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Why Jeremy Awori will be walking a tight rope in Ecobank

Nonetheless, having had stints in Standard Chartered and Absa, much more ring-fenced brands, Awori will now be walking a tightrope in Ecobank, for five classical reasons.

1. ‘ETI is a thinly capitalized non-operating entity’

First, the Group’s holding (parent) company, Ecobank Transnational Incorporated (ETI), is a thinly capitalized non-operating entity that relies on medium term borrowings and dividend cheques from affiliates for capitalization.

The fragmentation of the group’s total capital of $2bn across the 34 operating affiliates doesn’t present a strong underwriting proposition. The task is either to build a new capital vehicle or establish strategic affiliate balance sheets that can easily be externalized.

Ultimately, ETI, in the current structure, can be seen as a portfolio manager that seeks to extract as much value from the $27bn portfolio of assets. And as a portfolio manager, the goal then is two-pronged: strengthen the capital raising franchise and allocate capital in businesses with the highest return potential. These are often tough calls to make.

2. Elevated stakeholder interests

Secondly, the stakeholder interests are ever-elevated. There is an ever omni-present silent battle between French-speaking and English-speaking affiliates. This traces back to the origins of the bank when both camps contributed seed capital to form a bank that could compete with multinationals that dominated the region at the time.

While the ambition has since metamorphosized, the two groups still dominate senior-level management. For instance, in 2021 the group’s executive committee had six members from French-speaking affiliates out of a total of 15 (while Nigeria and Ghana had five and three respectively). In addition to the lingual divide, you have top shareholders with long term misalignment.

The top four shareholders, namely South Africa’s Nedbank, Qatar National Bank, Arise BV and Public Investment Corporation of South Africa, which together own 69% of ETI’s share capital, all have different strategic goal(s) which each of them is keen to achieve. Beyond the shareholders, there are nearly 40 banking and capital markets regulators (as well as governments) to deal with, some of which have tended to be aggressive in recent past.

As a result, an ETI CEO’s top priority is to manage a perceived competing interests from these groups; and Jeremy will also have to plug into the script of balancing these competing stakeholder interests.

3. Unachieved bank goal

Thirdly, the one bank goal is yet to be fully achieved. The long term objective of the group’s pan-Africa expansion over the last two decades was to build a seamless coverage across the entire Sub-Saharan Africa.

However, inter-affiliate operations are still largely offline. For instance, customers with multiple operations across the group’s footprint have to contend with asymmetry in systems and processes. Jeremy’s task will be to craft a disruptive execution mechanism to fully achieve the one bank goal.

4. Nigeria: ‘A permanent state of turn around’

Fourth, Nigeria, the largest affiliate in terms of balance sheet, and having gobbled the largest capital allocation over the past 10 years, seems to be in a permanent state of turn around.

With a total equity of $703m (a third of the group’s total capital), it continues to deliver single-digit return-on-equity. From a portfolio management perspective, Jeremy will be faced with some tough decisions on Nigeria as a business.

5. Southern and East African business lack ‘critical mass’

Finally, the group’s Southern and East African businesss, which remain relatively tender, still lack the critical mass to be able to compete. These are markets where critical mass lies not in the balance sheet but in the ability to penetrate and capture certain core segments of the market. And Jeremy, having worked in East Africa for several years, is all too aware of this. While the Ecobank brand commands market leading positions in both the Francophone and Anglophone West Africa, the story is diffferent in East and Southern Africa.

Lack of critical mass has meant a stunt in shareholder value creation in these markets to the extent that the group recently mulled exiting some of the markets but had to back down (instead choosing to scale down some of its in-market propositions). At the same time, these markets are the next growth story for the group and deserve special attention. Consequently, Awori has to prioritise capital allocation to these markets to either purchase additional market share; and/or strengthen existing priority balance sheets (such as Kenya).

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