Banking for Africa s tomorrow, today

Transcription

1 Banking for Africa s tomorrow, today Ecobank Group Annual Report 2017 Select Service Transfer Payee Akua Joyce Idris Amount: $35.00 PIN: SEND

2

3 Banking for Africa s tomorrow, today Ecobank Group Annual Report 2017

4 2017 Annual Report 2 Contents

5 Contents 3 Performance Highlights 2017 Performance Highlights A leading pan-african Bank Business Model Our Pan-African footprint Board and Management Reports Group Chairman s statement Group Chief Executive s review Consumer Bank Commercial Bank Corporate and Investment Bank Corporate Governance Board of Directors Directors biographies Directors report Corporate Governance report Sustainability report People report Risk Management Business and Financial Review Financial Statements Statement of Directors responsibilities Auditors report Consolidated financial statements Notes to consolidated financial statements Five-year summary financials Parent Company s financial statements Corporate Information Executive management Share capital overview Holding company and subsidiaries Shareholder contacts Customer contact centers

6 2017 Annual Report 4 Performance Highlights Our 2017 results were substantially better than in 2016 with marked improvements from all our three divisions, especially in our Corporate and Investment Bank. Ecobank achieved substantial cost savings as we right-sized our businesses whilst we also restricted lending as we embedded greater discipline into our risk management procedures and took decisive action to significantly reduce impairment losses.

7 2017 Performance Highlights 5 Select Service Transfer Payee Akua Joyce Idris Amount: $35.00 PIN: SEND

8 2017 Annual Report 6 Performance highlights Selected income statement data For the year ended 31 December (in millions of US$, except per share amounts) Net revenue 1,831 1,972 Operating expenses 1,132 1,237 Pre-impairment profit Impairment losses Profit/(Loss) before tax 288 (131) Profit/(Loss) for the year 229 (205) Profit/(Loss) attributable to ETI shareholders (from continuing operations) 179 (250) Profit/(loss) attributable per share ($): Basic 0.01 (0.01) Diluted 0.01 (0.01) Selected statement of financial position data For the year ended 31 December (in millions of US$, except per share amounts) Customer loans (net) 9,358 9,259 Total assets 22,432 20,511 Customer deposits 15,203 13,497 ETI's shareholders' equity 1,881 1,578 Total equity 2,172 1,764 Ordinary shares outstanding 24,730 24,730 Book value per ordinary share ($) Tangible book value per ordinary share, TBVPS ($) ETI share price($) High Low Period end Selected ratios Profit for the year to average total assets (ROA) 1.1% (0.9)% Profit for the year to total equity (ROE) 11.6% (9.6)% Profit for the year to tangible total equity (ROTE) 13.6% (11.3)% Basel I Tier 1 capital ratio 24.8% 23.4% Basel I total capital adequacy ratio 28.8% 25.3% Net interest margin 6.5% 6.9% Cost-to-income ratio 61.8% 62.7% Non-performing loans ratio 10.7% 9.6% Non-performing loans coverage ratio 52.4% 63.4%

9 2017 Performance Highlights 7 Net revenue (US$M) Pre-impairment (US$M) Profit before tax* (US$M) 2,003 2,280 2,106 1,972 1, (131) Customer loans (US$B) Customer deposits (US$B) Total assets (US$B) Profitable attributable to ETI shareholders* (US$M ) 339 Earnings per share (Basic)* (US$) Return on average equity (US$M) (250) (9.6) 11.6 (0.010) * For the periods 2013 to 2015 amounts relate to continuing operations EPS for 2014 has been restated to reflect the 1-for-15 bonus issue in June 2015

10 2017 Annual Report 8 Ecobank is the leading pan-african banking institution Founded in 1985 and headquartered in Lomé, Togo, Ecobank provides consumer and commercial banking, corporate and investment banking, and securities and asset management to approximately 14 million customers, ranging from individuals, small and medium-sized enterprises, regional and multinational corporations, financial institutions, international organisations and governments via 927 branches and offices, 2,665 ATMs, the internet (ecobank. com), and mobile banking. Ecobank is present in 36 African countries, with international of offices in Paris, London, Dubai and Beijing, to support our customers who conduct business in the global economy. Our vision, which steers us towards growth and success, is to build a world-class pan-african bank and contribute to the economic development and financial integration of Africa. Our mission is to provide all of our customers with convenient and reliable financial products and services. Ecobank Transnational Incorporated ( ETI ), the parent holding company of the Ecobank Group, is listed on the Nigerian Stock Exchange ( NSE ), in Lagos, the Ghana Stock Exchange ( GSE ), in Accra and the Bourse Régionale des Valeurs Mobilères SA ( BRVM ) in Abidjan. For management reporting purposes Ecobank is organised into three customer-centric business segments and four geographical regions: The business segments are Consumer Bank, Commercial Bank, and Corporate and Investment Bank. As at 31 December 2017, Ecobank had $22.4 billion in total assets and $2.2 billion in total equity. Ecobank business segments and geograpical regions Consumer Bank Commercial Bank Corporate and Investment Bank Nigeria Francophone West Africa (UEMOA) Anglophone West Africa (AWA) Central, Eastern and Southern Africa (CESA)

11 2017 Performance Highlights 9 At Ecobank we serve our customers in each of our geographical regions through our three customer-centric business segments Consumer Bank, Commercial Bank, and Corporate and Investment Bank with a product suite that meets the financial needs of our customers Business segments Consumer Bank Commercial Bank Corporate and Investment Bank Customers Personal Banking Direct Banking Microfinance Small and Medium Sized Enterprises (SMEs) Medium Local Corporations High Value Local Corporations Governments Regional and Global Corps Financial Institutions International Organisations Non-Government Public Sector (Local Governments, Domestic NGOs, Faithbased institution, Educational Institution, Healthcare Institutions). Products Current & Savings Accounts Cash Management Trade Finance & Services Remittances Cards Mobile & Internet Payments Personal Loans Mortgages Bancassurance Asset management for High Net Worth Individuals (HNWI) Trade Finance Fixed income, currencies and commodities (FICC) Internet é &Banking Loan and Liquidity Cash Management and Client Access Loans & Liquidity Fixed income, currencies and commodities Investment Banking Securities Wealth & Asset Management Research & Economics 2017 Net revenue $1.8 billion 2017 Pre-impairment Income - $700 million 2017 Profit before tax $288 million CB 25% CMB 20% CIB 55% CB 11% CMB 14% CIB 75% CB $46 CMB $(32) CIB $268 The breakdown of revenue, pre-impairment income and profit before tax reflects performance figures for each line of business only and has not incorporated the impact of other non-banking entities and consolidation adjustments.

12 2017 Annual Report 10 Our pan-african footprint Our pan-african geographical footprint is segmented into the four regions of Nigeria, Francophone West Africa ( UEMOA ), Anglophone West Africa ( AWA ) and Central, Eastern and Southern Africa ( CESA ). MOROCCO TUNISIA WESTERN S AHARA ALGERIA LIBYA EGYPT CAPE VERDE MAURITANIA MALI NIGER SENEGAL CHAD SUDAN E R I T R E A THE GAMBIA GUINEA-BISSAU GUINEA SIERRA LEONE CÔTE D IVOIRE BURKINA FASO G HANA BENIN Lomé (Headquarters) NIGERIA CAMEROON CENTRAL AFRICAN REPUBLIC SOUTH SUDAN Addis Ababa (Representative Office) D J I B O U T I E T H I O P I A S O M A L I A EQUATORIAL GUINEA UGANDA K E N Y A SÃO TOMÉ & PRÍNCIPE GABON CONGO D.R. CONGO RWANDA BURUNDI Map Key TANZANIA Francophone West Africa (UEMOA) Luanda Nigeria ANGOLA ZAMBIA Anglophone West Africa (AWA) ZIMBABWE Central, Eastern and Southern Africa (CESA) BOTSWANA M A D A G A S C A R Non-Ecobank region NAMIBIA Johannesburg SWAZILAND (Representative Office) Ecobank representative offices SOUTH AFRICA LESOTHO

13 2017 Performance Highlights 11 In millions of US Dollars unless otherwise stated Nigeria UEMOA AWA CESA Net revenue Pre-impairment income Profit before tax Total assets 6,056 9,222 2,951 4,657 Countries Branches Employees ATMs 1, Total assets $22.4 billion 2017 Net revenue $1.8 billion Nigeria 27% UEMOA 40% AWA 13% CESA 20% Nigeria 31% UEMOA 27% AWA 20% CESA 22% 2017 Pre-impairment income $700 million 2017 Profit before tax $288 milliom Nigeria 37% UEMOA 26% AWA 22% CESA 15% Nigeria 20% UEMOA 33% AWA 32% CESA 15% The breakdown of revenue, pre-impairment income and profit before tax reflects performance figures for each individual region only and has not incorporated the impact of ETI, other subsidiaries, affiliates and structured entities and consolidation adjustments.

14 2017 Annual Report 12 Board and Management To resolve credit issues, we have overhauled and strengthened our risk management senior executive team and instituted much stricter controls across our lending processes and authorisations. We have progressed our 5-year Roadmap to Leadership strategic plan which now moves on from its success in fixing the basics to reaching our full potential across Africa.

15 Board and Management Reports 13 Select Service Open Xpress Account Enter details Create PIN OPEN ACCOUNT

16 2017 Annual Report 14 Group Chairman s statement We are working tirelessly to turn around the Group s financial fortunes to enable uninterrupted and growing dividend payments in the future. I look forward to the ongoing support of everyone at Ecobank in the coming year as, having addressed Ecobank s largely legacy credit issues, our strategic emphasis is focussed on maximising the potential of, and returns from, our pan-african footprint. Emmanuel Ikazoboh Group Chairman Ecobank Group

17 Board and Management Reports 15 Esteemed shareholders, It is my great pleasure to present to you, on behalf of the Board of Directors of Ecobank Transnational Incorporated ( ETI ), the Annual Report of our institution s activities and financial performance for the year ended 31 December 2017 at the Group s 30th Annual General Meeting. This is a truly auspicious occasion as we have much to celebrate in Ecobank s achievements over the past three decades. The organisation today bears no resemblance to the fledgling West African bank that started the journey in the 1980s. We have established a truly pan-african scale and reach, combined with offices in four of the world s major financial centres (Paris, London, Dubai and Beijing). We are a leading employer in Africa with 15,930 staff made up of 40 nationalities and we are the largest bank in sub-saharan Africa excluding South Africa in terms of assets. We are bringing our founders vision to fruition by utilising digital technology to increase financial inclusion across the continent. Macroeconomic environment Sub-Saharan Africa s commodity shock-induced slowdown is easing, with 2.6% average GDP growth in 2017, up from 1.4% in Local currencies stabilised during the year with the Nigerian Naira and the Ghanaian Cedi depreciating against the US dollar by 13% and 5% respectively in 2017, compared to depreciation of 35% and 11% respectively in The CFA Franc, appreciated 14% against the US dollar in 2017, as opposed to its 4% depreciation in the prior year. Rising crude oil prices led to a marginal rebound in the economies of oil exporting countries, such as Nigeria, Ghana and Angola. However, high bond yields in Nigeria had a negative impact on customer deposits, thereby reducing the liquidity of all commercial banks, including ours. Financial performance Ecobank Transnational Incorporated (ETI), the parent company of Ecobank Group, delivered a profit for the year of $182 million compared to 2016 s $39 million loss. This year s profit benefited from lower provisions for other assets compared to 2016, when we implemented the resolution vehicle and accelerated provisions. Additionally, ETI adopted equity accounting method in 2017, which allows it to record undistributable profits of its subsidiaries and affiliates according to its percentage controlling interest. The consolidated group generated a profit attributable to shareholders of $179 million and diluted earnings per share of $0.01, compared to an attributable loss of $250 million and a diluted loss per share of $0.01 in The Group generated a return on total equity ( ROE ) of 11.6%. Bottom line earnings were reduced by credit losses in line with guidance that we expected these losses to remain elevated in We have, and are, working through our challenged loans while the impact of economic recovery is gradually feeding through to heightened activity in our major markets. We are making encouraging progress, but still expect credit losses and nonperforming loan levels to remain relatively high. Revenues of $1.8 billion fell 7% from 2016, but adjusting for the impact of currency translation effects, were largely unchanged, due to the negating impact of lower net interest income on growth in non-interest revenue. Our cost reduction initiatives continue to gain momentum, leading to positive operational leverage. As a result, income before impairment losses increased by 3% in constant currency to $755 million ($700 million if unadjusted), and the cost-to-income ratio improved to 61.8%, compared to 62.7% at year-end Management of our NPLs/legacy portfolio issues At the end of 2017, the non-performing loan ratio stood at 10.7%, which we consider high. As explained last year, lapses in internal credit control across the group, coupled with the effects of Nigeria s recession, had a negative impact on Ecobank s credit quality. We have diligently addressed these issues, resulting in specific provisions of approximately $1.6 billion over the past two years. Your Board is determined to resolve Ecobank s credit issues. The appointment of a new Group Chief Risk Officer highlights the importance that we are assigning to this task. That is just one of many measures we have taken, but I would also highlight: the complete overhaul of our credit origination and approval process the establishment of a corporate finance unit to structure regional term loans and other transaction-related lending, and the strengthening of our loan approval processes with the introduction of regional risk managers armed with limits, responsibilities and sanctions. Dividends Although we previously signalled that the near-term resumption of cash dividend payments would be challenging, that does little to alleviate the Board s disappointment and sadness that we cannot reward our shareholders loyalty this year. Rest assured that we regard this as a matter of major importance and are working tirelessly to turn around the Group s financial fortunes to enable uninterrupted and growing future dividend payments. Several factors conspired to prevent us paying a dividend in Firstly, the Bank of Ghana s directive to increase minimum capital requirements from GHS120 million to GHS400 million meant that Ecobank Ghana, one of our subsidiaries that is usually a most consistent dividend payer by amount and frequency, had to substantially reduce its dividend pay-out to enable the increased capital buffer to be funded from retained earnings. Additionally, Ecobank Côte d Ivoire s Initial Public Offering saw ETI s stake in it fall from 94% to 75%, with a proportional impact on ETI s dividend income in the near term. Finally, earnings growth, overall, was stifled by higher credit losses and weak economic activity in Middle Africa. As we address the former and the fragile recovery gains momentum, we expect resumption of earnings growth and, with it, likely dividend reinstatement Major developments during the year Ecobank achieved some impressive milestones in 2017, and I would draw your attention to the following: The strengthening of the Group s capital and liquidity position evidenced by the successful placement of $400 million of convertible loans with existing strategic shareholders The listing of $150 million of this issue on the International Securities Market of the London Stock Exchange has raised Ecobank s standing and profile with international investors ETI s $250 million senior unsecured loan facility to refinance maturing loans The successful launch of Ecobank mvisa across 33 African Countries The joint $500 million programme with Afreximbank promoting trade finance in African countries where we share a presence, and The 2017 African Banker Awards named Ecobank Group as the Most Innovative Bank of the year.

18 2017 Annual Report 16 Board changes and corporate governance In 2017, Dr. Adesegun Akin-Olugbade and Mr. Ignace Clomegah, both Group non-executive Directors, resigned from the Board to enable them to focus on other business interests. Mr. Greg Davis, the Group s new Chief Financial Officer, was appointed to ETI s Board in May. Mr. Monish Dutt, an experienced investment professional and a consultant on emerging markets, was appointed to the Board as a nominee for the International Finance Corporation and replaces Mr. Kadita Tshibaka following his retirement. The Board composition has restructured to allow the participation of two representatives from each of our major strategic shareholders, namely the Nedbank Group and Qatar National Bank ( QNB ). Mr. Brian Kennedy, the Managing Executive of Nedbank Capital, and Mr. David O Sullivan, Head of Group Legal at QNB, have joined Ecobank s Board as a result. Priority Areas for 2018 The Impact of Basel II/III on capital allocation across the Group A new prudential capital framework, Basel II/III, was adopted by the Central Bank of West African States (BCEAO). This applies to banks and credit institutions in Francophone West Africa and became effective on 1 January Our eight subsidiary banks based in the member countries of the UEMOA region must comply with these new rules, as will ETI, which is now regulated by the Commissionaire Bancaire, on a group-wide consolidated basis. The minimum capital adequacy requirements will increase over the next five years with the phase-in of a 2.5 percent capital conservation buffer and an increase in the minimum total capital adequacy ratio from 8 percent to 9 percent. It will cause substantially lower capital adequacy ratios for the Group and poses challenges on how to allocate capital efficiently across the Group, particularly in markets outside of UEMOA, which, are not yet required to comply with the Basel II/III regulations. For them it may force a natural capital distortion. One of the challenges that your Board faces in 2018 is balancing the requirement to ensure Group compliance with these regulatory changes, without saddling our Francophone Corporate culture Converging external factors are pressurising African businesses to become more agile if they are to remain competitive and prosper. Rapid technological change, a skills gap inhibiting Africa s global competitiveness and the entrance of Africa s next generation into the workplace, are all placing corporate culture on the the front burner of your Board. Corporate culture affects performance and we are focussing on instilling an ownership mentality into all Ecobankers by incorporating the tenets of culture that foster openness and honesty, that eliminates bureaucracy and internal politics, and that rewards innovation, teamwork and behaviour that prioritises always doing the right thing for the customer. We are encouraging employees to be more accountable for their actions. Succession planning To reinforce trust with our external stakeholders and encourage employees to concentrate on their own development goals, we focus on having continuity across our business. Group Human Resources is ensuring that performance evaluation is properly implemented, that talent is identified, and that all employees get the opportunity to learn, grow and become Ecobank s leaders of the future. Board remuneration and diversity The subject of senior managements remuneration is a recurring theme in our dialogue with shareholders. How we reward executives has a significant influence on how they perform their fiduciary duty of capital stewardship and maximising shareholder value. The Board s Remuneration Committee works with senior management to ensure that, in line with best practices, future remuneration packages are closely aligned to expected total shareholder returns and value-creation, thus delivering value to all Ecobank stakeholders. Your Board is committed to creating a pipeline of diverse talent throughout Ecobank. We are conscious of the need for a better gender balance on the Board, following recent departures of some of the Group s most senior women, and remain committed to promoting diversity without compromising on our directors calibre. Outlook Economic growth is expected to strengthen across sub-saharan Africa in 2018 to about 3.4%. The combination of higher commodity prices and economic recovery should lead to opportunities for trade and infrastructure financing, whilst stabilising local African currencies should encourage continued foreign exchange inflows. While improving fundamentals will boost economic activity and ease credit risk, we expect credit quality metrics to remain elevated in some countries, notably Nigeria and Ghana. To address these issues, Ecobank Nigeria has appointed a highly experienced Chief Risk Officer to ensure that the bank establishes and maintains a robust risk management framework. Political uncertainty, with a swathe of elections scheduled across the continent in 2018, could dampen investor and consumer confidence. Against this backdrop, management is concentrating on non-performing loan recovery and credit risk management. We are delighted by the speed and scale of the uptake of our new digital offerings and are advancing our digital agenda by pressing ahead with the enriching of our customers experience and becoming more data-driven across the Group. Our five-year strategic Roadmap to leadership and digitisation strategy plan has successfully completed phase 1 which focused on fixing the basics and we now concentrate on reaching our full potential across Africa. Those wishing to learn more about the strategy should refer to the CEO s letter in this financial report. On your behalf, I would like to acknowledge the efforts and contributions of our Board, our executive management and all Ecobank staff to Ecobank s continuing success story, through good times and bad. I look forward to their ongoing support in the coming year as, having addressed Ecobank s largely legacy credit issues, our strategic emphasis reverts to maximising the potential of, and returns from, our pan-african footprint. Ecobank has been a true pioneer in African banking over the past 30 years and we keenly embrace the challenges that lie ahead for a continent that will be richly transformed for the better by the Fourth Industrial Revolution. Talent management requires having a selection of succession candidates ready to step up, so we are instilling a framework that embeds succession planning across the organisation, from the newest trainee to the Group CEO. Emmanuel Ikazoboh Group Chairman, Ecobank Group

19 Board and Management Reports Group Chief Executive s Review 17 Group-wide we returned to profitability in 2017, which reflects a significant reduction in impairment losses on loans and advances, as we continue to instil greater discipline in managing our businesses. Over the past two years, we have also focused on strengthening Ecobank s competitiveness and have positioned the Group to create shareholder value on a sustainable basis. I am confident that Ecobank s long-term success is assured. Ade Ayeyemi Group Chief Executive Officer Ecobank Group

