by 17 percent to $2.45 billion, this expansion was partly offset by rising costs and risk charges. Operating expenses increased by 7 percent, driven largely by higher staff costs and regulatory expenses. While the bank improved its cost-to-income ratio to 48.3 percent, sustaining this efficiency could become challenging if revenue growth slows or credit costs continue to rise.

Another red flag is the significant increase in expected credit loss (ECL) reserves, which rose to $1 billion. While this provides a buffer against potential shocks, it also signals management’s cautious outlook on credit risk, particularly in volatile markets like Nigeria.

Loan growth, though strong at 22 percent, may also carry risks. The expansion was driven by trade finance and consumer lending, areas that can become vulnerable in periods of economic uncertainty. With macroeconomic conditions still fragile across parts of Africa, rapid credit growth could translate into further asset quality deterioration if not carefully managed.

Additionally, while deposits rose by $4.9 billion, the bank’s reliance on low-cost CASA deposits, though beneficial for funding costs, could pose a risk if customer confidence weakens or liquidity conditions tighten.

Chief Executive Officer of Ecobank, Mr Jeremy Awori, acknowledged the uncertain outlook, pointing to geopolitical tensions and global economic risks as potential headwinds. These external pressures, combined with internal credit challenges, could test the resilience of the bank’s earnings momentum.

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“Our 2025 performance has further demonstrated that our Growth Transformation and Returns (GTR) strategy, along with our geographically diversified business model, are yielding positive results. Group-wide revenues increased by 17 percent to $2.45 billion, with Corporate and Investment Banking (CIB) revenues rising by 21 percent and Consumer and Commercial Banking (CCB) revenues increasing by 14 percent.

“Payment revenue rose 14 percent to $305 million, driven by higher transaction volumes across channels. Group-wide profit
before tax rose by 21 percent to $801 million, resulting in a return on tangible shareholders’ equity of 27.8%. We also
increased per-share earnings and tangible book value by 23 percent and 82 percent, respectively.”

Even within its growth story, there are concerns. The decline in transaction volumes despite a rise in transaction value suggests uneven digital activity, while the decision to exit Mozambique highlights ongoing portfolio optimisation challenges.

Overall, while Ecobank’s headline numbers appear strong, the results point to a more complex reality, one where rising credit risk, Nigeria-specific vulnerabilities, and elevated impairment costs could undermine future performance if not effectively managed.