By KABONA ESIARA

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Pan African lender Ecobank has recapitalised its loss making units in Tanzania and Rwanda even as the business environment in East Africa becomes increasingly tougher.

Ecobank Rwanda injected $8 million from shareholders in June adding to the $4 million received at the close of 2016 financial year.

Ecobank shareholders also pumped an additional $21 million to recapitalise Ecobank Tanzania.

Both the Rwanda and Tanzania units were weighed down by non-performing loans and provisioning, which pushed them into loss making territory in 2016 and the first quarter of this year.

The audited statement of comprehensive income for the year ended 2016 shows Ecobank Rwanda recorded a Rwf3.2 billion ($3.8 million) loss after tax compared with a profit of Rwf706 million ($836,098) in 2015.

“The bank opted to review its risk asset portfolio and make additional net provisioning of Rwf8.3 billion ($9.8 million in 2016 in line with regulatory requirements as well as reflecting the challenging operating environment,” said Alice Kilonzo Zulu managing director Ecobank Rwanda.

However, the banks’ 2016 financial statement shows a health capital position with the shareholder funds reaching Rwf14.6 billion ($17.2 million), capital adequacy ratio of 19.7 per cent and liquidity ratio of 50.5 per cent which is above the statutory requirement.

The bank plans to reduce non-performing loans through aggressive recovery and also reduce operating expenses by using technology.

“Ecobank has increased its investment in technology to have more financial inclusivity,” said Ms Zulu.

Last year, Ecobank Kenya also reported high non-performing loans, while its Uganda unit broke even. This was after seven years of loss making.

The bank recorded a net profit after tax of $221,295 in 2016 in contrast to a loss of $205,296 posted in 2015. Its total assets stood at $76.1 million, while total expenses amounted to $10.8 million at the end of 2016.

READ: Uganda banks upbeat on credit growth mid-year

According to analysts, a slowdown in East African economies, the depreciation of local currencies coupled with increasing competition impacted negatively on the banks’ financial performance.

Last year the banking industry in East Africa reported sluggish appetite for credit, which reduced earnings.

“Credit to the private sector in the past five-ten years has mainly been in the construction sector in all EAC countries.

READ: Low credit appetite, rise in defaulters hit Kenya banks

New investments in this sector are not as large and robust as the past period because of low occupancies and lower than expected offtake demand and investor returns.

Many NPLs in the region at the moment are in this sector,” said Maurice Toroitich managing director KCB Rwanda.

The banking industry is expected to rebound amid tight regulatory requirement of capital to withstand risks.

Bank of Kigali and Cogebank are looking for investors to shore up their balance sheets in order to fund big projects.

“Bank of Kigali is well capitalised, so I think the bank is hunting for more capital to create a niche market in financing big profitable projects, which other small banks in the country cannot individually do,” said a banker.

“The bank also wants a strong capital base in order to keep its leading position as the major lender for retail and corporate bankers,” said an analyst who used to work with Bank of Kigali.

Last year, One of Morocco’s big banks Attijariwafa Bank, signed an MoU expressing interest in Cogebank.

“The negotiations usually take long as they involve bank regulators and shareholders whose interests have to be met.

This is something that cannot be agreed on in a short time” a source closely following the Cogebank and Attijarwafa negotiations told Rwanda Today.

READ: Rwandan banks post good profits despite loan defaults