20 2017 Annual Report 18 Dear fellow shareholders, I very much welcome this opportunity to update you on the steady progress that Ecobank is making towards our Roadmap to Leadership and digitisation strategy. Economic growth in sub-saharan Africa began to recover in 2017, due to improving fiscal and monetary policy, which led to lower inflation and depreciation in most African currencies. However, the banking sector in most of our markets remained under pressure as a result of falling interest rates and higher than expected non-performing loans marked a return to profitability In 2017, Ecobank Transnational Incorporated (ETI), the parent company of the Ecobank Group, made a profit of $182 million, compared to a loss of $39 million in The current year s profit reflected our new policy of equity accounting for ETI, which allows ETI to account for the proportion of the undistributed attributable profits of its subsidiaries, according to its percentage controlling interest in them. Group-wide we returned to profitability in 2017, reporting a profit before tax of $288 million, compared to a loss before tax of $131 million in Profit attributable to ETI shareholders amounted to $179 million, which equates to a return on tangible equity of 13.6% and diluted earnings per share of $0.01. We are delighted by this marked improvement on 2016, which reflects a significant reduction in impairment losses on loans and advances, as we continue to instil greater discipline in managing our businesses by embedding appropriate risk management procedures. However, the legal environment in many of our countries remains disappointingly slow in adjudicating the cases brought to recover long outstanding client obligations. Reported net revenues of $1.8 million, decreased 7% from the previous year. However, local currency fluctuations relative to the US Dollar (our reporting currency) have had a negative impact on the reported figures: adjusting for foreign-currency movements would have meant that net revenue would have only marginally decreased. There were a number of other factors that contributed to this decrease falling yields on interest earning assets and higher funding costs squeezed net interest income, despite For the year ended 31 December (in millions of US$, except per share amounts) % Change *In constant currency Selected income statement data Net revenue 1,831 1,972 (7)% 1,963 Pre-impairment profit (5)% 755 Impairment losses (52)% 454 Profit/(Loss) before tax 288 (131) NM 301 Profit/(Loss) for the year 229 (205) NM 222 Profit/(Loss) attributable to ETI shareholders 179 (250) NM ETI (parent company only) profit for the year 182 (39) NM Diluted EPS ($) 0.01 (0.01) Net interest margin 6.5% 6.9% Cost-to-income ratio 61.8% 62.7% Return on equity (ROE) 11.6% (9.6)% Return on tangible total equity (ROTE) 13.6% (11.3)% Selected statement of financial position data Customer Loans (net) 9,358 9,259 1% 8,853 Customer deposits 15,203 13,497 13% 14,554 Total equity 2,172 1,764 23% 2,126 Basel I tier 1 capital ratio 24.8% 23.4% Basel I total capital adequacy ratio 28.8% 25.3% Non-performing loans ratio 10.7% 9.6% Non-performing loans coverage ratio 52.4% 63.4% NM not meaningful * Constant currency excludes the impact of foreign exchange translation of our functional currencies into U.S. dollars for reporting purposes. The average exchange rates used in converting the income statement items for the year ended December 2017 are NGN306.27, XOF and GHS4.41

21 Board and Management Reports 19 a significant increase in the value of investment securities held by the Bank. Also, lower than expected client activity led to a reduction of 8% in fees and commission income, which was partly offset by a 3% growth in our client-driven sales and trading business, as a result of the recovery in Nigeria s foreign exchange market. On the expense side, we have achieved significant costs reduction and we are making continued progress in right-sizing our businesses. Expenses fell by 9% to $1.1 billion, or 2% in constant currency terms, while the cost-to-income ratio improved to 61.8% from 62.7% in This was after absorbing the costs of restructuring our business in the Central, Eastern and Southern Africa region in We have been careful about growing our balance sheet, because of the level of non-performing loans and stringent credit origination terms. As a result we grew customer loans by a modest 1% year-on-year. Because of the confidence that our customers have in us, they increased their deposits with us by an impressive 13%. Given our decision to curb lending, most of these additional deposits were invested into government treasury bills and bonds. Our balance sheet strength, measured by our capital adequacy ratios, remained acceptable, with our Basel I Tier 1 capital ratio and total capital adequacy ratio (CAR) standing at 24.8 % and 28.8% respectively. However, the adoption of Basel II/III rules by the Central Bank of West African States and the Commission Bancaire, ETI s regulator, in 2018 will substantially impact on our capital ratios in the future. I will elaborate on this later in this review. Our regional businesses reported mixed financial results. Lower impairment levels boosted Nigeria s profit before tax by 191% to $67 million, while strong revenue growth in Central, Eastern and Southern Africa, led to a 103% year-on-year increase in profit before tax to $49 million. Profit before tax in Francophone West Africa rose 8% to $111 million, but was largely unchanged in constant currency terms. We are, however, encouraged by the pick-up in economic activity in the region and are seeing many opportunities for future growth. Finally, in Anglophone West Africa, profit before tax fell by 25% (17% in constant currency terms) to $105 million as a result of the weaker interest rate environment in Ghana depressing revenues. Our business divisions had varied results. Consumer Bank increased its profit before tax by 53% to $46 million which was driven by a reduction in impairment losses. Commercial Bank further reduced its pre-tax losses, to $32 million from the $36 million in 2016 as a result of a decrease in operating expenses and modest underlying revenue growth. We are working vigorously to reduce Commercial Bank s high level of non-performing loans, which is inhibiting its financial performance. Corporate and Investment Bank reported an impressive return to profitability in 2017 largely because of significantly lower impairment losses than in the previous year. Corporate and Investment Bank s profit before tax was $268 million compared to a loss of $40 million in Its underlying revenue growth was modest due to an increase in clientrelated foreign exchange sales and trading income, particularly in Nigeria, which was driven by improved foreign exchange liquidity and greater client activity Revenue and profit before tax by geographical regions 2017 Net revenue $1.8 billion Nigeria 31% UEMOA 27% AWA 20% CESA 22% 2017 Profit before tax $288 million Nigeria 20% UEMOA 33% AWA 32% CESA 15% (NB): The regional and business segments breakdown of revenue and profit before tax excludes the impact of other entities and consolidation adjustments

22 2017 Annual Report 20 Revenue and profit before tax by business segments Net revenue $1.8 billion CB 25% 2017 Profit before tax $288 milliom CIB CMB CB CMB 20% CIB 55% in the Investors and Exporters FX window. Corporate and Investment Bank s cash management and trade finance activities performed well, with the latter doubling the value of trade loans it granted over the year, reflecting the benefits of our geographical footprint. We regard these latter two businesses as the main engines for growth within our wholesale banking operations. Disciplined execution of our Roadmap to Leadership and digitisation strategy In the first two years of our five year strategic Roadmap to Leadership plan, we have focused on fixing the basics. This is Phase 1 of our strategy, which concentrated on a set of actions and disciplines aimed at enhancing Ecobank s competitive position, which will drive long-term value creation. It gives me great pleasure to report that we have implemented Phase 1 with remarkable success, which gives me significant optimism for the future. In 2018 and beyond, we will be moving on to Phase 2 of our strategy, which will be centring on execution, execution and execution. As we have strengthened the business foundations, I, my colleagues in the Group Executive Committee and, indeed, all Ecobankers are adopting a greater sense of urgency and tenacity in our drive to consistently exceed our customers expectations and meet our return on equity targets. Let me now turn to the highlights of our progress in Right-sizing our business Our cost base was too high and needed radical surgery. We began with Nigeria, our largest subsidiary in terms of allocated equity capital, where we rationalised senior management, cut 2,000 jobs and closed 74 branches. We also streamlined its procurement procedures and outsourced its fleet The key objectives of our Roadmap to Leadership and Digitisation Strategy Phase 1: Fix the Basics: Phase 2: Execution: Rationalise our geographic footprint Reorganise our business segments Enhance risk and compliance culture Drive operational efficiency Digitization to drive customer experience Improve the customer experience Invest in technology Continue to improve our risk culture Run a fit-for-purpose model Allocate capital for value creation

23 Board and Management Reports 21 and real estate management. As a result of these measures, Ecobank Nigeria s cost-to-income ratio reduced to 51% from the 61% in December More recently, we have turned our attention to the rationalisation of our network in Central, Eastern and Southern Africa, which encompasses 18 countries. In the space of seven months, we have closed 75 branches and shed around 600 jobs, and are now on track to realise annual savings of $34 million in the region. We have also reorganised our operating regions, reducing the number of reporting segments from seven to four, with four newly appointed regional executives joining the Group Executive Committee, reporting directly to me. This is so that we can ensure the strict alignment of policies, procedures and accountability, across the Group to fully leverage the potential of our diversified business model, for the benefit of our customers and shareholders alike. We also retreated from our former target of becoming a top 3 player in all of our African markets. With the benefit of hindsight this former objective had inadvertently contributed to the asset quality issues that we are now tackling today. We have adopted what we call a fit-for-purpose go-to market strategy. This means that we will continue to build our capabilities people, systems and products in markets where Ecobank has a dominant position, such as West Africa. Where we lack market dominance and have neither scale nor market leadership, which comprises most of our Central, Eastern and Southern Africa operations, we are being more selective in our lines of business and capital allocation and investment decisions, in order to ensure that we meet our return targets through efficient stewardship of capital. Technology to unlock the economies of scale of our footprint Our geographical footprint provides us with a competitive advantage and technology is the key to unlocking it and offering our customers the full benefits of our pan-african presence. Mobile phone and other technologies are rapidly changing the ways that customers engage with financial services providers. We had to move fast. We established two regional processing centres in Lagos and Abidjan, to which 21 of our subsidiaries have migrated their back-office functions, and we have set up two data centres in Lagos and Accra, helping to reinforce Ecobank s position as a digital bank. Broadening our range of digital banking offerings Over the last year, our digital innovation has gained increasing recognition, receiving a total of 35 industry accolades across Africa and internationally. In August we marked the first anniversary of the launch of our award-winning Ecobank Mobile App with the release of a functionality upgrade. Since the launch of the new release of the mobile app, our customers have downloaded the app more than 1.2 million times, resulting in over 5.3 million mobile transactions worth approximately $604 million that were processed on the platform. Our Masterpass QR and Ecobank mvisa peer-to-peer (P2P) solutions are revolutionising the way that our customers and merchants make payments and receive funds. Masterpass QR enables merchants - particularly micro, small and medium enterprises - to accept secured payments via our mobile app and avoid the need for costly point-of-sale devices. As a result of these operational efficiencies, we have onboarded 63,000 merchants to date and they have processed nearly 170,000 transactions worth over $3 million in We have rolled out Ecobank mvisa, incorporating the Scan+Pay functionality of our mobile app, across 33 African countries. This strategic tie-up supports cross-border interoperability and allows customers to directly access funds in their bank accounts via their mobiles and to make person-to-merchant (P2M) payments or transfer money to their friends and family at very low cost. Our Ecobank XpressAccount, which allows the unbanked to open accounts using simple mobile phones, is proving to be very popular, with over 2.8 million accounts having been opened to date and has attracted $2.3 million of cash balances. Ecobank OMNI and Bank Collect, our digital cash management solutions for corporate and commercial clients, are making it easier for them to efficiently pay and receive cash. Bank Collect is a receivables service that facilitates mass collections and allows clients to monitor their transactions in real time. We are also increasingly digitising the way we work internally, employing tools such as Microsoft s Power BI, which gives senior management real-time insights into key financial and business metrics, thereby speeding up our decision-making and response times to client needs. I will now address the recurring investor concerns which have been voiced during our engagements with the investment community in The Group s asset quality challenges: have we turned the corner? At the start of the 2017 financial year, we announced that we expected our asset quality ratios to remain higher than we would like in the medium term. Therefore it should not be surprising that, at the end of 2017, the Group s non-performing loans as a percentage of total gross loans was 10.7% and the

24 2017 Annual Report 22 Ecobank Mobile App Number of App users Number of transactions Value of transactions Thousands Thousands Millions Mar Mar Mar 534 Jun 829 Sep 1,949 Dec 1,783 Jun 3,175 Sep 5,506 Dec 208 Jun 387 Sep 634 Dec cost-of-risk was 3.3%. We regard both of these ratios as being high and recognise that they will concern investors. We have instigated a number of measures to address Ecobank s asset quality and are being carefully selective about the loans that we write. Our internal procedures place the responsibility for collection at every level and we are conducting a comprehensive review of, and continuously monitoring, our nonperforming loan portfolio. We have completely overhauled our credit origination and monitoring procedures. Also, we have placed focus on recoveries and collateral realisation. We have strengthened the team and have recently hired a new Chief Risk Officer (CRO) who has extensive experience of African and European banking. The CRO has been charged with the task of ensuring that the best risk management practices are embedded throughout our organisation. We have been much encouraged by the $20 millionplus of recoveries achieved by the Resolution Vehicle (RV) s dedicated team during However, the objective of the RV was to protect the capital and improve the liquidity of Ecobank Nigeria, and was not a comprehensive exercise to resolve our non-performing loan portfolio. Nevertheless, we are confident that Ecobank s asset quality will improve thanks to our more stringent credit portfolio monitoring and the improvement in market conditions. We are mindful that our adoption of the new accounting standard for financial instruments, IFRS 9, effective from January 2018, will require earlier recognition of expected credit impairments. We expect this to reduce Ecobank s earnings in the near-term as it will lead to additional credit loss provisioning. We will shortly be deploying resources to critical areas of our risk management process. These will include: the complete separation of the management of non-performing loans from that of past-due obligations, or PDOs, to ensure effective, focused management of each portfolio; the creation of the position of Group Remedial Head to be filled by an experienced individual tasked with Group-wide supervision of loan remediation; and the use of third-party contractors to assist in the recoveries of PDOs and non-performing loans. Ade Ayeyemi at the Ecobank Fintech Challenge

25 Board and Management Reports 23 Addressing our asset quality challenges Watchlist loans, NPLs and PDOs ($M) Actions being executed $1,069 71% $919 63% $930 66% $948 64% $1,026 $1,111 59% 57% $934 $1,059 54% 52% Hired a new Chief Risk Officer with extensive experience Implement an enhanced credit operating model 9.0% 8.6% 8.9% 9.6% 10.4% 11.0% 9.6% 10.7% Aggressive on collections and collateral realisation 1Q16 1H16 9M16 FY16 1Q17 1H17 9M17 Non-performing loans (NPLs) NPL coverage ratio NPL ratio Watchlist loans, NPLs and PDOs ($M) $967 $948 $886 $834 $582 $536 $480 $392 FY17 $1,059 Strengthen our Remedial function in the process of hiring Group Head, Remedial Management Build capacity through targeted training Separation of management of NPLs from PDOs Third-party contractors to assist with recoveries of PDOs and NPLs Watchlist Past due obligations (PDOs) Non-performing loans Dec 2015 Dec 2016 Dec 2017 Addressing our capital needs We recently completed the issuance of $400 million of convertible debt, which will enable us to replace shorter-dated loans with longerterm debt, and will transform ETI s debt profile. The tremendous support shown for the issue by our major shareholders, the Public Investment Corporation (PIC) of South Africa and Qatar National Bank (QNB), is testament to their confidence in the Group s future. Moreover, the listing of $150 million of the issue on the International Securities Market (ISM) of the London Stock Exchange further enhances Ecobank s standing with international investors. In September, Ecobank Côte d Ivoire successfully raised 45 billion CFA, approximately $80 million, via an initial public offering (IPO). The fact that it was more than two times oversubscribed indicated a strong appetite for the issue both in Côte d Ivoire and across UEMOA. This additional equity capital injection will allow Ecobank Côte d Ivoire to pursue its market growth opportunities. However, while the reduction of ETI s stake in Ecobank Côte d Ivoire, from 94% to 75% after the listing, will proportionately lower Ecobank Côte d Ivoire s dividend contribution to the Group in the short-term, we are optimistic that Ecobank Côte d Ivoire s dividend pay-outs will be higher as earnings grow in the medium to long term. Pros and cons of a tightening regulatory environment Our presence in multiple jurisdictions exposes us to a plethora of supervisory rules and regulations. Most of these are designed to protect stakeholders and customers, to which we wholly subscribe. However, they also impose a regulatory burden in terms of the time and resources required to comply with their various reporting requirements. In 2018, the Group and some of its subsidiaries are facing a number of regulatory challenges, most notably increasing capital requirements and the wider adoption of Basel II/III standards.

26 2017 Annual Report 24 The Central Bank of West African States (BCEAO) has adopted Basel II/III standards with effect from January This means that all eight of our Francophone West African subsidiaries must adhere to these new regulations. Additionally, given that ETI, the bankholding parent company, is headquartered in Togo and regulated by the BCEAO, ETI will have to comply with the new rules on a consolidated basis. As such, capital adequacy ratios for the Group will be recalculated according to Basel II/III rules from January 2018, with initial results due to be submitted to the BCEAO in April The implementation of Basel II/III standards represents a significant tightening of the regulatory environment for ETI and its subsidiaries. Minimum capital adequacy requirements will increase over the next five years, with the phase-in of a 2.5% capital conservation buffer and an increase in the minimum total capital adequacy ratio from 8% to 9%. This will result in substantially lower capital adequacy ratios for the Group, given that: The foreign currency translation reserve, which arises on consolidation, will become an adjustment to Tier 1 capital; The addition of operational risk weighted assets will also increase total risk weighted assets by approximately 20% The objective of Basel II/III is to create a more resilient and secure banking system, by reducing risk and leverage. However, it remains to be seen how investors will react to the prospect of lower profitability and lower equity returns. Higher capital requirements may also further limit the supply of credit to the SME sector, which already suffers from a lack of reliable access to bank finance. In our ongoing dialogue with the regulators, we continue to stress that regulation needs to be commensurate with the particular circumstances and needs of each jurisdiction. Elsewhere, to strengthen their capital position, the Bank of Ghana has directed deposit-taking banks in the country to raise minimum capital requirements by the end of 2018 to GHS400 million (approximately $86 million) from the current GHS120 million. This could lead to additional equity capital raisings, or mergers, for banks that have insufficient retained earnings. Ecobank Ghana will not have to raise additional capital, but its ability to return capital to shareholders in the form of dividends will be substantially curtailed, and this will have a knock-on impact on ETI s own ability to distribute earnings Market s undervaluation of the Ecobank Group ETI s share price rallied 45% in US dollar terms over the course of 2017, based on NAFEX exchange rates. I believe that this increase partly reflected the market s confidence in the measures that management is taking to position the firm for growth, and also the growing investor optimism in Africa s macroeconomic revival. As at the end of December 2017 our market capitalisation of approximately $1.2 billion (Naira share price was converted to US dollar with NAFEX rate) was below our book value of $2.2 billion, clearly at a price multiple lower than book, and a discount to the average multiple of our similarly sized sector peers on the Nigeria Stock Exchange. The apparent under valuation of our stock is as much of a concern for the management team as it is for our shareholders. There are many issues that are causing investor concern, creating legitimate reasons for the undervaluation. These could border around asset quality, risks of a capital raise, ownership structure, corporate governance and transparency, and the quality of the management team. Whatever the concerns may be, we know that the best way to create shareholder value is to build a formidable and healthy company. This is exactly what we set out to build in our Roadmap to leadership and digitisation strategy. Rest assured that achieving returns above the cost of equity remains central to our strategy. We will continue to engage actively with the investment community to further their understanding of our pan-african investment case. We have strong banking franchises in exciting markets, a strong brand, and have made the investments in processes, systems, data centres, customer satisfaction etc. - primarily the intangibles - that won t quickly enhance valuation. However they are vital processes which will provide the bedrock on which the firm will leapfrog. Conclusion Over the past two years, we have focused on strengthening Ecobank s competitiveness and have positioned the Group to create shareholder value on a sustainable basis. This has involved right-sizing and upskilling our staff, taking out unnecessary costs, overhauling our credit and risk procedures and investing in technology, with a focus on enriching our customers experience. Our digital drive is already yielding results, with our customer base growing by nearly 40%, bringing our medium-term target of 100 million customers within closer reach. Equally, our pan-african partnerships, with the likes of Microsoft, Afreximbank and The Global Fund, are advancing our vision of delivering genuine financial inclusion across Africa. I am really encouraged by our recent achievements, which have been accomplished in a challenging debt-servicing environment for all our customers, and for this I extend my wholehearted thanks to the diligence and dedication of all of our nearly 16,000 Ecobankers in our 40 countries. However, I do recognise the need to intensify our efforts to enhance shareholder value. So, the next stage of our strategy will be galvanising our resources to deliver on the promises that we have made, both to ourselves and to our stakeholders. We need to fully leverage our inherent strengths as Middle Africa s leading financial services platform to generate superior equity returns. I am confident that these objectives are eminently achievable in the light of our ongoing rationalisation and asset quality initiatives. Finally, I wish to take this opportunity to thank our strategic investors and partners for the confidence that they have invested in me. I remain resolute in my commitment to build a strong and sustainable bank that promotes the economic development and financial integration of the continent. I am confident that Ecobank s long-term success is assured. Ade Ayeyemi Group Chief Executive Officer

27 Board and Management Reports Group Executive s Review 25 Through our established products and services, we are now accelerating the growth of our consumer banking franchise to become a scale business run efficiently on digital platforms. This will deliver instant fulfilment to a customer base we aim to increase to 100 million customers by the end of Patrick Akinwuntan Group Executive Consumer Bank

28 2017 Annual Report 26 Consumer Bank I am delighted to report on the progress that we have made towards achieving our aim of making our consumer banking franchise the preferred financial services provider across middle Africa. Our products and services are meeting the needs of customers by being relevant, convenient, fast and affordable. Households, millennials, micro-businesses and Africans in diaspora are choosing to bank with us because we can provide them with instant payment and collection facilities on our digital platforms throughout our pan- African network of 33 countries. New-to-bank customers can open Ecobank Xpress Accounts within minutes on our Ecobank Mobile App. In 2017 our customer numbers increased by 40% from 10 million to 14 million. We provide the full suite of personal banking services for our customers from transactional banking to wealth creation: internet banking, a comprehensive range of globally accepted Ecobank cards (credit, debit, virtual, platinum and gold) dedicated relationship management services and wealth management products. Our loyalty programme enables our Premier and Advantage customers to enjoy benefits at supermarkets, restaurants, spas, airport lounges and airlines. We serve our mass market and youth direct banking customers primarily through our unified Ecobank Mobile App which covers 33 countries in four languages English, French, Portuguese and Spanish. IMPROVED EASE OF USE SIMPLE FUNDS TRANSFER AND REMITTANCES ECOBANKPAY SCAN + PAY MERCHANTS 24HR DEDICATED SUPPORT The Ecobank Mobile App is available from Google Play and App Store and enables users to: open an Ecobank XpressAccount instantly on their mobile phone and provides an easy route to financial inclusion for the previously unbanked transfer money instantly free within Ecobank or at very low costs to other banks, and across Africa, using Ecobank Rapidtransfer and Ecobank mvisa P2P make payments using Ecobankpay Scan+Pay through Masterpass, mvisa and Mcash pay utility bills, school fees, subscriptions, make donations and buy airtime instantly generate payment tokens using Ecobank Xpresscash to do cardless ATM withdrawals or at an Ecobank Xpresspoint manage accounts and investments transparently and conveniently. Within 16 months of launch, the Ecobank Mobile App has attracted over 2.8 million customers, over 60,000 merchants, and processed over $750 million payments in over 7 million transactions. The Ecobank Mobile App is quickly becoming the market leader in our geographical area of operations. We are already enjoying recognition for our multi-award winning innovation and digital banking services. In 2017 we won the Euromoney Award for the Best Digital Bank in Africa. We are rapidly increasing our Agent network - Ecobank Xpresspoints - across our pan-african footprint. Ecobank Xpresspoints provide convenient and fast cash-in and cash-out services to our customers in under-served urban neighbourhoods and rural centres, and it also enables them to embrace cashless banking. Our range of products and services meet the day-to-day banking, financing, investment and transactional needs of our customers, and have resulted in substantial growth in customer numbers, transactions and profitability during GROWTH Profit before taxes (USD millions) % Total deposits (USD millions) 4,568 5,145 13% Remittances Volumes (USD millions) 2,032 2,587 27% Number of mobile app users (thousands) ,954 1,238% Number of mobile app transactions (thousands) ,336 3,057% Value of mobile app transactions (USD millions) ,913% Number of customers (millions) % Number of accounts (millions) % Ecobank Mobile App was released on 20 October 2016 Through our established products and services, we are now accelerating the growth of our consumer banking franchise to become a scale business run efficiently on digital platforms. This will deliver instant fulfilment to a customer base we aim to increase to 100 million customers by the end of Our people are at the core of our success, and we continue to invest heavily in them. We have recruited skilled resources from the fastmoving consumer goods and telecoms industries, and we continue to train, develop and support our teams to maximise both their career opportunities and their productivity. Our marketing communications concentrate on making us top of mind, particularly through use of social media and marketing campaigns on Facebook and Google which leverage the reach and scale afforded by these platforms. We continue to collaborate successfully with International Card Associations, International Money Transfer Organisations, Telcos, Global technology players and Fintechs to improve our speed to market and expand our distribution in an efficient manner. I am immensely appreciative of our growing number of customers across Africa, and globally, for their custom and loyalty to Ecobank. I also thank the Board, the consumer bank team and colleagues across the Bank for our progress and results to date, which is the result of joint effort, dedication and strong commitment throughout the bank. We remain confident and focused on delivering on our commitment to be the leading consumer financial services franchise in Africa in the medium term. Patrick Akinwuntan Group Executive Consumer Bank

29 Board and Management Reports Group Executive s Review 27 Our suite of needs-based solutions and services aims to support and encourage African entrepreneurship across a broad spectrum of commercial clients. Commercial Bank has embarked on a structured transformation project with the aim of becoming the leading commercial bank in sub-saharan Africa by revenues by Laurence do Rego Group Executive Commercial Bank

30 2017 Annual Report 28 Commercial Bank With our suite of needs-based solutions and services, Commercial Banking (CMB) aims to support and encourage African entrepreneurship across a broad spectrum of commercial clients, from small and medium enterprises (SMEs) to local corporates and non-governmental public sector customers. Our services focus on transactional banking, including trade finance, cash management and treasury offerings. CMB launched its five-year, three-phase business transformation strategy eighteen months ago. In Phase 1, which lasted a year, we rolled out strategic, risk and organizational structure initiatives that have improved our business performance by increasing transactional revenues for Trade Finance (+34%), FICC (+27%) and deposits (+8%). We have also trimmed our cost base to increase profits before impairments, leading to a reduction in our cost-to-income ratio to 74% (from 76% in 2016). This year, CMB has championed and supported several customer events and activities, including SME business forums and the launch of our new QR Merchants Apps (Master Pass and mvisa). To promote awareness of our trade services among prospective and existing customers, we organised Trade Finance forums in 19 countries. In the third quarter, CMB in Burkina Faso supported the leading local travel agency for the Hajj by providing financial services to 8,000 pilgrims, and collected CFA7.8 billion ($14.1 million) in deposits. Local strategic partnerships are a key element of our drive to promote entrepreneurship in sub- Saharan Africa. In 2017, we formed an agreement with Senegal s Ministry of Commerce to support the country s SMEs. We expect to develop many more such government partnerships across our footprint in In the second half of the year, we began the first year of Phase 2 of our strategic plan by deploying our go-to-market strategy. To date, we have prioritised core markets (focusing on the top 15 countries that account for over 85% of divisional revenues) and key non-credit and asset-light services (such as cash management, foreign exchange and trade finance), which we see as key growth drivers. We have also implemented a digitisation strategy to improve customer onboarding and servicing. We expect five emerging trends to drive the revival of Ecobank s commercial banking activities: The large contribution of transactional banking (70%) to divisional revenue across our key subsidiaries over the next five years, offering major opportunities in asset-light and cash management products; A nascent economic recovery in Nigeria, our single largest market, and continued strong and stable growth in niche markets within West Africa; Growing value chain opportunities in asset-rich sectors, especially trade, telecom and manufacturing; SME demands for services that go beyond lending to enable them to run their businesses better; The Group-wide focus on using digital services to improve customer experience, e.g., process automation, targeted communications, cross-selling and credit assessment. Mindful of these trends, CMB has embarked on a structured transformation project with the aim of becoming the leading commercial bank in sub-saharan Africa by revenues by The Lead Ecobank s Acceleration Programme (LEAP) has been developed to enhance the profitability of our existing customers and acquire new ones by improving our credit assessment and collection processes using digital and advanced customer analytics. We will begin to implement LEAP initiatives in We are confident that we have laid the solid foundations for CMB s sustained growth trajectory. As part of our vision to empower Africa s entrepreneurs to create positive socio-economic change across the continent, Ecobank is committed to providing its commercial banking customers with tailored, responsive services. Laurence do Rego Group Executive Commercial Bank

31 Board and Management Reports Group Executive s Review 29 Our performance demonstrates the continued strength of our diversified pan-african banking model, as well as our ability to continue growing in challenging environments. A year into the implementation of our vision of becoming the Trade Finance Bank for Middle Africa, our trade finance revenues have nearly doubled. Amin Manekia Group Executive Corporate and Investment Bank

32 2017 Annual Report 30 Corporate and Investment Bank The Corporate and Investment Bank (CIB) delivered a profit before tax of $268 million compared to a loss of $40 million in This performance demonstrates the continued strength of our diversified pan-african banking model, as well as our ability to continue growing in challenging environments. Despite the economic headwinds experienced in some of our key markets, including Nigeria, Ghana and Kenya we remain as the go-to Pan-African bank, providing cross-border solutions that are responsive to a dynamic business environment. Ecobank s Cash Management business leverages the latest technology to help our customers with their collections and payments in domestic or cross border locations and provide liquidity management and investment solutions to enable better optimization of their funds. Through our proprietary electronic banking channel, Ecobank Omni, our Commercial and Corporate banking customers can access online information on their accounts, for example, statements, balances and transaction details as well as initiate payments to suppliers, statutory bodies like tax revenue authorities, pension payments, dividends, healthcare contributions and salaries. In 2017, we saw both the volume and value of transactions processed via Omni more than double growing by 64% and 55% respectively indicating early success of our strategy to migrate all our clients unto digital platforms. Our digital collection channel Bankcollect also increased our collection volumes on the back of adoption by more revenue authorities for tax collections across our markets. Our innovative, Cash Management solutions continue to get industry recognition; for example, in 2017 Global Finance named Ecobank as the Best Bank for Payments and Collections in Africa an award that has been the preserve of international banks in the past. The Asian Banker went on to announce Ecobank Nigeria as The Best Cash Management Bank, Nigeria. A year into the implementation of our vision of becoming the Trade Finance Bank for Middle Africa, our trade finance revenues have nearly doubled. We completed the organizational set-up with a centralized team supporting the network, continued our structural re-alignment to trade finance and continued the roll-out of our digital trade solutions designed to revolutionize our trade customer experience and reduce the cost to serve. To ensure effective sales management we also completed a certification training program for over 800 Relationship Managers during the year. We successfully increased the trade asset exceeding US$1 billion; doubled the confirmation capacity of EBISA through risk sharing/de-risking to handle over US$500m Trade volumes; secured over US$500m in trade lines; increased strategic collaboration with our alliance & strategic partners Nedbank, QNB, AfDB, Afreximbank, Proparco and repositioned Ecobank as a key player in the export commodity financing for Cocoa and Cotton in Ghana, Cote d Ivoire, Cameroun, Benin and Burkina Faso. In 2017, the FICC business saw tremendous growth across the various business segments. The Client Sales business revenue grew by 7% with Trading and Balance Sheet Management growing by 57% and 54% respectively. The sustained growth in the Client base across the affiliates, efficient Balance Sheet management as well as strong Trading performance resulted in an overall growth in revenue of 30%. As we transit into a new financial year, the team has concluded plans to diversify the revenue base with the launch of the Currency and African Distribution Desk as well as the Hedging Distribution desk. In addition, we expect a stronger Fixed Income Distribution platform in the UEMOA and CEMAC regions which should increase client outreach as well as trading opportunities. To ensure operational efficiency, appropriate technology has also been deployed to aid the Business. The full implementation of Calypso commenced in Paris and Nigeria in 2017 with roll outs for the other regions expected in Q was a successful year for our Global Corporates Client Coverage Group as we aligned our coverage portfolio with the product-led engine growth of the Bank per Ecobank s 5-Year Strategy for Growth. The aim was to set the base for a Trade and Cash Management led-revenue growth as well as selected well-structured financings deals with a push on selfliquidating structures. Finally, we continued to work as One Firm with our colleagues from Commercial Bank and Consumer Bank to serve their clients, hence locking in the value chain around our Multinationals. We are well positioned to make Ecobank the partner of choice for leading multinationals operating in Middle Africa by leveraging on our local knowledge and innovative solutions. The International Organizations (IO) business has delivered a year-on-year revenue increase of more than 20%. Evidence of our strong ties with global development sector stakeholders is our success in multiple tenders for banking services, cash distributionled programs, cash-alternative structures and contractual agreements. These agreements extend to all Ecobank subsidiaries creating a formidable revenue base for now and the future. In addition, Ecobank has been selected as a pre-approved money services supplier for the Global Fund. This positions Ecobank as a supplier of choice in digital channels reaching an extensive network of grant implementers and collaborating with a prominent NGO group on a framework for mobile payments. We have also won new regional Cash Management mandates from numerous African regional multilateral institutions and Regional Economic Councils. Our Pan-African foot print, common technology platform and a centralized hub for systems integration and processing continues to be a unique value proposition that is very relevant to international organizations looking to access Africa.

33 Board and Management Reports Corporate and Investment Bank 31 Our Investment Banking team remains focused on Loan and Debt Capital Market opportunities across sub-saharan Africa. In 2017, we executed a number of transactions, including a CFA Franc 155 billion crude oil import financing for Societe Ivoirienne de Raffinage (SIR) in Cote d Ivoire, a CFA Franc 85 billion loan for the State of Senegal to pre-finance advance payments related to the construction of the Regional Express Train (TER) in Dakar and a EUR 250 million medium term loan for the State of Côte d Ivoire to fund public investments. The Securities, Wealth and Asset Management division supports retail and institutional clients with marketrelated solutions and fund management services, through two business verticals, Securities and Investor Services and Asset and Wealth Management (AWM). In 2017, this Product House completed landmark transactions such as the successful IPO of Ecobank Côte d Ivoire raising XOF45bn ($80 million) at 2.8x book value on offers of XOF108bn. The successful listing of ETI USD 150 million on the International Securities Market of the London Stock Exchange is also a demonstration of the growing capabilities of this business. The Asset and Wealth Management business has also recorded strong client activity with a yearon-year growth of 51%. In response to the operating environment remaining subdued, albeit with signs of recovery, we will focus on increasing our Asset base with the launch of a new Wealth Management product and leverage further the strong Ecobank digital distribution platform. In 2017, the International platform of Ecobank (Paris- London-Beijing-Dubai) continued to be a key hub for its customers and the affiliates through supporting their FX, Trade and Cash transactions. Despite the challenging economic environment, a slowdown of the African growth and depreciated African currencies and commodities prices, EBI SA FX platform remained a market leader, highly active and maintained its number 1 ranking on most of the 25+ African currencies transacted. The development of a new Structured Trade Finance offer, with tailored-made solutions, will reinforce this capacity in Through the Group-wide initiative, the International platform will also offer a European Digital Banking capability to Retail clients, thanks to the set-up of a dedicated subsidiary based in France. FICC = Fixed income, currencies and commodities. During 2017, our Research team based in London, Lagos and Nairobi deepened its support for group businesses. Major projects included building macroeconomic scenarios for all 36 markets in our African footprint for the risk team s IFRS9 project, taking part in the trade team s London roadshow with insurance brokers (arranged by Miller). In 2017 the team published over 200 reports and launched a web version of its popular Middle Africa FICC guidebook: The team also started producing research on the mobile, digital and disruptive sectors in Middle Africa, directly supporting the Group s digitization strategy. Despite tightening Credit and Compliance markets across the region, 2017 saw a further strengthening of the Group s access to correspondent bank lines from various Financial Institutions partners. The year ended with aggregate non-committed lines of credit of over USD4billion. Access to funded lines increased by 18% over the previous year s level. Centralized teams worked to ensure the effective utilization of this access across the network. Amin Manekia Group Executive Corporate and Investment Bank

34 2017 Annual Report 32 Corporate Governance Ecobank recognises the importance of corporate governance in building a sustainable and cohesive organisation. It seeks to implement the highest of standards and best practice to ensure fairness, transparency and accountability for the benefit of all its stakeholders. The Board is committed to improving the governance of the institution and is working closely with regulators and other stakeholders to further strengthen this area.

35 Corporate Governance 33 Transfer Payee Mom Emmanuel Kofi Amount: $50.00 PIN: SEND

36 2017 Annual Report 34 Board of Directors Emmanuel Ikazoboh Chairman Non-Executive Director Nigeriangerian 2. Ade Ayeyemi Executive Director Group Chief Executive Officer Nigerian 3. Alain F. Nkontchou Non-Executive Director Cameroonian 4. Dr. Catherine W. Ngahu Non-Executive Director Kenyan 5. David O Sullivan Non-Executive Director Irish 6. Monish Dutt Non-Executive Director Indian 7. Bashir M. Ifo Non-Executive Director Nigerian

37 Corporate Governance Tei Mante Non-Executive Director Ghanaian 9. Dolika E. S. Banda Non-Executive Director Zambian 10. Abdulla M. Al Khalifa Non-Executive Director Qatari 11. Brian Kennedy Non-Executive Director South African 12. Dr. Daniel M. Matjila Non-Executive Director South African 13. Mfundo C. Nkuhlu Non-Executive Director South African 14. Greg Davis Executive Director Group Chief Financial Officer British

38 2017 Annual Report 36 Directors biographies Emmanuel Ikazoboh (68) Chairman Non-Executive Director since 2014 Independent Nigerian Emmanuel Ikazoboh has more than 30 years experience in senior management roles, executing high profile advisory assignments for public and private sector clients in Nigeria, Côte d Ivoire, Cameroon and South Africa. He spent most of his career with Deloitte and Touche, holding the position of Chairman and CEO of Deloitte West and Central Africa between 2007 and From 2010 to 2011, he served as Interim Administrator of the Nigerian Stock Exchange. He was appointed by Nigeria s Securities & Exchange Commission to restructure the stock exchange, equities market, stockbrokerage and corporate governance processes to meet with best practice and put in place a new management team. As Chairman of Nigeria s Central Securities Clearing System, Emmanuel led its restructuring and transformation to conform to global standards. Ade Ayeyemi (55) Executive Director since 2015 Group Chief Executive Officer Nigerian Ade Ayeyemi, was appointed Group Chief Executive Officer of Ecobank in June 2015 and assumed office on September 1, He is an experienced banker, who before joining Ecobank, had a long and successful career with Citigroup, where he was CEO of Citigroup s Sub-Saharan Africa division based in Johannesburg. Ade is an accounting graduate of the University of Ife, now Obafemi Awolowo University, Ile-Ife, Nigeria, where he earned a Bachelor of Science degree with First Class Honours. He also studied at the University of London and is an alumnus of the Harvard Business School s Advanced Management Programme. A Chartered Accountant, his many interests include business strategy, economics, process engineering and technology. He is a member of the Board of Dangote Cement group and serves as the chairman of the Governance and Remunerations Committee. He is currently the only African board representative of the International Institute for Sustainable Development (IISD) in Canada and serves as the Chairman of the Audit and Risk Committee. Emmanuel is a UK Certified Accountant and a Fellow of the Chartered Association of Certified Accountants, the Institute of Chartered Accountants (Nigeria) and the Nigeria Institute of Taxation. He holds an MBA in Financial Management and Marketing from Manchester University s Business School. He was also one of the top CEOs seconded to the Kellogg Senior Management School, Northwestern University Chicago, USA.

39 Corporate Governance 37 Abdulla M. Al Khalifa (44) Non-Executive Director since 2015 Qatari Abdulla Mubarak Al Khalifa is Executive General Manager and Chief Business Officer at Qatar National Bank Group (QNB), now the largest bank in the Middle East and Africa, with activities in 30 countries. With over 20 years of banking experience, covering Strategic Planning, Sales and Marketing, Risk Management, Business Partnerships, M&A and Customer Relations, Abdulla drives QNB to achieve its strategic goals and mission. He has held a variety of executive positions in QNB s wholesale banking division since joining QNB in 1996 and has made a significant contribution to the growth of the bank. Abdulla is currently responsible for group-wide business functions, including Group Corporate and Institutional Banking, Retail Banking, International Banking Division, Group Treasury, Group Asset and Wealth Management, QNB Capital and QNB Financial Services. In addition to his non-executive role with Ecobank, Abdulla is also a member of the following Executive Boards: QNB Capital, Qatar; QNB Al Ahli, Egypt; Housing Bank Trade & Finance, Jordan and QNB Finansbank, Turkey. He holds a Bachelor s Degree in Business Administration from Eastern Washington University (USA) and speaks English and Arabic fluently. ETI Board Committees: Finance & Regulatory Requirements Committee Governance Committee Dolika E. S. Banda (55) Non-Executive Director since 2014 Independent Zambian Dolika Banda is currently the CEO of African Risk Capacity, an agency of the African Union set up to help Member States improve their climate response systems. She is also an independent consultant, with over 25 years experience in international banking and financial management, who lately has focused on the economic development of sub-saharan Africa. From 2013 to 2015, she served as Regional Director and Private Equity Fund of Funds Director for Africa for the Commonwealth Development Company in the UK. Prior to this, she was a senior advisor and director of the International Finance Corporation (IFC) for 16 years. She has also held senior Corporate and Merchant Banking roles at Barclays Bank, Zambia, and worked in Financial Control, Credit, Treasury and International Relationships with Citibank, Zambia. Dolika is a non-executive director of Harith General Partners, a pan-african infrastructure fund, and DFID/UK AID s Financial Sector Deepening Africa and Financial Sector Deepening Zambia. She also chairs the Focus Investment Group, a SME financial services provider in Zambia. She has a degree in International Business and Marketing from Schiller International University (UK) and a Masters in International Business and Banking from Schiller University (France). ETI Board Committees: Social, Ethics & Reputation Committee Governance Committee Greg Davis (38) Executive Director since 2017 Group Chief Financial Officer British Greg Davis joined Ecobank as Group Chief Financial Officer in October Greg has nearly 2 decades of banking and financial services experience and is an accomplished banking CFO. Prior to joining Ecobank, he had a successful career with both Standard Bank and Barclays PLC, most recently holding the role of CFO for Standard Bank s Africa division encompassing 17 countries. He has worked in banking in Africa for over 10 years building on a successful career in financial services in London before that. A Chartered Accountant with The Institute of Chartered Accountants in England and Wales, Greg holds a Bachelor of Arts honours degree in Economic and Social History from the University of Leicester, England. He was selected for Institute of International Finance (IIF) Future Leaders Class of 2016 representing financial institutions across the world.

40 2017 Annual Report 38 Directors biographies Monish Dutt (59) Non-Executive Director since 2017 Indian Monish Dutt is a seasoned investment professional and a consultant on emerging markets. He is a Director of Sagicor Financial Corporation, a pan-caribbean insurance group, with assets of $6 billion. He also holds board positions with Sagicor Life Insurance Corporation, the Group s US operations, and Sagicor Bank, Jamaica. He is a Director of Peak Reinsurance, Hong Kong, part of the Fosun Group of China. He is also a member of the Washington-based Board of FINCA Microfinance Holdings, which has operations in over 20 countries in Eurasia, Latin America and Africa. Prior to this, he worked for 25 years with the International Finance Corporation (IFC). Between 2004 and 2011, Monish was IFC s Chief Credit Officer for Global Financial Institutions and Private Equity Funds, a Director level role, where he oversaw portfolio performance and represented IFC on the boards of investee companies. Prior to this, he was the Divisional Head of the Baltics, Central Europe, Turkey and Balkans Group, where he led investments in several privatisations. He previously held regional investment officer roles, covering Africa, Asia, Central and Eastern Europe and Latin America. Before joining the IFC, Monish worked with Ernst & Young in London. He has an MBA, majoring in Finance, from the London Business School and an honours degree in Economics from St. Stephen s College, University of Delhi. Monish is a Chartered Accountant and accredited as a Fellow by the Institute of Chartered Accountants (UK). Monish is a nominee of IFC. ETI Board Committees: Audit and Compliance Committee Risk Committee Bashir M. Ifo (58) Non-Executive Director since 2011 Nigerian Bashir Mamman Ifo is currently the President of the ECOWAS Bank for Investment and Development ( EBID ) in Togo. He has more than 30 years of experience within the public and private sectors. He has held several senior management roles at EBID, including Head of the Financial Operations Division, Director of the Treasury Department, Head of Finance and Administration, Acting Managing Director of the former ECOWAS Regional Investment Bank ( ERIB ) and Vice President for Finance and Corporate Services. From 1982 to 1995, Mr. Ifo worked in both the public and private sectors in Nigeria. Bashir is a non-executive director on the Board of Asky Airlines. He holds a Bachelor s degree in Business Administration (Banking and Finance) and an MBA in Finance, both from the Ahmadu Bello University, Zaria, Nigeria. He is also an Honorary Senior Member of the Chartered Institute of Bankers of Nigeria (CIBN). Mr Ifo was honoured with the award of the Grand Officer of the National Order of Benin by the Republic of Benin. ETI Board Committees: Nomination & Remuneration Committee; Audit and Compliance Committee Brian Kennedy (57) Non-Executive Director since 2017 South African Brian Kennedy is currently Group Managing Executive, Nedbank Corporate and Investment Banking (Nedbank CIB). Brian has been working in investment banking for the past 29 years, the last 21 of which have been with the Nedbank Group. He worked in the engineering industry for six years and moved into investment banking at FirstCorp Merchant Bank in In 1996, Brian joined BoE NatWest and was appointed Managing Director of BoE Merchant Bank in He led the Capital Markets business in Nedbank following the merger with and incorporation of BoE, and in November 2003 was appointed Managing Executive of Nedbank Capital and member of the Nedbank Group Executive Committee. He is also responsible for the London operations of Nedbank. Following the integration of Nedbank Capital and Nedbank Corporate in 2015 into a single client-facing wholesale business, Brian has been leading the teams responsible for developing and driving the overall strategy, positioning and business growth. Brian holds a BSc (Eng) (cum laude), MSc (Eng), MBA, AMP (Harvard, USA) Brian is a nominee of Nedbank Group Limited. ETI Board Committees: Audit and Compliance Committee Nomination and Remuneration Committee

41 Corporate Governance 39 Tei Mante (68) Non-Executive Director since 2014 Independent Ghanaian Tei Mante is an economic and financial consultant with forty years of experience in financial markets, including investment banking, project finance and private equity. He worked with the World Bank Group in Washington D.C. from 1975 to 2000, where, amongst a variety of assignments, he headed up the Africa and Agribusiness Departments of the International Finance Corporation (IFC). Tei has also worked as a consultant for the African Development Bank, the Government of Ghana, the European Commission, UNECA and the Government of Sierra Leone. He served as a special advisor to the Ghanaian Government s Economic Management team between 2001 and He was Chairman of the Board of Ecobank Ghana Ltd from 2006 to He is currently an Independent member of the Investment Committee of the West Africa Emerging Markets Growth Fund. He graduated with a BSc in Administration from The University of Ghana and holds an MBA from Columbia University, New York. He is also an alumnus of INSEAD (IEP). ETI Board Committees: Finance & Regulatory Requirements Committee Risk Committee Dr. Daniel M. Matjila (55) Non-Executive Director since 2012 South African Daniel Matjila is a highly respected figure in the international asset management industry, with considerable experience in investment management. Dr Dan is currently the CEO and Executive Director of the Public Investment Corporation (PIC), the largest asset manager in Africa. He is responsible for PIC s overall investment strategy and manages an investment portfolio valued in excess $145 billion, across all asset classes. Highlights of his investment career include spearheading the development and implementation of PIC s Offshore Investment and Rest of Africa Investment Strategies and the re-purposing of the Alternative Asset Mandates for clients, which resulted in portfolio diversification benefits and revenue improvement for PIC. He has positioned PIC to be among the top asset allocators that incorporate ESG issues in their investment process, receiving numerous awards and accolades as a result. Dr. Dan was previously Chief Investment Officer of PIC and, prior to this held senior positions in quantitative fund management with Stanlib and Anglo American, as well as being a Senior Lecturer in Applied Mathematics. Amongst many academic and professional qualifications, Dr. Dan holds a PhD in Mathematics from the University of Witwatersrand, a postgraduate Diploma in Mathematical Finance from Oxford University and an MSc in Applied Mathematics from Rhodes University. ETI Board Committees: Finance and Regulatory Requirements Committee Governance Committee Dr. Catherine W. Ngahu (56) Non-Executive Director since 2016 Independent Kenyan Dr. Catherine Ngahu is a consultant, educator and entrepreneur with over 25 years of experience in business strategy, marketing, research, communications, ICT policy and corporate governance. She is a senior lecturer at the University of Nairobi and is the founder and Executive Chairman of SBO Research Ltd. She has consulted for a wide range of organizations in the financial services, FMCG, energy, ICT, and manufacturing sectors in Africa. Dr. Ngahu has extensive board experience and is currently the Chairperson of the Universal Service Advisory Council of the Communication Authority of Kenya and Uchumi Supermarkets Limited, a Nairobi Stock Exchange (NSE) listed company. She is a member of the boards of AAR Insurance and Eveready EA Limited. She was awarded the Elder of the Order of the Burning Spear (EBS) in 2011 by the President of the Republic of Kenya for devoted service. She holds a PhD in Business Administration, a Master of Business Administration and a Bachelor of Education (First Class Honors) from the University of Nairobi. She studied entrepreneurship and small business systems as a Business Research Fellow at Wharton Business School, University of Pennsylvania. She also has several certifications in ICT and corporate governance. ETI Board Committees: Governance Committee Social, Ethics and Reputation Committee

42 2017 Annual Report 40 Directors biographies Alain F. Nkontchou (54) Non-Executive Director since 2014 Independent Cameroonian Alain Nkontchou is the Managing Partner and co-founder of Enko Capital Management LLP, an asset management company based in London and Johannesburg, which focuses on African investment opportunities. Alain was an advisor of Laurent Perrier, a champagne company in France, having also been a non-executive director from 1999 to He previously worked in London between 1995 and 2008 as Managing Director of Credit Suisse s Global Macro Trading Group and also with JP Morgan Chase & Co in the same capacity. Between 1989 and 1994, he worked with Chemical Bank in Paris and New York, where he became Vice-President, Head of Trading and Sales. Alain has a track record of business success, having generated significant dollar revenues for each of these bulge bracket institutions. Alain has an MSc. in Electrical Engineering from Supelec and P.M. Curie University, Paris, and an MSc in Finance and Accounting from ESCP (Ecole Supérieure de Commerce de Paris). ETI Board Committees: Audit & Compliance Committee Risk Committee Mfundo Clement Nkuhlu (51) Non-Executive Director since 2015 South African Mfundo Nkuhlu has served as Chief Operating Officer and Executive Director of Nedbank Limited and Nedbank Group Limited since January He has worked in senior roles with Nedbank for 13 years, including Managing Executive of Nedbank Corporate ( ), Managing Executive of Corporate Banking ( ) and Managing Executive of Nedbank Africa ( ). Prior to joining Nedbank, he was the executive responsible for strategy, revenue and economic analysis at the South African Revenue Services (SARS). He also worked for the Department of Trade and Industry as Chief Director for Africa and the New Partnership for Africa s Development (NEPAD) programme. Mfundo holds a BA Honours degree from University of the Western Cape, and completed a course on Strategic Management in Banking at INSEAD (France). He is an alumnus of the Advanced Management Programme (AMP) from Harvard Business School (US). ETI Board Committees: Finance and Regulatory Requirements Committee Risk Committee David O Sullivan (43) Non-Executive Director since 2017 Irish David O Sullivan is Head of Group Legal for QNB, a position he has been holding since He has over 20 years experience as a lawyer and investment banker working on corporate and financing transactions in the emerging markets (principally in the Middle East, Africa and Eastern Europe). Prior to his current position, he was Director, Gulf Investment Incorporation, , Associate Director, HSBC Corporate Finance and Senior Associate at Clifford Chance LLP, London, Dubai and Moscow from He played a leading role in QNB s investment in Ecobank. Since 2016, he has been a Director of the QNB Global Funds ICAV (an EU fund authorised by the Central Bank of Ireland with sub-funds focussing on sectors including MENA and Sub-Saharan Africa). Mr. O Sullivan is a Chartered Financial Analyst and a Solicitor, Law Society of England and Wales. He has a Law degree (LLB) from the Trinity College, Dublin. David O Sullivan is a nominee of Qatar National Bank. ETI Board Committees: Nomination and Remuneration Committee Social, Ethics & Reputation Committee

43 Corporate Governance Directors report 41 Principal activity Ecobank Transnational Incorporated ( ETI ), the parent company of the Ecobank Group, is a bank holding public limited liability company incorporated in Lomé, Togo on 3 October 1985 under a private sector initiative led by the Federation of West African Chambers of Commerce and Industry and the Economic Community of West African States (ECOWAS). Its principal activity is the creation and acquisition of operating units for the provision of banking, economic, financial and development services. The Ecobank Group is the leading Pan African bank with operations in 36 countries across the continent. The Group also has a licensed operation in Paris and representative offices in Beijing, Dubai, Johannesburg, and London. Business review In 2017, ETI continued to lead the deployment of the revised Ecobank strategy, dubbed Roadmap to leadership and digitisation strategy, which sets out a framework on generating sustainable shareholder returns by building a customer centric organisation with a simplified business model anchored on improving risk culture, operational efficiency and excellence. ETI has significantly increased its digital offerings to cater for the broad and diversified pool of customers on the Ecobank network and also to attract potential customers to the Ecobank franchise. A detailed review of the Group s business and financial performance for 2017 is contained in the Business and Financial Review section of the annual report on page 102. Results ETI made a profit after tax of US$182 million for the financial year ended 31 December The detailed results for 2017 are set out in the consolidated financial statements. The Board of Directors approved the financial statements of the parent company and the Group for the year ended 31 December 2017 at its meeting of 22 February Messrs Emmanuel Ikazoboh, Ade Ayeyemi and Gregory Davis were authorised to sign the accounts on behalf of the Board. International Financial Reporting Standards The accounts of both the parent company and the Group are prepared in accordance with International Financial Reporting Standards ( IFRS ). Dividend The Directors do not recommend the payment of dividend for the 2017 financial year. Capital The Authorized Capital of the Company is US$1,276,664,511 as at 31 December The ordinary shares of the company continue to be traded on the three West African stock exchanges, namely, the Bourse Régionale des Valeurs Mobilières (BRVM) in Abidjan, the Ghana Stock Exchange (GSE) in Accra and the Nigerian Stock Exchange (NSE) in Lagos. Directors The names of the Directors of the Company appear on pages 34 and 35 of this annual report. As of 31 December 2017, the Board was composed of fourteen (14) Directors: twelve (12) Non-Executive and two (2) Executive Directors. During the year, Messrs Monish Dutt, Brian Kennedy and David O Sullivan were co-opted to the Board and will be presented for the ratification of their appointment at the Annual General Meeting of The Board will propose a resolution for the renewal of the mandates of Ms Dolika Banda, Mr. Bashir Ifo and Mr. Alain Nkontchou at the Annual General Meeting of In 2017, Dr Adesegun Akin-Olugbade, Mr. Kadita Tshibaka and Mr. Ignace Clomegah retired from the Board. The Board of Directors met seven (7) times during the year. Each of the Board Committees, namely the Governance Committee, Audit & Compliance Committee, Risk Committee, Finance & Regulatory Requirements Committee, Nomination & Remuneration Committee and the Social, Ethics & Reputation Committee met three (3) times to deliberate on vissues under their respective responsibilities. Corporate governance and compliance The Group s corporate governance practices continue to improve. More details are highlighted in the Corporate Governance Report on page 43. The Company continues to maintain corporate policies and standards designed to encourage good and transparent corporate governance, avoid potential conflicts of interest and promote ethical business practices. The Board is committed to improving the governance of the institution and is working closely with regulators and other stakeholders to strengthen this area.

44 2017 Annual Report 42 Directors report Subsidiaries In 2017, the number of ETI subsidiaries remained unchanged from The Group is focused on translating the achieved pan-african scale advantage to sustainable long-term value for stakeholders. ETI has a majority equity interest in all its subsidiaries and provides them with management, operational, technical, business development, training and advisory services. The total number of ETI subsidiaries consolidated in this Annual Report is 53. Post balance sheet events There were no post balance sheet events that could materially affect either the reported state of affairs of the Company and the Group as at 31 December 2017, or the result 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 and other financial information included in this annual report, 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. Independent External Auditors The Joint Auditors Deloitte & Touche, Nigeria and Grant Thornton, Côte d Ivoire have indicated their willingness to continue in office. A resolution will be presented at the 2018 Annual General Meeting to renew their mandates. Dated in Lomé, February 22, 2018 By Order of the Board, Madibinet Cissé Company Secretary These responsibilities include ensuring that: Adequate internal control procedures are instituted to safeguard assets and to 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; and The financial statements are prepared on a going concern basis unless it is inappropriate to presume that the company will continue in business.

45 Corporate Governance Corporate Governance 43 Introduction Ecobank recognises the importance of Corporate Governance in building a sustainable and cohesive organisation. It seeks to implement the highest standards and best practice in corporate governance, in accordance with the most widely accepted codes, thereby ensuring fairness, transparency and accountability to its shareholders and other stakeholders. As an independent pan-african banking group, founded on the spirit of regional co-operation and the economic integration of African countries, Ecobank acknowledges the critical nature of its relationships with all the regulatory bodies across its footprint in executing its vision and discharging its responsibilities with respect to its customers, lenders, shareholders and the communities within which it operates. This ensures that their needs and interests are taken into account in a balanced and transparent manner. Ecobank believes that only good governance will deliver sustained business performance and, ultimately, appropriate returns for shareholders. These objectives are clearly articulated within our corporate literature. Corporate literature The Articles of Association of the Company, and those of its subsidiaries, provide a clear delineation and separation of the rights and responsibilities of the Board, Executive Management and shareholders to ensure the non-interference of the Board in management functions and the full disclosure of information to shareholders. Whilst the Board approves policies and general strategy, it is the duty of Executive Management to ensure the day-to-day implementation of policies and strategies adopted by the Board. The Annual General Meeting is a key forum for sharing information and decision-making, engendering the active participation of shareholders. Ecobank shareholders right to access information is an essential principle underpinning the Corporate Governance philosophy of the Group, which promotes the establishment of meaningful dialogue. The Group Corporate Governance Charter sets out the structures and processes to be followed to build credibility and ensure transparency and accountability across the Group. It also defines appropriate strategies and policies to enable the execution of Ecobank s overall vision, which is to be recognised as a world class pan-african banking group. The Governance Charter is regularly updated to reflect a constantly evolving business environment. Delegation of power and authority Since the ultimate corporate power belongs to the shareholders, Ecobank ensures that their rights are both respected and exercised effectively. Shareholders delegate their authority to the Board and subsequently to the Board Committees. The Board then delegates the day-to-day operations of the Group to Executive Management. The scope of the authority for each of these corporate bodies is clearly defined and agreed. In addition to those of our shareholders, the legitimate interests of all of its stakeholders are duly recognised and taken into account. There are clear and published terms of reference and accountability for committees at Board and Executive levels. The Board is structured in a manner to enable it add value to the Group through its composition, size and the commitment of all of its members. Board Responsibilities The primary responsibility of the Board is to act in the best interests of the Group and to foster the long-term success of Ecobank, in accordance with legal requirements and its responsibilities to shareholders, regulators and other stakeholders. The Board ensures that the necessary leadership, financial and human resources are made available to enable the Group to achieve its objectives. It confirms that there are no potential conflicts of interest between Executive Management, members of the Board and shareholders. The Board also ensures that reporting lines of key control functions, such as Internal Audit, Compliance and Risk Management, are structured to ensure the effectiveness of checks and balances and the independence of such functions. The Board reports annually to shareholders on the integrity and timely disclosure of the financial performance of Ecobank via the Group s consolidated annual report and accounts, including other substantive financial and non-financial information, about which shareholders and potential investors should be informed. The Board is responsible for assessing the ability of the Group to meet its obligations and is accountable to its shareholders. The Board encourages active dialogue with shareholders and potential investors, based on a mutual understanding of objectives and expectations.

46 2017 Annual Report 44 Appointment of Board Directors The process of nomination and appointment of the Board of Directors has been clearly defined in the Governance Charter. It provides for a Nomination and Remuneration Committee, which is charged with the selection and appointment of Board Directors. Prior to any appointment, this Committee defines the functions and core competencies for each Directorship role. It then develops suitable selection criteria, screens and interviews potential candidates. The Committee then recommends the short-listed candidates to the Board. Thereafter, successful candidates are presented for the approval of the Annual General Meeting. Directors appointed during the year are co-opted by the Board and then presented for ratification at the following Annual General Meeting. New Directors are issued with letters of appointment including clear terms and conditions regarding the discharge of their duties. The following competencies are also taken into account in appointing Directors to the Board. Demonstrable business acumen Directors must have considerable business experience, together with proven understanding of corporate and business processes, thanks to a successful track record and an impeccable reputation in the business community. Leadership and Board experience A recognised ability to add value and display leadership, together with an ability to assert balanced and constructive views at Board level. Special technical skills or expertise Experience in international banking best practice, with specific reference to African markets. This encompasses commercial banking, retail banking, investment banking, treasury, capital markets and fund raising, asset management, central banking, rating agencies, IT/digital banking, accounting and auditing, regulation and risk management, succession planning, executive compensation, government relations and political intelligence, international insurance, law and taxation, investor relations and international trade, especially relating to commodities. The Board as a whole is expected to exhibit these competencies, reflecting the combined experience of all the Directors. Integrity Directors should demonstrate high levels of integrity, professional and personal ethics, as well as values consistent with those of the Ecobank Group. Character Directors should exhibit strength of character and the ability and willingness to challenge and probe. This includes sound business judgement, strong interpersonal skills and the ability to listen carefully and communicate with clarity and objectivity. Time commitment Directors need to be able to dedicate sufficient time to carry out the duties of a Non-Executive Director adequately. The Articles of Association of the Company limit the tenure of Directors to nine (9) years. Directors are appointed for an initial period of three years and are eligible for re-appointment. However, re-appointment is not automatic. Directors are required to be evaluated periodically; the outcome of this evaluation and the competency needs of the Board, as well as the Directors contributions and input, are taken into account in assessing potential re-appointments. There are clear guidelines for the dismissal/ retirement of a Director, in addition to statutory provisions. A Director may be dismissed for breach of their fiduciary duties under the terms of their letter of appointment or other corporate documents or for underperformance. Furthermore, the Board may recommend the replacement of the nominee or representative of an institutional shareholder where he or she does not possess the requisite competencies required by the Board or where his or her performance is found to be unsatisfactory.

47 Corporate Governance 45 Board composition and structure The Articles of Association of the Company limit the size of the Board to fifteen (15) members. The Governance Charter of the Company was amended in 2017 to provide for a board composition that is more representative of shareholders interest. It stipulates that the Board shall comprise nominees of any shareholder for each ten per centum (10%) of the issued share capital of ETI, or multiple thereof, that such a shareholder may hold directly, subject to a maximum of two seats per shareholder, one (1) representative of ECOWAS Bank for Investment & Development (EBID), no more than two (2) executive directors, including the GCEO, and a minimum of five (5) independent directors, including directors selected from the geographical clusters where the Group operates, and the requisite number of additional independent directors that are required to fill the remaining seats. The composition of the Board takes into account, as much as practicably possible, the geographical coverage of the Group, relevant professional experience, shareholders representation and gender equality. There are currently six (6) committees, namely: 1. Audit and Compliance Committee 2. Risk Committee 3. Governance Committee 4. Nomination and Remuneration Committee 5. Finance and Regulatory Requirements Committee 6. Social, Ethics and Reputation Committee Given the Group s emphasis on digitalisation and the associated risks, such as cyber crime, data security, reputational risk and vendor (Fintech) risk, the Board of ETI agreed at its last meeting of 2017 to establish a dedicated Board Committee to assist the Board in the oversight of all the Group s IT functions. Mindful of the need to maintain efficiency, the Board agreed that the number of Committees should be maintained at six, leading to the merger of the Governance and Nomination and Remuneration Committees, effective from The charters of the various Board Committees have been established in accordance with best practice. The composition of the Board Committees excludes the membership of Executive Directors. Also, for the purposes of revitalising the Board Committees, the tenure of members has been restricted to a maximum of two (2) three-year terms, which may be extended, if it is deemed appropriate. Independence of Directors The Governance Charter has an independence evaluation policy and a definition of an Independent Director, which adopts the following principles: Not an officer or employee: Neither the Director, nor an immediate family member of the Director is, or within the last two years has been, an officer or employee of a member of the Group. An immediate family member of an individual is the individual s spouse, parent, child, sibling, mother-in-law, father in-law, sister-in-law, brother-in-law, daughter-in-law, son-in-law and anyone, other than an employee, who resides in the individual s home. An officer of the Group includes an individual who performs a policy-making function on behalf of Ecobank, or who makes, or participates in, decisions that affect all or a substantial part of the business of Ecobank, whether or not the individual is an employee and whether or not the individual does so directly or through another organisation. Not a substantial shareholder: The Director or an immediate family member is not, nor has not been in the last three years, a substantial shareholder of a member of the Group or affiliated with a substantial shareholder of a member of the Group. A substantial shareholder of ETI is a person who beneficially owns, directly or indirectly, or exercises control or direction over, 0.1% or more of the voting rights of the Company, or 1% of the shares of a subsidiary or affiliate of the Company. An individual is affiliated with ETI if the individual is a Director, officer, employee, principal, partner or Managing Director of the Group, or occupies a similar position within the Group, or is a substantial shareholder of a member of the Group. No material contractual relationship: The Director does not have any material contractual relationship with a member of the Group, other than as a Director. The test of whether a contractual relationship is material will be based on all the circumstances relevant to the Director. Does not receive consulting or other advisory fees or payments: Neither the Director, nor an immediate family member or related entity of the Director, receives, or within the last three years has received, consulting or other advisory fees or payments from the Group, other than compensation for Board services, payments arising from investments in securities of Ecobank or, in the case of an immediate family member who is not an officer of a member of the Group, compensation for services as an employee of a member of the Group. An entity is a related entity of a Director, if the Director, or an immediate family member of the Director, is a Director, officer, employee, principal, partner or Managing Director of, or occupies a similar position within, the entity or is a substantial shareholder of the entity.

48 2017 Annual Report 46 Corporate Governance Does not receive incentive compensation: The Director does not participate in any share-based incentive scheme or performance-related pay scheme of the Group. Is not a professional consultant or advisor: Neither the Director, nor an immediate family member of the Director, is, or within the last three years has been, an auditor, other professional consultant or advisor to a member of the Group or affiliated with an auditor or other professional consultant or advisor to a member of the Group. A professional consultant or advisor includes an entity that provides accounting, actuarial, consulting, legal, investment banking or financial advisory services. Is not a material supplier or customer: Neither the Director nor an immediate family member of the Director is, or within the last three years has been, a material supplier or customer of the Group or affiliated with a material supplier or customer of the Group. A material supplier or customer of the Group is a person to which the Group made or from which the Group received payments (other than payments arising from investments in securities of the Company) in any year that exceed 5% of the consolidated annual gross revenues of the entity. Has not served too long: The Director has not served on the Board for a period that, in the determination of the Board, could, or could reasonably be perceived to, materially interfere with the Director s ability to act in the best interests of the Group. A Director may be considered to have served too long on the Board for the purposes of the assessment of his/her independence, if he/she has been a Board member for more than six years. Has no other material business relationship: Neither the Director nor an immediate family member or related entity of the Director has, or within the last three years has had, directly or indirectly, any other material business relationship with the Group. The test of whether a business relationship is material will be based on the circumstances relevant to the Director. Has no significant links with other Directors: The Director does not hold cross directorships or have any significant links with any other Director (e.g. through involvement with other entities) that would materially interfere with the ability of the Director to exercise independent judgment or to act in the best interests of the Group. Is independent: The Director must be independent in character and judgment. Is not affiliated with a charitable organisation: to which the Ecobank Foundation, or any other member of the Group, has made significant contributions. Is free from any relationship with Ecobank: The Director has no relationship with its Executive management or major shareholders that may impair, or appear to impair, the Director s abilities to make independent judgment. At least a third of the Board s members are expected to be independent Directors. Generally, a Director will be considered to be independent if he or she satisfies all of the criteria set out above. A Director may, however, still be considered to be independent even though he/she does not satisfy one or more of the criteria, if the Board determines that such criteria will not impair his/her independence. The independence of the Directors is assessed annually. As at the end of December 2017, there were fourteen Directors on the Board, including five independent directors, namely Mr. Emmanuel Ikazoboh, Ms. Dolika Banda, Mr. Tei Mante, Dr. Catherine Ngahu and Mr. Alain Nkontchou. There is a sixth independent director seat that has been allocated to the UEMOA region that is currently in the process of being filled. Although not all of the Non-Executive Directors need to meet the Independent Director definition above, all should be capable of exercising independent judgment and decision-making. Board and Directors performance The Board takes a number of steps to ensure that Directors discharge their duties with the requisite competence and skills. Firstly, prior to an appointment, the Nomination and Remuneration Committee is required to carry out a competency assessment of potential candidates to ensure that they meet the necessary criteria. The Governance Charter sets minimum competency requirements for each Director that must be met. Additionally, Directors receive appropriate induction and are expected to undertake on-going professional development to meet the ever-changing demands of their roles. All Directors are expected to avail themselves of appropriate training courses, where necessary and at the earliest opportunity, to fulfil their competency requirements. Evaluation of the Board In accordance with the requirements of the Governance Charter, the firm Board Practice conducted an evaluation of the ETI Board for the year ended The following is a summary of the findings: i. The Board is professional, exhibiting expertise and a diversity of skills; ii. The governance structures, including guiding documents and committees, are appropriate and effective; members adhere to good standards and display integrity;

49 Corporate Governance 47 iii. The Chairpersons of the Committees are effective and committee proceedings are contributing positively to the work of the Board; iv. The Board has established a good relationship with the CEO and Management; v. Management is empowered to execute on its mandate and provides open and frank information to the Board; vi. The most significant legacy issues have been dealt with; vii. A performance culture should be built within the whole organisation; viii. The attraction, development and retention of critical skills across the Group merit attention to ensure sustainable growth. ix. The Board has not started the development of processes for CEO succession; x. There is a need to focus more on technology/it by establishing a responsible Committee; and xi. The governance structure of subsidiaries and their communication with the Holding Company have substantial room for improvement. Conflict of interest and related party policies A conflict of interest policy and associated procedures, covering all staff and Group Directors, are in place. Directors are required to complete standard forms each year to confirm that no conflict of interest exists. The review of related party credits is conducted on a monthly basis and reported to the Board by the Risk Committee. Assurance monitoring The internal control and internal audit charters provide the framework for the two functions. Whistle blowing policy Ecobank has implemented a whistleblowing policy, as well as a whistleblowing portal. The portal is a user-friendly system that generates reports and forwards them directly to the Group Head of Compliance, who is responsible for carrying out the necessary investigation. Issues may be reported online, using a designated website, following steps laid out in Ecobank s whistleblowing policy. Ecobank s whistleblowing portal fully guarantees the confidentiality of information exchanged via the portal. A third party provider that specialises in whistleblowing services operates the portal, independent of Ecobank s in-house IT systems. This provides a secure environment for staff to report complaints or unprofessional behaviour. Members of staff reporting issues can do so anonymously. Staff can report, without limitation, on issues such as: Theft, fraud, bribery, or other forms of dishonesty Harassment or discrimination Accounting or financial irregularities On-the-job drug or alcohol abuse Violence or threatening behaviour, and Violation of laws, regulations, policies or procedures. Procedures for independent investigation of allegations by whistleblowers and appropriate follow-up actions have been put in place. Cases are managed by Compliance and investigated by Audit. The Board is informed of the cases and the progress made towards their resolution. Directors remuneration The remuneration policy for Executive and Non- Executive Directors is embedded in the Group Corporate Governance Charter. Recognition is given to the new, onerous Corporate Governance regulations that exist in many jurisdictions, which hold Board members individually and collectively responsible for the actions of the boards. Adequate compensation is given to attract and retain professional and experienced individuals to carry out these duties. The remuneration policy for Non-Executive Directors is not intended to reward meeting attendance via per diem payments; rather, it reflects the responsibility, dedication and challenges inherent in the position. Efforts are made to ensure that the remuneration of the Directors continues to match the level in comparable organisations, whilst also taking into consideration Board members required competencies, effort and the scope of the Board work, including the number of meetings attended. External consultants undertake periodic remuneration benchmarking surveys. Once these surveys are concluded, the Board makes a decision, which is submitted to the Annual General Meeting of the Company for approval. Non-Executive Directors receive fixed fees of $100,000 per annum for services to the Board of ETI. The Chairman receives $150,000 per annum. In addition, Directors receive attendance fees for Board and Board Committee meetings. Non-Executive Directors receive neither short term nor long term performance incentives. Consistent with Ecobank s objective of being an employer of choice in our markets and to attract the best talent, Senior Executives are compensated with a combination of fixed compensation (salary, benefits and pension) and variable compensation (bonuses and a share options scheme). The total remuneration paid to all Senior Executives during the 2017 financial year amounted to 11,040,275,12 million.

50 2017 Annual Report 48 Corporate Governance Code of conduct There is a code of conduct for all Directors within the Group and its subsidiary boards. It requires a Director, whilst acting in the best interest of the Group as a whole, to take account of the interests of the Group s shareholders, employees and creditors and, where appointed as a representative of a special class of shareholders, employees, or creditors, to give special, but not exclusive, consideration to the interests of that class. It prohibits a Director, without the consent of the Board, from placing himself/herself in a position such that his/her personal interests conflict, or could be seen to conflict, with his/her duties to the Group. It also prohibits a Director from entering into any contract on behalf of the Group or any of its subsidiaries or affiliates in which he/she, or any Director of the Group or any associated company, may have material interests, whether directly or indirectly, until a Board resolution has been passed to approve the contract. There were no breaches of the Directors code of conduct in Dispute resolution policy A dispute resolution policy is embedded in the Corporate Governance Charter. It sets out the Board s procedures for resolving disputes between board members. It applies to all board members at all times in the performance of their duties. The Governance Committee is the resolution body for disputes within Ecobank s Board. The Committee recommends a course of action for consideration by the full Board, if necessary. Where the dispute involves a member or members of the Governance Committee, the Chairman designates impartial Board members to intervene on behalf of the full Board. Parties involved in the dispute are expected to acknowledge the dispute respectfully, listen objectively to the issues raised and consider the opinions of others. The Chairman of the Governance Committee ensures that the dispute is discussed openly and that questions are asked of all parties involved to formulate remedial action. No such disputes arose between Board members in Governance structures within the Ecobank Group The Ecobank Group Corporate Governance Charter clarifies governance structures throughout the Group. The standard of conduct and procedures for Directors. The key principles underlying the Group s governance structures are as follows: The Group, as much as possible, operates a standardised organisational structure at ETI and subsidiary levels, known as the One Bank concept. The organisational structure of the Group may be revised from time to time by the Group Executive Committee ( GEC ), subject to the approval of the ETI Board, to address the changing needs of the institution and the marketplace. ETI is responsible for the overall strategy of the Group. As the parent company, ETI acts as the Strategic Architect of the Group, with appropriate input in operational management and decisionmaking at the 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. Group decisions and policies are implemented by all members of the Group and are binding upon all subsidiaries, taking into account applicable local laws and regulations. Where there is a conflict with Group policies, local laws and regulations prevail. Key senior roles at the subsidiary level require the review and approval of the Group Executive Committee and ETI s Board. ETI s Board holds bi-annual meetings with the Chairpersons of subsidiary Boards and the Group s Functional Heads to disseminate information on the overall direction and major policy decisions of the Group. Operational decision-making is maintained at an appropriate level, as close as possible to the day-today management, to remain responsive to changing market conditions. Individual accountability and responsibility are institutionalised and embedded through empowerment and the granting of relevant levels of authority. Group-wide coordination is achieved through high levels of interaction between the parent company and its subsidiaries, as well as amongst the subsidiaries at Board and Executive Management levels. Clear terms of reference and accountability are laid out for Board and Executive level committees. There is effective communication and information sharing outside of meetings. The Charter essentially covers the following areas: The role of the parent company; The relationships and interfaces between the parent company and its subsidiaries; and

51 Corporate Governance 49 The following comprise the governance units within the Group: Parent Company ( ETI ) Board of Directors Country Board of Directors Group Executive Committee Group Management Committee Business Leaders Conference Country Management Committees Here is a brief overview of the roles and responsibilities of each of the governance units. Parent Company Board of Directors The Board of Directors of ETI is elected by and is accountable to shareholders for the appropriate and effective administration of the Ecobank Group. Their primary responsibility is to foster the longterm success of the company, consistent with its fiduciary responsibilities. The Group s governance charter requires the Board of Directors to be guided by the following principles: The clear delineation and segregation of Executive Management responsibilities needs to be safeguarded to ensure that the Board does not interfere in the operational management of the Group. The Board is responsible for developing Group policies and general strategies, whilst management ensures their day-to-day implementation. The Board needs to exercise objective judgment on corporate affairs, independent of Executive Management. The Board needs to take actions on a fully informed basis, in good faith, with due diligence and care and in the best interests of the Group and its shareholders. The Board needs to comply with applicable laws and regulations in line with Group strategy and direction. The Board needs to operate transparently to avoid conflicts of interest between the Directors and Ecobank s businesses. The Board needs to ensure the full disclosure of accurate, adequate and timely information regarding the personal interests of the Directors. At the end of 2017, there were fourteen (14) Board members, comprising two (2) Executives, and twelve (12) Non-Executive Directors, of whom five (5) were Independent Directors. Comprehensive profiles of all the Directors are to be found on pages of this annual report. The Board of Directors met seven (7) times during 2017.

52 2017 Annual Report 50 Corporate Governance Board attendance Name Role Year appointed to Board Number of Meetings held Number of Meetings attended 1 Mr. Emmanuel Ikazoboh Chairman/Independent Mr. Ade Ayeyemi Chief Executive Officer Mr. Greg Davis Chief Financial Officer Mr. Abdulla Al Khalifa Non-Executive (Qatar National Bank) 5 Dr. Adesegun Akin-Olugbade 2 Non-Executive/Independent Ms. Dolika Banda Non-Executive/Independent Mr. Ignace Clomegah 2 Non-Executive/Independent Mr. Monish Dutt 1 Non-Executive Mr. Bashir Ifo (EBID) Non-Executive Mr. Brian Kennedy (Nedbank Group Ltd 1 ) Non-Executive Mr. Tei Mante Non-Executive/Independent Dr. Daniel Matjila (GEPF/PIC) Non-Executive Dr. Catherine Ngahu Non-Executive/Independent Mr. Mfundo Nkuhlu Non-Executive (Nedbank Group Ltd) 15 Mr. David O Sullivan 1 Non-Executive (Qatar National Bank) 16 Mr. Alain Nkontchou Non-Executive/Independent Mr. Kadita Tshibaka (IFC 1 ) Non-Executive Messrs Kennedy, O Sullivan and Dutt joined the Board during the last quarter of Messrs Adesegun Akin-Olugbade and Ignace Clomegah retired from the Board in the course of the year. Board changes Following the changes in the composition of the Board that allows a shareholder who holds up to ten per centum of the shares to propose a nominee for each ten per centum (10%) of the issued share capital of ETI, or multiple thereof, that such a shareholder may hold directly, subject to a maximum of two seats per shareholder, Nedbank Group Limited and Qatar National Bank, who hold more than 20% of the shares of the Company, exercised their right to a second director by nominating Messrs. Brian Kennedy and David O Sullivan respectively. Also, as a result of the retirement of Mr. Kadita Tshibaka, having attained the statutory retirement age of seventy, the International Finance Corporation nominated Mr. Monish Dutt in his stead. Messrs. Kennedy, O Sullivan and Dutt were co-opted to the Board in September 2017 and have since been making significant contributions to the deliberations of the Board and its committees. The search for a fifteenth director, representing the UEMOA region, has started. Attendance of Board Committees The Governance Committee met three (3) times to deliberate on issues under their respective responsibilities. Governance committee Composition and attendance Name Role Number of Meetings held Number of Meetings attended Dr. Adesegun Akin-Olugbade 2 Chairman (until June 2017) 1 1 Mr. Bashir Ifo Member 3 3 Mr. Tei Mante 1 Member 2 2 Mr. Ignace Clomegah 1 Member 1 1 Dr. Catherine Ngahu 1 Chairperson (from November 2017) 1 1 Ms. Dolika Banda 1 Member 1 1 Dr. Daniel Matjila 1 Member Mr. Clomegah, Dr Ngahu, Ms Banda and Dr. Matjila joined the Committee in the course of the year. 2. Dr Adesegun Akin-Olugbade retired from the Board in the course of the year. The Group General Counsel and Company Secretary is the Secretary to the Committee.

53 Corporate Governance 51 Responsibilities: Formulates, reviews and ensures implementation of policies applicable to all units of the Group, as well as good governance throughout the Group; Manages the relationship between the Company and its shareholders and subsidiaries, including relationships with the Boards of subsidiaries; Formulates new, and reviews existing, Group-wide policies including organisational structure; Handles relationships 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 Ensures that the Annual Board Evaluation is carried out. Audit and Compliance The Audit and Compliance Committee met three (3) times to deliberate on issues under their respective responsibilities. Name Role Number of Meetings held Number of Meetings attended Mr. Tei Mante 1 Chairman 2 2 (until November 2017) Mr. Kadita Tshibaka 2 Member 1 1 Mr. Alain Nkontchou Chairman 3 3 (from November 2017) Mr. Ignace Clomegah 2 Member 1 1 Mr. Monish Dutt 2 Member 1 1 Mr. Brian Kennedy 1 Member 1 1 Mr. Bashir Ifo 1 Member Messrs Monish Dutt, Brian Kennedy and Bashir Ifo joined the Committee in the course of the year while Mr. Mante left the Committee. 2. Messrs Kadita Tshibaka and Ignace Clomegah retired from the Board during the year. All members have relevant business knowledge and skills and familiarity with accounting practices and concepts. The Group Head of Audit serves as Secretary to the Committee. Responsibilities: Reviews internal controls, including financial and business controls; Reviews internal audit function and audit activities; Facilitates dialogue between the auditors and Management regarding the 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, and Ensures compliance with all applicable laws, regulations and operating standards. Risk Committee The Risk Committee met three (3) times to deliberate on issues under their respective responsibilities. Name Role Number of Meetings held Number of Meetings attended Mr. Kadita Tshibaka 2 Chairman (until June 2017) 1 1 Dr. Daniel Mmushi Matjila 1 Member 2 1 Ms. Dolika Banda 1 Member 2 2 Mr. Abdulla Al Khalifa 1 Member 2 0 Mr. Mfundo Nkuhlu 1 Chairman 1 1 (from November 2017) Mr. Monish Dutt 1 Member 1 Mr. Tei Mante 1 Member 1 1 Mr. Alain Nkontchou 1 Member Dr. Matjila, Ms. Banda and Messrs. Al Khalifa, Nkuhlu, Dutt, Mante and Nkontchou joined the Committee in the course of the year. 2. Mr. Kadita Tshibaka retired from the Board during the year. All members have a good knowledge of business, finance, banking, general management and credit. The Group Chief Risk Officer serves as Secretary to the Committee.

54 2017 Annual Report 52 Corporate Governance Responsibilities: Initiates the determination and definition of policies and procedures 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, and Reviews all other risks (e.g. technology, market, insurance, reputation and regulatory). Nomination & Remuneration Committee The Nomination and Remuneration Committee met three (3) times to deliberate on issues under their respective responsibilities. Composition and attendance Name Role Number of Meetings held Number of Meetings attended Mr. Alain Nkontchou 1 Chairman 2 2 (until November 2017) Mr. Bashir Ifo Chairman 3 3 (from November 2017) Mr. Mfundo Nkuhlu 1 Member 2 1 Dr. Catherine Ngahu 1 Member 2 1 Mr. David O Sullivan 1 Member 1 1 Mr. Brian Kennedy 1 Member Dr. Ngahu and Messrs Nkontchou, Nkuhlu, O Sullivan and Kennedy joined the Committee in the course of the year. The Group General Counsel and Company Secretary is the Secretary to the Committee. Responsibilities: Determines the policy for the remuneration (including benefits, pension arrangements and termination payments) of Non-Executive Directors, the Chairman of the Board, the Chief Executive Officer, the Executive Directors, and the Senior Executives of ETI; Develops suitable criteria for the selection and appointment of new Board members and for the selection, appointment and removal of the Group and Country Board members; Develops and implements plans for identifying, assessing and enhancing Director competencies; Creates succession plans to maintain the appropriate balance of skills, expertise and experience on the Board; Reviews the structure, size and composition of the Board and makes recommendations to the Board with regard to any adjustments that are deemed necessary; Identifies and nominates, for Board approval, candidates to fill Board vacancies as and when they arise. Finance & Regulatory Requirements Committee The Finance & regulatory Requirements Committee met three (3) times to deliberate on issues under their respective responsibilities. Name Role Number of Meetings held Number of Meetings attended Mr. Mfundo Nkuhlu Chairman 3 2 (until November 2017) Dr. Adesegun Akin-Olugbade 2 Member 1 1 Dr. Daniel Matjila Member 3 2 Mr. Abdulla Al Khalifa Member 3 1 Mr. Tei Mante 1 Chairman (from November 2017) Mr Mante joined the Committee in the course of the year. 2. Dr Akin-Olugbade retired from the Board in the course of the year.

55 Corporate Governance 53 Responsibilities: Oversight of finance strategies, capital and liquidity management of the Company; Reviewing the Company and Group s financial performance; Reviewing compliance with applicable financial regulatory requirements; and Reviewing certain corporate development matters as the Board may direct. The Group Chief Financial Officer or his designate is the Secretary of the Committee. Social, Ethics & Reputation & Committee The Social, Ethics & Reputation Committee met three (3) times to deliberate on issues under their respective responsibilities. Name Role Number of Meetings held Number of Meetings attended Ms. Dolika Banda Chairperson 3 3 Mr. Kadita Tshibaka 2 Member 1 1 Dr. Catherine Ngahu Member 3 3 Mr. Mfundo Nkuhlu 3 Member 2 1 Mr. David O Sullivan 1 Member Mr. O Sullivan joined the Committee in the course of the year. 2. Mr. Nkuhlu moved to another Committee during the year. 3. Mr. Tshibaka retired from the Board during the year. Responsibilities: Overseeing and reviewing the positioning of the Ecobank brand to ensure that a clear strategy is being delivered to increase the value of the brand, as well as the Group s standing, reputation and legitimacy in the eyes of all stakeholders; Reviewing the processes by which Ecobank identifies and manages reputational risk in an effective and transparent manner, consistent with the Board-approved Group Risk Appetite Statement; Ensuring Ecobank s adherence to statements regarding activities/businesses in which it will/will not be involved, in line with its brand promise; Reviewing Ecobank s sustainable business priorities, assuring the Group has policies in place to respond to any issues arising from external factors. The Group Manager Environmental Risk & Sustainability is the Secretary of the Committee.

56 2017 Annual Report 54 Corporate Governance Subsidiary boards The Boards of Directors of subsidiaries operate as separate legal entities in their respective countries. ETI is the majority shareholder in all the subsidiaries, but host country citizens and institutions often invest 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 the same governance principles as the parent 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 parent company. However, an individual country s regulatory requirements may necessitate more committees. The Boards of Directors of the subsidiaries are accountable to the subsidiaries shareholders for the proper and effective administration of the subsidiaries in line with 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 with Group policies, the local laws prevail. Subsidiary governance model With regard to the governance of its subsidiaries, the Group adopts a dual reporting model. The subsidiary s corporate governance is administered both by the local board and the Group Board concurrently. Legally, the country Board has ultimate responsibility for the subsidiary but ETI, as the majority shareholder (in some cases holding 100%) and as the Strategic Architect, has a duty to ensure that the subsidiary is run properly. As a result, the subsidiary CEO has a dual reporting lines to the local board and to ETI s Executive Management. The local board has access to the ETI governance and management structure. The local boards are legally constituted and Directors duties comply with the host country s legal system. The subsidiaries at all times comply with the Group Corporate Governance Charter, subject only to local legal requirements. Candidates for directorship positions in the subsidiaries are shortlisted by Directors of the subsidiary and ETI Directors or other credible persons. The proposed candidates are then screened by the subsidiary board in consultation with ETI. Thereafter, the candidates go through the formal internal Board processes of the subsidiary, including Board committees and regulatory/shareholder approvals, as appropriate. Group Executive Committee In 2017, the Group Executive Committee ( GEC ) comprised the following: Chief Executive Officer Group Executive, Finance Group Executive, Consumer Banking Group Executive, Operations and Technology Group Executive, Corporate and Investment Bank Group Company Secretary/General Counsel Group Head, Internal Audit Group Chief Risk Officer Group Executive, Human Resources and Corporate Affairs Regional Executive, CESA Regional Executive, Nigeria Regional Executive, WAMZ Regional Executive, UEMOA The GEC meets monthly and is responsible for the day-to-day operational management of the Group and its subsidiaries. The GEC is responsible to the Board and plays an important role in the Group s corporate governance structure. The GEC manages the broad strategic and policy direction of the Group, makes submissions to the Board for approval, where necessary, and oversees their implementation. The GEC has decision-making powers in specific areas of Group Management. In particular, the GEC works with, and assists, the Chief Executive Officer to: Define and develop Group strategy; Confirm alignment of individual subsidiary s plans with overall Group strategy; Track and manage strategic and business performance against plan, at Group and subsidiary levels; Implement Group policy and decisions; Make recommendations regarding human resources issues; Recommend the 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, and Make important decisions in areas for which authority is delegated to the GEC.

57 Corporate Governance 55 Group Management Committee ( GMC ) The GMC is the wider arm of the GEC. For purposes of Group succession planning, critical country and business roles are consulted in the decision-making and execution of Group strategy. It comprises all members of the GEC and/or such other Executives as the GCEO may determine. The GCEO is the Chairman of the GMC. The Group Company Secretary or his/her designate is the Secretary to the Committee. The GMC is charged with the following: Reviewing the operational and financial performance of the respective lines of business to ensure that actual performance is in line with overall strategy, business goals and objectives; Monitoring operational performance on an on-going basis against plan and expectations; Assessing progress and achievements of business units and major initiatives; Determining appropriate responses to operational and financial performance issues; and Disseminating strategy and policies across the Group. Business Leaders Conference The Business Leaders Conference ( BLC ) is a collegial group of all subsidiary CEOs and Group functional heads that has been constituted to encourage collaboration in strategy and policy formulation. It comprises the GMC and all subsidiary CEOs. The GCEO is the Chairman of the BLC. The Group Head, Strategy, or his/her designate, is the Secretary to the Committee. Country Executive Management Committee The Country Executive Management Committee consists of the Managing Directors and other senior executives of each subsidiary. In addition to the dayto-day management of the subsidiary s operations, the role of a Subsidiary Executive Management Committee includes the following: Aligning strategic objectives and operational plans with overall Group strategy, Defining business goals and objectives for the country s operations, Approving business unit direction and strategies, Making decisions on operating plans and budgets, Reviewing the financial reporting and control framework, Tracking and managing country strategy and business performance against plan, Tracking and monitoring progress and accomplishments of 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 parent company on adaptation of overall strategy to the specifics of the local environment, and Advising on local laws and regulation impacting on Group policies. The BLC is the primary coordinating body for Group cohesion and integration, and the implementation of Group strategy. The BLC is a consultative body and not a decisionmaking body. It plays a key role in facilitating the harmonisation and integration of Group strategy. Its role includes: Sharing and disseminating information, experiences and best practice across the Group; Initiating policies that encourage integration and promote the One Bank concept; Promoting integration and standardisation of Group policies and procedures; Promoting and monitoring compliance with Group operational standards; and Contributing to the formulation of Group policies.

58 2017 Annual Report 56 Corporate Governance Directors interests in contracts No Director has any interest either directly or indirectly in contracts with the Company or any of its subsidiaries. Director s interests in Ecobank Ordinary Shares The Directors interests in the issued ordinary shares of the Company as of the date of the statement of financial position are disclosed in the following table: Direct Indirect * Total S/N Name Mr. Emmanuel Ikazaboh 480, ,000 1,520, ,000, ,000 2 Mr. Ade Ayeyemi 16,418, ,418, Mr. Greg Davis Mr. Abdulla Al Khalifa (Representing Qatar National Bank) 0 0 4,970,904,524 4,896,904,524 4,970,904,524 4,896,904,524 5 Dr. Adesegun Akin- Olugbade 377, , , ,319 6 Ms. Dolika Banda Mr. Ignace Clomegah 92,075 92,075 92,075 92,075 8 Mr. Monish Dutt Mr. Bashir Mamman Ifo (Representing EBID) , ,209, ,209, ,209, ,209, Mr. Brian Kennedy (Representing Nedbank Group) 0 0 5,249,014,550 5,249,014,550 5,249,014,550 5,249,014, Mr. Tei Mante 500, , , , Dr. Daniel Matjila (Representing GEPF/PIC) 0 0 3,333,333,333 3,333,333,333 3,333,333,333 3,333,333, Dr. Catherine Ngahu Mr. Alain NKontchou Mr. Mfundo Nkuhlu (Representing Nedbank Group) 0 0 5,249,014,550 5,249,014,550 5,249,014,550 5,249,014, Mr. David O Sullivan (Representing Qatar National Bank 0 0 4,970,904,524 4,896,904,524 4,970,904,524 4,896,904, Mr. Kadita Tshibaka (Nominee of IFC) Total 22,627,227 1,075,485 24,014,900,558 23,865,380,558 24,037,522,452 23,866,450,710 * The indirect holdings above are shares held by major institutional shareholders who have nominated the Directors to the Board. These are not shares held by the Directors in their individual capacity.

59 Corporate Governance 57 Executive share options In 2017, no new ETI executive share options were awarded to Executives under the staff options scheme. Related Party Security Trading policy The Group has a code of practice for staff dealing in Ecobank securities that requires them to seek the approval of the Group Company Secretary, or the Company Secretary of a subsidiary of the Group, prior to the purchase of shares of the parent company or any subsidiary of the Ecobank Group. The policy makes it mandatory for such staff to disclose the nature of the securities, the amount to be invested and the nature of the transaction and their interest. The member of staff undertakes to ensure that the transaction is not in connection with the possession of any inside information and further undertakes not to proceed with the transaction should he/she come into possession of any inside information prior to the execution of the transaction. The policy will be updated to include other related parties. Shareholders Rights The Board has always placed considerable importance on effective communication with its shareholders. It ensures that the rights of shareholders are protected at all times. Notice of meetings and all statutory notices and information are communicated to shareholders on time. The Annual General Meeting is a key forum for relaying information and decision-making, thereby fostering active shareholder participation. The shareholders right to information is an essential principle underlying the philosophy of Corporate Governance and is a pre-requisite in establishing a meaningful dialogue. The Board is responsible for submitting complete and comprehensive financial and management information to the Annual General Meeting to facilitate a balanced and fair exchange of views within the Company. The Board ensures that there is on-going dialogue with shareholders and that information furnished to the Annual General Meeting is accurate and reliable. Shareholders are encouraged to communicate their opinions and recommendations, whenever they feel the need to do so, to the Investor Relations Unit and or the Company Secretary. Their contact details are available at Ecobank s Group website, ecobank.com.

60 2017 Annual Report 58 Sustainability Report Managing Sustainability: Ecobank remains committed to the tenets of sustainable development in banking and continue to have a positive impact on the lives of people our customers, shareholders and employees, our societies and our environment. The bank is also working with its host countries towards the attainment the United Nations Sustainable Development Goals (SDG), adopted in 2015, through its core competency - banking and financing. In doing this, the pan-african bank continued to implement the Ecobank Sustainable Framework to guide its efforts aimed at: Driving economic transformation; Promoting socially responsible finance; Developing human capital; and Protecting natural resources and environmental sustainability. Under the guidance of the Social Ethics and Reputation Committee (SERC) of the ETI Board, management is ensuring that Ecobank s financing activities continue to add value and bring sustainable benefits to the socio-economic and environmental development of Africa, in line with the Sustainable Framework. Sustainability Framework Creating Economic Value Fostering Integration Partnership for Development Driving Economic Transformation Socially Responsible Finance Microfinance and Micro banking Women in Business Ecobank Foundation Community Engagement Risk Management Green Business Global Initiatives Protecting Natural Resources: Environmental Sustainability Human Capital: Attracting & Retaining Talented Staff Diversity and Culture Training and Developement Pan-African Spirit Sustainability Performance Africa s challenges often require a pan-african solution, such as policy harmonization, free crossborder trade and free movement of capital, people and goods. Our Pan-African approach to banking and finance has enabled us to contribute to the financial and economic integration of our continent. Our integrated competencies are unique within middle Africa. We have built economies of scale, with extensive coverage in 33 countries, 943 branches access to cash 24/7 at over 3,400 ATMs, and 10,976 point of sales devices. No other bank in Africa has such breadth of coverage. We are making crossborder transactional banking more convenient, accessible and efficient. The countries in which we have a presence all have a significant number of migrant workers. Our Rapid transfer and CashXpress Card products provide safer payments platforms and remain the market leader to serve our customers. These products also enables diaspora Africans to transfer and remit funds to their relatives faster and to support projects in their home country. Our transformational banking solution is predicated on the need to support Africa s trade and infrastructure development through private-public partnership and regional integration, which gives us the opportunity to finance projects of larger scale at lower unit cost. We leverage African trade corridors across the various sub-regions by providing integrated trade solution, using various payment methods, to facilitate intra-african trade. The continent is witnessing the rise of businesses that are often considered as emerging regional champions. Our unique One Bank platform enables us to serve such regional corporates seamlessly. Banking for the public sector: The public sector in African countries is significant when measured by key parameters, such as employment, government expenditure, public investment, tax income and contribution to GDP. Although the private sector is now widely recognised as an engine of economic growth, the public sector remains dominant in many African countries. To ensure

61 Corporate Governance 59 sustainable socio-economic development, the public sector, at all levels of government, continues to play a critical role in the service delivery of education, health, water and sanitation. Our goal is to be the preferred bank for Africa s public sector business and we are making progress in this direction. With our single-view Omni products, tailored for corporate and commercial banking customers, we on boarded over 14,000 clients in These Omni collection clients mainly comprise revenue authorities, pension funds and commodity traders, which together accounted for nearly $15.5bn of transactional value in This achievement is the result of Ecobank s customised services for civil servants, including deposits, collections, payments, cash management, payroll administration, project accounts, advanced payment guarantees, supplier payments and credits. We have positioned ourselves to deliver full value chain services to public sector entities, covering salaries, pensions, benefits and bursaries to all forms of tax, revenue, utility, customs and school fees collections. For countries that access donor funds and those that seek significant bilateral relationships with leading global economies and with multilateral development institutions, we have positioned ourselves as a partner of reference for integrity, accountability and transparency factors that are critical to collaboration with these market players. In Ghana, we have won several mandates to be the custodian of project accounts funded by donors including the World Bank. Recognising the need to mobilise public and private investment for development, we have been actively involved in financing opportunities that are being created in infrastructure finance, project finance and bond market development through public-private partnership. In Senegal, we also implemented a short-term $15million financing for SENELEC, the power utility, to pay for the State s electricity. This facility was set up to provide an uninterrupted supply of electricity and smooth delivery of services and will be repaid from the government s budget. Ecobank also supported a regional transmission company with a $30.86 million documentary Line of Credit to support the implementation of West Africa Power Pool (WAPP) projects for the supply and distribution of electricity in Côte d Ivoire, Liberia, Sierra Leone and Guinea. In a related development, our Group CEO reiterated the bank s commitment to micro, small and medium enterprises (MSMEs) as a fundamental part of Africa s economic fabric, during his speech at the 23rd Nigerian Economic Summit in Abuja last October. In delivering this commitment, we are leveraging the expertise of our Consumer banking division to provide targeted, digital banking products for MSMEs in served and under-served markets that are simple and convenient to use. In 2017, we on boarded 1,945,309 customers via the Ecobank MobileApp, resulting in over 5.5 million transactions, valued at a total of $634 million. Although Ecobank Masterpass and mvisa service have only recently been launched, the merchant QR is already reconfiguring the way in in which Ecobank clients are transacting business. In 2017, about 170,000 Masterpass and mvisa transactions were successfully processed for 63,214 merchants, with a value of over $3 million. Banking the United Nations: Following the decision of the UN Treasury on the harmonization of treasury services to consolidate banking services in the UN system, Ecobank entered into negotiation and successfully signed the Master Banking Agreement (MBA) with the United Nations. This agreement with Ecobank is the second of a number of global banking agreements to be signed by the United Nations under the Banking Harmonization Project. The Global Banking Harmonization Project was launched by the then Secretary-General Ban Ki-moon and by the Chair of the High Level Committee on Management (HLCM), as part of the Harmonization of Business Practices in the UN System, to adopt a standardized, coordinated approach to the procurement and administration of global banking services and relations for the UN and all participating Funds and Programmes as well as Specialized Agencies and Related Organizations. These entities have field banking requirements for peacekeeping operations and support activities in post-conflict situations, among others. Ecobank Master Banking Agreement (MBA) recognizes that the UN System s entities across our geographic footprint in Africa have varying needs and requirements depending upon the type of operations and countries involved. Subsequent to the MBA, several UN entities have signed the Participation Agreements ( PAs ) as a requirement to complete the MBA process and this has informed the continuous successes with UN RFPs as Ecobank was nominated as one of the two selected providers of banking services for the UN System in Benin and Zambia. Thus the bank is poised to continue to offer the UN System a customized banking services to assist the largest development organisation to effectively implement its developmental mandates. Mr. Ade Ayeyemi, the Ecobank Group Chief Executive Officer, in his remarks at the signing of UN Ecobank MBA, that Ecobank is delighted to be signing the Master Banking Agreement as a long term partner of the UN in the African continent. We have a common goal around support for, and the development of, the communities that the bank serves and Ecobank sees the signing of the Master Banking Agreement as an important step in the further development of our relationship with all UN entities.

62 2017 Annual Report 60 Sustainability Report Ecobank Foundation: The Ecobank Foundation was established in 2005 to support charitable and humanitarian programmes, with the Group committing 1% of its annual profits after tax to the Foundation. In 2017, the Foundation continued to advance the implementation of its 2020 strategy that seeks to develop a stronger footprint on the continent, supporting the Group s digital strategy of reaching 100 million customers by Over the course of the year, we have made progress in strengthening existing partnerships and building new ones. In delivering on the Foundation s strategy, we are seeking to contribute to the transformation of the African continent. Building on Ecobank s financial management capabilities, we have worked in Chad and Liberia in partnership with The Global Fund and Humentum, a non-governmental organisation, to improve financial management in programme delivery. We will be extending this programme to other countries in Also, we are collaborating with our colleagues in the Financial Institutions/International Organisations teams to develop a broader version of this programme for other Ecobank DFI/NGO clients. Ultimately, our goal is to provide services that ensure that development finance funds reach their final beneficiaries as rapidly and securely as possible. Through our partnership with The Global Fund, the Ecobank Foundation is focusing on eliminating malaria from Africa. For example, last year, our commitment to invest $250,000 in Mozambique was doubled by DFID, making a total contribution of $750,000 towards the Government of Mozambique s anti-malarial initiatives. Via this investment, Ecobank has joined a consortium of private sector organisations that are dedicated to combatting malaria in Mozambique. We have also collaborated on the conceptual framework and implementation of a pan-african initiative, Africans for Africa, aimed at accelerating the pace of the transformation of the African continent. In 2018, we aim to increase our cooperation with Ecobank subsidiaries to strengthen their respective investment in the communities in which we operate. Community Engagement: We are all part of our local communities. In addition to serving these communities through our various business activities, we have a keen interest in, and engage with, our communities as part of our corporate sustainability stewardship. Our community engagement activities in 2017 include the following: Leading the Developmental Agenda: As a thought leader, we share our ideas and exchange views of the socio-economic and financial developmental agenda in Africa: World Economic Forum Africa Durban, 3-5 May 2017 Ecobank Group CEO, Ade Ayeyemi, spoke passionately about how digital technology can drive inclusive growth across Africa at a range of events during the World Economic Forum Africa, held in Durban, South Africa. Addressing a roomful of political and business leaders at the Closing the Digital Divide panel, he emphasised how digital provides an opportunity to deliver banking products at a price point that everyone can afford. The GCEO also took part in a debate with Senegalese President, Macky Sall, detailing how Africa can advance regional financial integration. Meanwhile, Sebastian Ashong-Katai, Group Head of Financial Institutions and International Organisations, spoke about the business case for investing in core public health capacities on an Africa Centres for Disease Control and Prevention panel. Ecobank launches Help Sierra Leone Fund, August 2017 Ecobank acted quickly to support victims of the Sierra Leone mudslide disaster, which rocked the country s capital, Freetown, last August. The country faced a race against time to prevent further deaths, following devastating floods and mudslides that claimed hundreds of lives and rendered many more homeless. Ecobank kick-started the launch of the Help Sierra Leone Fund, with a $100,000 donation, urging stakeholders and the general public to unite in their support of the efforts of the Sierra Leonean government to save lives.

63 Corporate Governance 61 The AGOA Forum Lomé, 8-10 August 2017 The US and Togo co-hosted the African Growth and Opportunity Act (AGOA) Forum in Lomé in August. The forum brought together senior government officials from the US and over 35 Sub-Saharan African countries to discuss ways to boost economic cooperation and trade between the US and Africa. The African Union and regional economic communities also participated. As one of the key corporate players in Lomé, Ecobank played an active role at the Forum. One of the key events was a panel discussion on Private Sector Dialogue, hosted at the Ecobank Pan- African Centre. Mrs Mareme Ndiaye Mbaye, who was Chairperson of the Technical Committee of the Side-Events, was one of the key speakers at the event, while Ecobank s Group Head of Trade, Kassi Ehouman joined a panel discussion on trade finance. bank has a presence. The 2017 Ecobank Day focused on Safe Water, Healthy Living, to raise awareness of the millions of African who cannot access safe, clean water, and how this impacts their quality of life and opportunities. Hailed as the most successful to date, a number of impactful activities were undertaken to provide hospitals and schools (amongst others) with clean water facilities. In Lomé, the Group CEO, Mr. Ade Ayeyemi, led the staff of ETI and Ecobank Togo in over 10,000 man hours of volunteering in various community development projects. For example in Cape Verde, Ecobank Day offered another opportunity for staff to interact with the local communities as part of our social responsibility in action. In commemorating the fifth anniversary of Ecobank Day with the theme, Save Drinking Water for a Healthy Life, the management and staff of Ecobank Cape Verde donated plastic drum containers for storage of safe drinking water in the communities. The donation of drum was informed by the delayed rainfall, high salty concentration groundwater coupled with drought in some part of the island, particularly in the Espinho Branco municipal area of Calheta Sao Miguel on Santiago Island. The Ecobank Day programme was organised in collaboration with the Solidarity League of Church of Nazareth, as part of the church s Eu guero ajudar project. Ecobank Day: Started in 2013, every first Saturday in October, we celebrate Ecobank Day, which is the day we earmark to give back to our communities through volunteerism. We believe that our host communities play an important role in our corporate activities; thus Ecobank Day offers a unique platform for making a positive difference, whilst acting as a good role model for other private sector organisations. The day also helps the participating Ecobank staff to feel compassion and develop an active interest in societal welfare. Each year, Ecobank commits a significant amount of money towards this critical giving back activity. This, in turn, allows volunteering and fundraising activities around a specific theme to simultaneously take place across the 33 African countries where the Staff of Ecobank Cape Verde offloading the water storage drums in preparation for presentation to the community The theme for 2017 Ecobank Day was Safe Water, Healthy Living. Albeit, special consideration were given to a few Ecobank affiliates to consolidate their ongoing staff volunteering activities from the previous year and within the context of the affiliate specific developmental needs. In this regard, Ecobank Zambia celebrated Ecobank Day on two separate days in two regions where the bank has a presence, namely Lusaka and the Copper Belt provinces.

64 2017 Annual Report 62 Sustainability Report Lusaka: Ecobank Day was celebrated on 14th December 2017 in Lusaka by the award of scholarships to pay for all the tuition and exam fees from secondary education until university for three vulnerable, but high achieving, girls. This was in order to highlight the challenges of inequalities in education faced by girls. During the presentation of scholarship certificates, the Managing Director, Mr. Kola Adeleke, reaffirmed Ecobank s commitment to support the efforts of the Government of Zambia to address community issues especially in health and education. As part of the Ecobank Group, we are especially sensitive to the challenges of access to quality education within the communities in which we operate. Our corporate social responsibility programme is dedicated to supporting community welfare and development, whilst also addressing financial inclusion across Africa, he said. The colourful event was officiated by the Minister of Higher Education, Hon. Professor Nkandu Luo. The Minister thanked Ecobank for this noble gesture. I would like to thank Ecobank for coming on board to support the education of girls in Zambia. The inability to pay school fees is one of the main reasons that girls are denied access to education. Kindly extend my thanks to the Ecobank Group CEO s Office for this contribution, she said. In attendance were the United Nations Population Fund Country Representative, Dr. Mary Otieno, the Director of Standards and Curriculum at the Ministry of General Education, a representative of the University of Zambia, Head Teachers and pupils of New Mtendere Secondary School and Kamulanga Secondary School and the parents of the girls who received scholarships. The Copper Belt: Ecobank Day was celebrated in Kitwe on 9th December 2017 at the Kawama Race Course Community School. The School, which has 1,775 pupils, has had no water for over ten years. Furthermore, the school has no electricity or desks. Ecobank Zambia donated a borehole and water treatment products in its efforts to promote safe water for healthy life, both for the school and the entire local community. Speaking at the handover ceremony, Ecobank Zambia Head of Corporate Bank, Mr. Misheck Mkokweza, said: Access to clean water not only promotes a better life but also helps to keep children in school, rather than searching for water. It also promotes food security and reduces the risk of water borne diseases, to name but a few benefits. The event was officiated by the Kitwe District Commissioner Mr. Binwell Mpundu who thanked Ecobank for supplementing Government s efforts in providing safe water to communities. He said, Thank you to Ecobank for this donation as it will go a long way in meeting the water needs of this community. It is my hope that the school administration will take care of this borehole donated by Ecobank to the community so that the future generation can also benefit from it. He was so moved by the Bank s efforts in assisting the school and the community that he preceded to open accounts with the Bank and downloaded the Ecobank banking APP. 1 Transactions with potentially limited adverse social and/or environmental impacts that are few in number, generally site-specific, largely reversible and readily addressed through mitigation measures. 2 Transactions with potential adverse social and/or environmental impacts that are generally beyond the site boundaries, largely reversible and readily addressed through relevant mitigation measures. 3 Transactions that carry minimal, or no, environmental or social impacts 4 Transactions with potential significant adverse social and/or environmental impacts, which are diverse, irreversible or unprecedented.

65 Corporate Governance 63 Protecting the Natural Resources and Environmental Sustainability As a bank in the vanguard of sustainable financial institutions, Ecobank has been implementing environmental and social risk management (ESRM) on credit transactions in the environmental and socially (ES) sensitive sectors since This is necessary to ensure that our clients are carrying out their business in an environmental friendly and socially acceptable manner. It also helps to protect Ecobank s reputation, whilst supporting the natural resources and communities in our host countries, with the ultimate goal of advancing sustainable development. Overview of the Implementation of ESRM in 2017 In Ecobank, ES policy and procedures offer a consistent approach to the identification, screening, classification, mitigation and compliance monitoring of our decisionmaking processes. The ES policy follows the Group Credit Process and Procedures Manual ( GCPPM ) that defines the nature and level of risk that Ecobank is willing to take in pursuit of its strategic and business objectives. Our engagement with clients in the ES eligible sectors, such as the extractive industries, heavy construction, manufacturing, real estate and utilities (including energy generation, transmission and distribution), continues to broaden and deepen. We regularly review eligible transactions in line with the IFC Performance Standards on Environmental and Social Sustainability, as well as the Equator Principles, where necessary. The review is followed by recommendations to improve the alignment and integration of our clients business practices with sustainable development priorities. Following the restructuring of Ecobank s subsidiaries into 4 regional groupings in 2016, our ESRM processes needed to be refined and reinforced to focus on material environmental and social issues specific to each region. A summary of our ES activities in 2017 is presented in Table X Table X: Summary of ES transaction activity in 2017 Activity 2017 No. of managed transactions 1755 No. of High risk 23 No. of Medium A risk 708 No. of Medium B risk 330 No. of Low risk 694 Exclusion List transactions 0 Of the total of 1,755 transactions that were screened and managed for ES risk in 2017, 59.1% were in the Medium B and Medium A ES risk categories, versus 61.75% in Low-risk transactions as a percentage of the total increased from 36.2 in 2016 to 39.5% in the year under review, whilst the percentage of High-risk transactions screened decreased marginally from 1.9% in 2016 to 1.3% in Furthermore, the percentage concentration of the ES eligible transactions in the Medium A and Medium B risk categories signifies that Ecobank s exposure to potentially ES sensitive activities remained within operational containment limits and, hence, largely manageable. Across the regions, specific environmental and social risk due diligence criteria were adopted in assessing cross-border issues, such as biodiversity, that heighten the ES risks. Figure X below, presents the number of transactions screened and managed for potential ES risks by region in 2015, 2016 and Number of transactions screen and managed for the E&S risks by Ecobank regions in 2015, 2016 and AWA UEMOA Nigeria CESA

66 2017 Annual Report 64 Sustainability Report The largest Ecobank region by market size as well as a percentage of total assets, Ecobank Nigeria, accounted for only 6.6% of the total transactions managed for ES risk in 2017, compared to 5.2% in the previous year. Although the bank has taken a conservative approach to lending in Nigeria since 2016, the increment in the volume of ES transactions is partly due to the renewal/restructuring of existing facilities, together with the increasing value of existing assets as a result of the improving economic outlook. The total portfolio exposure to ES sensitive sectors in Anglophone West Africa (AWA) and the West Africa Economic and Monetary Union (UEMOA) regions as of December 2017 were 29.05% and 30.48% respectively. The 5 Ecobank affiliates in AWA accounted for 14.4% of the total transactions managed for ES risk in 2017, whilst the 9 affiliates in UEMOA had the largest number of transactions managed for ES risk of all of Ecobank s regions, making up 49.5% of the Group total. The Central, Eastern and Southern Africa (CESA) region is the largest Ecobank region in terms of the number of subsidiaries, covering 18 countries in total. In 2017 CESA s total portfolio exposure to ES sensitive sectors was 30.8%. The region accounted for 29.5% of the total transactions managed for ES risk, a decline in comparison to the 32% registered in Nevertheless, analysis of 2017 data revealed that the ES data integrity management in the region has continued to improve. This is partly due to a bottomup risk assessment, in which the subsidiaries ES risk information is aggregated at the Group level. This is helping to ensure that a wide range of perspectives and critical analyses are incorporated to ensure balanced and objective ES risk management overall. Implementation of ESRM as part of the contractual obligations of the IFC facilities (Annual Environmental Performance Review): Ecobank has facilities with varying ES requirements from several development lenders such as the IFC, FMO, FinFund, African Development Bank (AfDB), European Investment Bank (EIB) and the French Development Agency, Proparco, amongst others. These facilities have varying but overlapping ES standard compliance requirements. The IFC facilities with the Group and 11 of its subsidiaries (Ghana, Nigeria, Cote d Ivoire, Mali, Liberia, Guinea, Chad, Togo, Congo Brazzaville, Congo Democratic Republic and Central African Republic), require that an Annual Environmental Performance Review (AEPR) is carried out. The AEPR is a self-assessment of the subsidiaries compliance with ES standards in their financing activities. It covers 2 main areas, namely: ES portfolio information, including the categorisation of transactions based on the severity of their ES impact; and Implementation of an ES Management Framework. In 2017, the Group, and the subsidiaries concerned, conformed satisfactorily with the IFC s AEPR reporting obligation and complied with all subsequent requirements relating to the report Affiliation with Environment, Social and Governance (ESG) Frameworks (UNEPFI): At the global level, Ecobank continues to ensure that its commitment to sustainability goes beyond compliance with legal requirements, whilst remaining an effective tool for gaining competitive intelligence and widening networking opportunities. Our participation in global sustainability initiatives is aimed at leveraging best practice to improve our internal programmes for the implementation of sustainability. Ecobank participated in UNEPFI s AGM and Africa Regional Roundtable, Johannesburg, November 2017 Ecobank remains an active member of UNEPFI and a signatory to the UNEPFI Statements of Commitment by Financial Institutions on Sustainable Development to develop and promote financing for sustainable development and an inclusive green economy. Ecobank participated in the 2017 UNEPFI Annual General Meeting, held in Geneva, Switzerland and the UNEPFI Africa Regional Roundtable Meeting in Johannesburg, South Africa, in November The Chairperson of Social, Ethics and Reputation Committee of the ETI Board, Ms. Dolika Banda, represented Ecobank in a panel session on Progress on Sustainable Finance and the Long Road Ahead. Ecobank a member of UNEPFI s Global Steering Committee The UNEPFI Global Steering Committee provides executive direction on strategic, work programme and budgetary issues on a regular basis. The Global Steering Committee reports to UNEPFI s Annual General Meeting, where all Members come together to make decisions on the initiative s overall strategic direction, structural issues and budget matters. The Committee comprises 13 members from the banking, insurance and investment industries and were appointed via membership election. Ecobank s appointment is in the banking category, along with BBVA (Spain), Corporacíon Andina de Fomento (Venezuela) and Citibank (USA). ESRM outlook: In 2018, we will continue to improve the implementation of our ESRM, with a particular focus on the compliance monitoring and reporting of the ES Corrective Action Plan. Furthermore, we are poised to revise the Ecobank ESRM policy, which was approved in This revision has become necessary in the light of new realities and emerging developments in the management of eligible transactions for ES risk within Ecobank.

67 Grow faster. Go further. Give your enterprise the edge with the fastest targeted solutions in the market Ready to go? Visit ecobank.com/commercial-banking ecobank.com

68 2017 Annual Report 66 People report Strategic Human Capital Initiatives for a Digital Future The diversity of backgrounds and skills of our people remains a key contributor to our unique, pan-african culture. Ecobank currently has 15,930 employees, made up of 43 nationalities from around the world. This represents a 8% reduction in the headcount since 2016, reflecting our focus on right-sizing our businesses in Nigeria, Ghana and the CESA region. Having taken steps to improve our operational effectiveness, our objective now is to meet the challenges of the digital workplace, ensuring that all our staff have the capabilities and skills that they need to be more agile and responsive, thereby positioning Ecobank for sustained growth. As in any major organisational change, the understanding and buy-in of our employees to Ecobank s digital transformation is a pre-requisite of success. Employee data As at 31 December Number of employees 15,930 Female Representation 44% Nationalities 43 Attrition Rate 12% Employees by geographic segment/regions (% As at December 31st 2017) Employees by Business/Functions (% As at December 31st 2017 ) CESA 18% Nigeria 42% UEMOA 20% AWA 16% Others 5% Corporate and Investment Bank 5% Consumer Bank 14% Commercial Bank 5% Client Engagement 7% Enabling Functions 69% 2017 Highlights In partnership with the senior management of each of Ecobank s three business lines Consumer Bank, Commercial Bank and Corporate and Investment Bank we are making steady progress with all of our strategic human resources (HR) objectives. We continue to support the Group s digital transformation ambitions by focusing on the following areas: Strengthening our Learning and Development platform to develop key capabilities; Further embedding Talent and Performance Management processes across the Group; Launching a Group-wide Employee Engagement initiative; and Aligning our reward programmes to global best practices to create a performance-driven culture and environment.

69 Corporate Governance 67 Overview of 2017 In the year under review, the Group s HR team continued to focus on the execution of its threepronged people strategy, aimed at: Attracting, developing and retaining the best talent; Delivering a performance-driven culture and working environment; and Deploying people and resources in the most productive and efficient manner. Learning and Development Recognising the strategic importance of developing the required skills and capabilities to underpin the Group s digital transformation, the Learning and Development function, together with the Ecobank Academy, was quick to respond to emerging business needs while continuing to focus on implementing long-term competency and assessment-driven learning interventions. Accelerated delivery of Game Changer Training Programmes During the course of 2017, our team worked diligently to design and deliver strategic learning initiatives to address critical business needs, including enhanced credit risk management and trade finance and cash management capabilities, improvements in sales and relationship effectiveness, tighter cost control and increased productivity. We have also needed to speed the process of equipping our staff with the necessary skills and competencies to embrace the challenges of digital financial services. Here we outline the progress of key Game Changer programmes that are being implemented across the Group: Digital Financial Services (DFS) Under the direct auspices of the Group CEO, we have begun the implementation of the holistic DFS curriculum that will enable us to build internal and external capabilities to develop partnerships to expand and accelerate distribution of digital products and services across the Group. Credit and Risk Management Working closely with Group Risk Management, we have accelerated our efforts to institutionalise credit risk training by making it mandatory for all staff involved in the credit process. The programme is made up of 3 stages: pre-assessment to measure individual capability and identify credit skill gaps; classroom training sessions; and post-training assessments to determine the impact of the learning. Our credit risk programmes are focused on developing better credit decisions at the origination stage, together with the identification of early warning signals. We are also introducing a more structured approach to analysis, with greater emphasis on cash flow and stronger relationship management, based on effective client dialogue. Trade Finance and Cash Management Given the strategic importance of Transactional Services to our overall strategy, we launched a skills-based training programme last year, known internally as the Ecobank Transactional Banking Services University. This programme aims to strengthen our capabilities in Trade Finance, Cash Management and Supply Chain Financing to boost non-interest revenues through a greater volume of higher value transactions. Delivered using an innovative Trainthe-Trainer approach, this programme has enabled us to reach over 1,800 staff in 30 of our subsidiaries, including business heads, trade finance and cash management executives, relationship managers and operational and control staff. Product Knowledge and Cross-Selling Skills Throughout the year, we have intensified our product training. In Ghana, for example, we made product training mandatory for all staff, resulting in a 95% participation rate. In Nigeria, intensive instructor-led product training has been rolled out for Consumer and Commercial Banking staff. In addition, hundreds of our employees completed our in-house Customer Service programme that focuses largely on retail banking products and services. Leadership and Management Development We continued to strengthen our initiatives to develop leaders right across the organisation through action learning. Incorporating all levels of leadership - senior, middle and front-line management - this programme is built around Ecobank s required leadership competencies, its values and strategic objectives. Other Business Game Changers Other business enabling curricula rolled out during the period included: - an Operational Risk Certification programme - a Customer Service Certification Programme - an FICC (Treasury) Certification Programme, and - Leadership and Management Development programmes.

70 2017 Annual Report 68 People report Breakdown of Participants in Game Changer Training by Region 2017 Providing tangible cost savings for the Group by meeting all training objectives within allocated budgets. Pursuing its vision and mission of: - developing world class managers and leaders for Ecobank; - enhancing professional and leadership skills in Africa s banking sector; and - fostering the creation of knowledge capital for Africa s financial integration and economic growth. Talent and performance management During 2017 we fast-tracked our Talent and Performance Management initiatives to support our corporate strategy and, more specifically, to: Nigeria 29% AWA 10% CESA 36% FWA 25% Upgrading our e-learning platform to facilitate workplace learning As part of our efforts to provide cost-effective, on-the-job learning opportunities for our staff, we finalised the upgrade of our new elearning platform, also known as the Virtual Banking Institute (VBI). This upgrade was crucial in terms of providing a state-of-the-art, digital learning platform that is capable of responding to our dynamic needs as an organisation. Among other objectives, the upgraded VBI is expected to facilitate a whole new approach to learning and self-development to the benefit of thousands of our staff across the Group. Celebrating 3 Years of the Ecobank Academy Last, but by no means least, we should also highlight that August 2017 marked the third anniversary for our Ecobank Academy. Over this period, the Ecobank Academy has succeeded in: Positioning itself as one of the key pillars in the advancement of our business objectives; Institutionalising the design centrally and distribute locally approach by upscaling our training delivery capabilities to: provide a consistent and high quality learning experience; train as many staff as possible in a cost-effective manner; embed understanding of our strategy across the organisation; effectively link learning with talent and performance management; and instil a learning and knowledge sharing culture. build a Group-wide pipeline of Talent and Leadership; build a multi-dimensional bench strength, aligned with our strategic priorities; ensure clear succession planning for business critical roles and the retention of high performers by providing clear career pathways. During the course of the year, we implemented the following strategic initiatives: Strategic Talent Review Process In 2017, we concluded the Strategic Talent Review process, targeting all members of the Group Executive Committee, their businesses, functions and regions. We also went on to implement targeted impact-driven talent intervventions for assessed individuals that included, inter alia, individual development plans, training, promotions, structured job rotation, coaching and mentoring. Strengthening Talent Acquisition In partnership with the businesses, we have successfully completed a recruitment exercise for key positions. It is important to note that 58% of these positions were filled by internal promotions and redeployments, with only 42% being offered to external candidates. Furthermore, we have also launched initiatives to strengthen our group talent acquisition process and systems through enhancements to our recruitment process. Across the group, we are also building, where appropriate, internal assessment and recruitment capabilities to minimise the use of external search agencies. Strengthening Performance Management Process We have enhanced our Performance Management Process by putting greater emphasis on key performance areas: - Making continued progress towards our goal of achieving a 100% paperless/automated Performance Management review process, using our upgraded online platform. - Implementing a culture of continuous performance dialogue to support employee development.

71 Corporate Governance 69 Employee Engagement We continue to emphasise the importance of our organisational culture and employee engagement both in the overall execution of our corporate strategy and in the sustainability of our business. Towards the end of 2017, we launched a group-wide Employee Engagement Survey, with the aims of: measuring employee engagement across all of Ecobank s subsidiaries, via Employee Net Promoter Scores (ENPS), to and identify areas for improvement and build a compelling Employee Value Proposition (EVP); enabling the HR function to gather data for Group policy formulation and implementation; facilitating the identification of people risks and their potential impact on the business; improving business performance through targeted employee engagement initiatives based on empirical data; and setting the baseline for culture and values-related staff objectives. Based on the results of this survey, we are planning to implement the required employee engagement activities during Compensation and Benefits We have continued our partnership with KPMG to ensure that our compensation plan and strategy are aligned to best practices and effectively encourage performance excellence. We finalised the review of our Total Reward strategy and aim to implement a revised and more effective incentive compensation plan in This revised plan aims to create a high performance culture that will incentivise employees to deliver superior performance and maximise the creation of shareholder value, without taking excessive risks. The objective of the scheme is to motivate and retain top talent that contributes to the growth of Ecobank s business by offering employees the opportunity to share in our success. Overall, the scheme is designed to better align the interests and focus of our employees with those of our shareholders. Workforce Planning We are making significant progress towards achieving greater operational efficiency. In 2017, we reassessed our deployment of human resources in line with our drive to right-size the business. This led to moves to rationalise our workforce, with effective redeployment wherever possible, following the optimisation of our branch networks in CESA, Nigeria and Ghana. Development Of Women We are continuing to make significant progress towards greater gender diversity within all levels of the organisation. For example, women now make up 44% of the overall headcount, whilst 30% of the management team is now female. As part of our broader gender equity policies, we are implementing a robust Women s Development Programme with the aim of increasing the number of women in senior leadership positions and to build a strong pipeline of female business leaders for the future. Strategic HR Priorities For 2018 Digital technology provides HR with a rich set of tools to engage people and deliver higher levels of performance. The key to success, however, lies in the effective implementation of a digital workplace strategy capable of driving true cultural change. Building on the progress already made, we are looking to accelerate the impact of our work by focusing on the following strategic initiatives: Learning and Development Solutions Integrated Talent Management Organisational Effectiveness Total Reward (Compensation and Benefits) Employee Efficiency and Effectiveness Automation and Digitalisation of HR processes

72 2017 Annual Report 70 Risk Management Risk Management has received a great deal of Board and senior executive attention and has significantly up-skilled its management, staff resources and processes to improve its capability in the identification and anticipation of all types of risk across the Group. We are transforming our risk culture and embedding shared and communicated principles and controls throughout Ecobank.

73 Risk Management 71 Select Service Pay bills Select provider Amount: $13.00 PAY

74 2017 Annual Report 72 Risk Management 2016 was a very challenging year in our major markets and it stretched the financial capacity of obligors resulting in a deterioration in asset quality, and this was also compounded by legacy issues in some cases. This led to record high levels of impairment losses at the end of 2016 and the impact of this continued to be felt in In 2017 we took the strategic decision to reposition Risk Management s role within Ecobank s overall strategy and engaged in a transformational journey which focussed on our people, systems, processes and especially, our Remedial Management function to cleanse our asset base and stabilise the situation. We recognise that this will require sustained effort and are pleased with the real progress that we have made so far. We have achieved recoveries on previously impaired assets and have slowed the pace of challenged assets converting into non-performing loans (NPLs). Our Roadmap to Leadership requires a strong, embedded and shared risk culture throughout Ecobank. We are putting Risk Management at the heart of our shareholder value creation so that it will support the growth of the business by monitoring our credit portfolio in a safe, sustainable and profitable manner. We will achieve this using a three-pronged strategy: Building the capacity of our expertise by providing adequate and targeted training (credit risk, market risk, risk analytics, operational risk and environment and sustainability risk); Fundamentally reviewing our policies and processes and implementing an enhanced credit operating model, with decentralised approval authority, coupled with improved processes and portfolio monitoring tools; and Strengthening our Remedial function to continuously monitor the quality of our portfolio and improve the performance of our remedial and recoveries performance. By rolling out these initiatives, we will limit the deterioration of our loan book and reduce our NPL ratio to acceptable levels, minimise our impairment losses, protect Group revenues and provide acceptable returns to our shareholders by contributing to the achievement of a key objective a return on equity above the cost of equity also saw the recovery of some major economies, with Nigeria s recession ending in the second quarter, thanks to higher oil production, reduced inflation, improved US Dollar liquidity and less volatility in local currencies. We expect the recovery in sub-saharan African economies to accelerate in In terms of Market Risk, our liquidity indices have shown consistent improvement throughout 2016 and 2017, and this has been driven mainly by a combination of increased deposits and constrained loan growth. We expect the proportion of our Fixed Income exposure to remain stable. We are focussing on revising our operational structure, both at Group and Regional levels, to pave the way for improved analysis, monitoring, management and reporting of exposures through staff with skills enhancement. In line with the globally recognized Environment, Social and Governance framework (ESG), Ecobank is a sustainable financial institution with an Environmental and Sustainability risk policy. We work in association with the UN Environment Programme Finance Initiative (UNEPFI), the UN Global Compact and the Equator Principles for project financing, as well as the IFC s Performance Standards. We are committed to ensuring that all our activities are carried out in an environmentally friendly and socially acceptable manner and we also help our clients conduct their businesses in a sustainable way. We are committed to ensuring that the potential Environment and Social (E&S) risks of our activities are within the acceptable limits agreed with our development financial institution (DFI) partners. The implementation of our initiatives is supported by our control environment and robust Operational Risk Management governance framework. This ensures that we will continue minimising operational losses through training, awareness and our Risk and Controls Self-Assessment (RCSA) processes. In 2018, IFRS 9 will be rolled-out in the Bank; in addition, Basel II/III will come into force from January 1st across UEMOA (WAEMU West African Economic & Monetary Union). The adoption of IFRS 9 could result in ETI s retained earnings and share capital absorbing some of the anticipated incremental impairment. We will comply with all regulatory requirements and intend to achieve a relatively high coverage ratio. With regards to Basel II/III, we are working closely with our regulator, the BCEAO, and expect full compliance, both for the Group and all our subsidiaries in the UEMOA region, without breaching any regulatory capital adequacy ratios. In 2018 we will continue to focus on reinforcing the risk culture across the Group, enhancing target market selection, and taking advantage of market opportunities.

75 Risk Management Risk Management Framework Risk is inherent within the business activities of the Ecobank Group. Accordingly, Ecobank has designed a risk management framework and a governance structure to achieve the appropriate balance between risk and reward. The risk management framework consists of a comprehensive set of policies, standards, procedures and processes designed to identify, measure, monitor, mitigate and report significant risk exposures in a consistent and effective manner across the Group. 1.1 Risk Identification The Group identifies risk by evaluating the potential impact of internal and external factors on business transactions and positions. Risk managers have developed strategies to set appropriate risk limits (by customer, product and business) and obtain sufficient collateral coverage, to mitigate identified risks. 1.2 Risk Measurement The Group uses a variety of methodologies to measure risk. These include calculating probable loss (both expected and unexpected), assessing risk rating, conducting stress tests and benchmarking. 1.3 Risk Mitigation The Group has introduced specific measures to minimise or eliminate unacceptable risks. These techniques include managed distribution across affiliates or others financial institutions, covenants (positive, negative and financial), insurance and collateral. 1.4 Risk Monitoring and Control The Group reviews risk management policies and systems regularly to reflect changes in markets, products and emerging best practices. Risk monitoring is based on the following central risk areas: credit risk (including counterparty risk), market risk, liquidity risk, operational risk and country risk. Risk professionals and internal auditors monitor risk exposures and adhere to approved risk limits by analysing reliable up to-date information systems on a daily, weekly and monthly basis. 1.5 Risk Reporting The Group allocates considerable resources to ensure ongoing compliance within approved risk limits. It has set guidelines for reporting to relevant management bodies, including the Board of Directors and the Group Executive Committee. Significant changes in the credit portfolio, non-performing loans and other risk measures are reported on a daily, weekly and monthly basis. 2. Major Risk Types The Group is exposed to the following major risk types: Credit risk is the probability of financial loss arising from the default or the credit risk migration of a customer or counterparty. It can arise either because the borrower or the counterparty is unwilling to execute or because their ability to execute has been impaired. Direct credit risk arises in connection with credit facilities, such as loans and advances, whilst indirect or contingent credit risk stems from the Group s guaranteed contractual obligations to a client resulting from the issue of letters of credit and guarantees. Credit risk also exists when the Group and its client have mutual obligations to exchange or deliver financial instruments at a future date. The risk of default before settlement, also known as pre-settlement risk, arises when the counterparty defaults before the contract matures and the Group suffers a financial loss in the process of replacing the unexecuted contract. The settlement risk becomes direct credit risk at the time of default. Market risk is the risk of loss arising from adverse changes in market conditions during the period required to close out the Group s on- and off-balance sheet positions. Losses may arise from changes in interest rates, exchange rates, equity values, commodity prices, etc. Positions that expose the Group to market risk can be trading or non-trading related. Trading risk relates to positions that the Group holds as part of its trading or market-making activities, whilst non-trading risk includes discretionary positions that the Group undertakes for liquidity or capital hedging purposes. Sources of market risk include: Interest rate risk is the exposure of current and future earnings and capital to adverse changes in the level of interest rates. Exposure to interest rate risk can result from a variety of factors: Repricing risk, which arises from timing differences in the maturity or repricing of assets, liabilities and off-balance sheet instruments; Yield curve risk is the risk that changes in market interest rates may have different effects on prices of similar instruments with different maturities; Basis risk is the risk that changes in market interest rates may have different effects on rates received or paid on instruments with similar repricing characteristics (e.g. funding an adjustable rate loan that is indexed to a 3-month Treasury bill with deposits that are indexed to the 3-month LIBOR). Interest rates for various assets and liabilities change at the same time, but not necessarily by the same amount; and Options risk is inherent in embedded options in assets and liabilities. An example is provisions in agreements that give borrowers the right (and not the obligation) to prepay their loans or give depositors the right (and not the obligation) to withdraw funds at any time, often with little or no

76 2017 Annual Report 74 Risk Management penalty. These options, if exercised, can affect net interest income and underlying economic value. Liquidity risk arises from the general funding needs of the Group and in the management of its assets and liabilities. The Group is exposed to the risk that depositors demands for withdrawals outstrip its ability to realise longer-term assets in cash. The Group, therefore, strikes a balance between its liquidity requirements and funding costs by capturing stable, reliable and low-cost sources of funding in each of its markets. There are two types of liquidity risk: Funding liquidity risk is the risk that funds will not be available when needed to meet our financial commitments; and Trading liquidity risk is the risk that assets cannot be liquidated quickly enough at reasonable market prices. This can happen when market liquidity disappears, making it difficult, or costly, to close or modify positions without incurring unacceptably high losses. Interest rate risk and liquidity risk are interconnected, given that management of either side of the balance sheet has an impact on interest rate risk exposure. Foreign exchange risk is the risk to earnings and capital arising from sudden fluctuations in currency exchange rates. It can arise directly through trading in foreign currencies, making loans in a currency other than the local currency of the obligor, buying foreign-issued securities or issuing foreign currency denominated debt as a source of funds. It can also arise when assets and liabilities are denominated in foreign, as well as local, currencies. The Group is also exposed to foreign exchange risk arising from adverse movements in currency exchange rates used to translate carrying values and income streams in local currencies relative to the US Dollar, Ecobank s reporting currency Equity price risk is the risk of loss from equity portfolio devaluations due to share price movements. Commodity price risk is the risk of loss from commodity portfolio devaluations due to commodity price fluctuations. Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or external events. It is inherent in every product and service that Ecobank provides. It manifests itself in a variety of ways, including internal fraud, external fraud, transaction processing errors, business interruptions and disputes with employees, clients and vendors. Operational risk also includes legal risk, the risk of loss resulting from the failure to comply with laws, prudent ethical standards and contractual obligations. Such events could potentially result in reputational risk for the Group. Reputational risk is defined as the current or prospective risk to earnings and capital arising from an adverse perception of the Ecobank brand amongst existing and potential transactional stakeholders, such as clients, trading counterparties, employees, suppliers, regulators, governmental bodies and investors. The perceptions of stakeholders, such as the media, Non-Governmental Organisations (NGOs), trade unions, competitors and the general public, can influence the bank s ability to maintain existing relationships, generate new business and maintain access to sources of funding. Country risk is the risk that political actions result in nationalisation, expropriation, transferability and convertibility risks. These may affect the ability of obligors in that country to honour their cross-border obligations towards Ecobank. Sovereign risk refers to the risk that a sovereign or State-Owned Enterprise (SOE) may not have the capacity or willingness to honour its debt obligations. Exposures to sovereign risk will include statutory requirements for liquid assets in the form of sovereign bonds, liquidity placed with the Central Bank, subscription for sovereign bonds, direct exposures to the sovereign and guaranteed obligations, and exposures to the SOE. Contagion risk is the risk that developments in one country lead to a rating downgrade or adverse credit conditions not only for that country but also other countries in its regions where the Group has interests. Strategic and franchise risks arise whenever the Group launches a new product or a new service, or when it implements a new strategy. The risk is that the strategy may fail, causing damage to the Group s image, which may impair the Group s ability to generate or retain business. However, the Group always carefully assesses both the impact of external factors on its strategic decisions ( strategic risk ) and the feedback from clients, shareholders and regulators regarding its results and capital ( franchise risk ). Environmental and Social risk: Environmental risk means the risk of causing pollution or destruction of the natural environment (land, water, air, natural habitats, and animal and plant species) either through accidental or deliberate actions. Similarly, Social risk is the risk of a customer not meeting acceptable standards for employment, working conditions and business ethics, within its own business or by its actions and the resultant impact on the community within which it operates. Compliance risk is related to violations of the rules and regulations in force in countries where the Group operates. Compliance risk also arises when the rules or regulations applicable to the products and activities of subsidiary banks are ambiguous. Such risks could result

77 Risk Management 75 in sanctions, penalties, damages and even the voiding of existing contracts. Legal and regulatory risks are part of compliance risk. Disclosure risk is the risk of loss due to the presentation of incomplete or false information to the general public, shareholders or regulatory bodies. Non-compliance with accounting rules and requirements for the delivery of reports to regulatory, supervisory or fiscal authorities could also give rise to strategic and franchise risks. 3. Governance Structure In 2017, the Group s Board of Directors approved a new governance structure around the credit process, which includes an amended Credit Policy, a new Credit Operating Model, and the decentralisation of approvals to regions and countries. The enhanced governance structure is in transition and will be fully implemented during The Group s Board of Directors supervises risk management through the Risk Committee and the Audit and Compliance Committee of the Board. The Board articulates the level of risk that Ecobank is willing to accept in the normal course of business ( risk appetite ) and sets the overall risk profile for the Group. The Risk Committee proposes risk policies and the overall approach to risk management and monitors the adequacy of controls, compliance with risk policies and the Group s risk profile. The Audit and Compliance Committee ensures that the financial activities of the business are subject to independent review and external audit. The Group Chief Risk Officer is Ecobank s most senior risk management officer, responsible for all risk activities, and reports functionally to the Board Risk Committee and administratively to the Group Chief Executive Officer. The Group Chief Risk Officer develops the risk management strategy, principles, framework and policies, and implements appropriate risk management processes, methodologies and tools. Risk Management Governance Structure Board of Directors Risk Committee Audit & Compliance Committee Non-Executive Directors Group Chief Risk Officer

78 2017 Annual Report 76 Risk Management The Group Chief Risk Officer advises and instructs management and business units on risk management, monitors the application and effectiveness of risk management processes and co-ordinates appropriate and timely delivery of risk management information to the Group Chief Executive Officer, the Group Executive Committee ( GEC ), the Risk Committee and the Board. The Group Chief Risk Officer provides overall supervision of a Credit Risk department, a Remedial Management unit, a Risk Analytics and Management Information System ( MIS ) unit, an Internal Control department which includes an Operational Risk Management unit, a Market Risk Management unit, an Environmental and Sustainability unit and Regional Risk Heads. The Credit Risk department comprises Regional Credit Heads, a Commercial and Consumer Credit Centre, a Group Credit Administration unit and a Country and Sovereign risk unit. In each subsidiary bank, Group Risk Management is represented by a Risk Management department, which is completely independent from all the operating and risk-taking units. A Country Risk Manager, who reports administratively to a Country Business Head and functionally to the Regional Risk Head, leads the Risk Management department. Group Risk Management is represented in each geographical cluster by a Regional Risk Head, who reports administratively to a Regional Business Head and functionally to the Group Chief Risk Officer. The risk management approval process is fully independent of the businesses. Credits to Governments, Financial Institutions and Corporations Subsidiary banks initiate and approve credits applications (CAs) within their approved limits. Country approvals are provided by Country Credit Committees and ultimately by the respective country Board Credit Committees. After such approval, and depending on amounts set in the Credit Manual, some of the CAs must be sent to the relevant Industry, Product and Country Risk Specialists for their no objection. Thereafter, they will be sent to Regional Executive, Business Group Head and Group Executive for their no objection as appropriate. Where credits exceed the approval limit of the subsidiary, they are referred to relevant Senior Credit Officers in line with the bank s approval authority matrix for their no objection. On receipt of the no objection and other required approvals, depending on the facility limits and nature of the transaction, the initiating subsidiary submits the request to the local board for approval for transactions that are above their Country Credit Committee approved limits. Credits to Individuals, SMEs and Local Corporates Credit transactions are approved under the terms and conditions of credit programmes approved by Group Risk Management through its Commercial and Consumer Credit Centre. Commercial and Consumer Credit Centre reviews credits above local limits for consistency with Group policies and procedures and provides its no objection. On receipt of no objection from Commercial and Consumer Credit Centre, the initiating subsidiary submits credits above local Country Credit Committee limits to the local board for approval. Organogram of Group Risk Management Group Chief Risk Officer Group Chief Credit Officer Group Risk Analytics & Risk MIS Head Group Head Internal Control (incl. Operational Risk) Group Head Remedial Management Group Environmental & Social Risk Head Group Market Risk Head Regional Risk Heads Group Country Risk & Sovereign Risk Head Group Consumer & Commercial Banking Credit Head Group Credit Administration Head Regional Heads of Credit

79 Risk Management 77 The Group Asset and Liability Committee ( GALCO ), a sub-committee of the Group Executive Committee ( GEC ), is responsible for the supervision and management of market risk (mainly interest rate and liquidity risks). Its members are the Group Chief Executive Officer, the Group Executive Finance, the Group Executive Consumer Banking, the Group Executive Commercial Banking, the Group Executive Corporate Banking, the Group Executive Technology and Operations, the Group Treasurer, the Group Chief Risk Officer, All Regional Executives, the Group Head of Compliance and the Head of Group Asset and Liability Management ( ALM ). The committee meets quarterly (although more frequent or ad-hoc meetings may be held) to review the structure and pricing of Group assets and liabilities, to agree on the optimum maturity profile and mix of incremental assets and liabilities, to evaluate inherent market risks in new products and to articulate the Group s view regarding interest rates. At the subsidiary level, the responsibility of asset and liability management lies with the Treasury Department. Specifically, the ALM desk of the Treasury Department manages the balance sheet. The results of balance sheet analysis, along with appropriate recommendations, are reviewed in monthly Asset and Liability Committee ( ALCO ) meetings where important decisions are made to minimise risk and maximise returns. Local ALCO membership includes the Country Managing Director, the Country Treasurer, the Country Risk Manager, the head of Internal Audit, the head of Finance and the head of Legal. 4. Risk Management Approach 4.1 Credit Risk Organisation The Group manages credit risk by means of a governance structure with clearly defined responsibilities and credit approval authority. The Board of Directors of ETI is the highest credit approval authority in Ecobank. It sets credit policies and ensures that all officers involved in the extension of credit across the Group strictly adhere to these policies. While credit approval limits are delegated to individual credit officers, no credit officer approves credits alone. All extensions of credit are approved by a minimum of three credit officers, one of whom must be from risk management with an individual credit approval limit equal to or greater than the amount of credit under consideration. The Board through its Risk Committee has delegated its authority to Senior Executives, including the Group Chief Risk Officer and the Group Chief Executive Officer, to review and approve all credits above the policy limit, which is defined as the maximum credit exposure to any borrower or group of related borrowers, currently set at 7.5% of Ecobank s consolidated shareholders funds. The Risk Committee is comprised of not less than three non-executive directors. The Group Chief Risk Officer and other senior representatives from the risk management organization attend the Risk Committee meetings. Whilst the primary responsibility for managing credit risk resides with the first line of defence, the Group Chief Risk Officer is responsible to ensure that there are resources, expertise and controls in place for the efficient and effective management of credit risk across the Group. Ecobank s subsidiaries receive delegations of credit approval authority from their respective boards of directors in line with the general framework set up by the Group Chief Executive Officer and the Group Chief Risk Officer Risk Identification The Group s business activities can be divided into three segments: Consumer Banking, Commercial Banking and Corporate and Investment Banking, each of which have shared support units, designed to improve operational efficiency. Each of these activities entails various risks, which fall into the main categories of the Group Risk Management framework, namely credit, market, operational and liquidity risks. Ecobank is exposed to credit risk through direct lending, the issuance of financial and performance guarantees and capital market activities. Credit risk analysts work in partnership with the sales function in identifying risk exposures within each subsidiary bank. Credit decisions are based on an in-depth review of obligor creditworthiness and its ability to generate cash flows to meet its operational needs and debt obligations. The Group utilizes an internal risk rating system that is based on a scale of 1 to 10 to rate commercial and industrial obligors, financial institutions, sovereign governments and SMEs. A rating of 1 identifies obligors of the highest quality, comparable to an AAA rating by Standard and Poor s. A risk rating of 10 is assigned to obligors of lowest quality or highest risk, equivalent to a D rating by

80 2017 Annual Report 78 Risk Management Standard and Poor s. Obligors risk-rated 1 to 6 are classified as normal borrowers ; those risk-rated 7 are classified as borrowers requiring caution, while those risk-rated 8 and 9 are substandard borrowers, and those risk-rated 10 are borrowers at risk of permanent default. Risk ratings provide an objective method to compare obligors and facilities within a given portfolio and to measure and manage credit risk using the same standards across different geographies, industry sectors and other relevant risk factors. Accordingly, the level of credit authority required to approve any credit transaction is also based on the risk rating of obligors and the facilities involved. Risk ratings are assigned to obligors based on the probability that the obligor will default and to facilities based on the loss that is expected in the event of such default. An obligor risk rating is defined as the risk of default on long-term unsecured debt in local currency over a twelve-month period. It is assigned and approved when a credit facility is first extended and is reviewed annually and upon the occurrence of any significant adverse event. The risk of default is derived from an analysis of the obligor s historical and projected financial statements and such qualitative criteria as industry issues, the obligor s position in the market, the quality of the board and management and access to financing. The process for determining the obligor risk rating is carried out through automated decision-making tools. Portfolio Distribution by Facility Risk Rating Percent of Total Portfolio Dec 2016 Dec 2017 Portfolio Breakdown by Risk Category Percent of Total Portfolio Normal Risk (1-6) Risk Under Watch (7) Substandard Risk (8-9) 0 1 Risk of Permanent Default (10) Dec 2016 Dec 2017

81 Risk Management 79 For consumer lending, the Group utilises a credit programme approach, whereby credit is extended based on product-specific risk parameters, using scoring systems. The products involved are secured and have a self-liquidating nature. A facility risk rating describes the risk associated with a facility of a given obligor. It is usually equivalent to the obligor risk rating; however, a different facility risk rating may be assigned by adjusting the obligor risk rating to take account of factors such as the facility structure or collateral. As at 31 December 2017, 79% of the credit portfolio was categorised as normal credit risk (rated 1-6), compared to 75% as at 31 December This improvement was largely driven by the increased proportion of securities (from 23% of the credit portfolio as of 31 December 2016 to 27% as of 31 December 2017) in the Normal Risk category Risk Measurement Credit risk measurement takes account of the actual risk exposure ( Exposure at Default or EAD ), the probability of default ( PD ) and the percentage of loss in the event of default (also called loss given default or LGD ). To measure credit risk, the Group estimates the level of statistically expected economic loss in the event of default. This figure measures the net present value of credit costs that the Group would face from the time of default until the end of the recovery process. Credit costs include all provisions taken against bad debts, write-offs, fully reserved interest earned but not collected and possibly legal fees incurred in the process of enforcing the Group s claims in court. Under current methodology, the Group assigns risk ratings to credit facilities of all the obligors in the credit portfolio. The amount of credit exposure with a given facility risk rating is then multiplied by the corresponding loss norms to arrive at a statistical measure of loss in the event of default on the exposure involved. The loss norm is the probability that an obligor will default within the next twelve months multiplied by the economic loss expected in the event of such a default. The weighted average loss norm provides a measure of the portfolio risk profile and portfolio risk rating. The results are compared with statistical loss measurement under the Group s economic capital model. From 31 December 2016 to 31 December 2017, the portfolio risk rating remained stable at 6-, and the average probability of default improved slightly from 10.19% to 10.17% Risk Monitoring and Control Credit risk exposures of subsidiaries are monitored at both the subsidiary level and at Group Risk Management level. At the subsidiary level, credit administration units monitor the performance of individual exposures daily, ensure regularity of credit approvals and line utilisations, authorise disbursements of credit facilities when approval conditions are met and perform periodical reviews of collateral. These units are also responsible for the preparation of internal risk management reports for country management and Group Risk Management. Risk control units within internal control departments provide a second line of defence as they ensure that controls are in place and are effective. Remedial management units identify early warning signals of portfolio quality deterioration and monitor past due exposures with a view to maximising collections of delinquent loans and recoveries of loans previously reserved or written-off. At Group level, the Risk Analytics and MIS unit monitor risks taken by subsidiaries on individual obligors and economic groupings through a review of monthly reports submitted by the country risk management units of the subsidiary banks. These reports include early warning systems designed to monitor troubled exposures and credit process problems. They include detailed credit exposure data that enables the Group to monitor the risk profile in terms of obligors, industry sectors, geography, currencies and asset maturity at both country and Group level. Group Risk Management also determines the level of the statistical unexpected and expected economic loss, and the overall direction of the portfolio risk profit. The Risk Analytics and MIS unit ensure that the Group is not exposed to excessive concentration of credit risk on any one obligor, asset class, industry sector or geography. The unit ensures that the Group achieves its strategic diversification objectives within the prescribed time horizon Credit Risk Portfolio In accordance with Group Credit Policy, risk concentration limits are in place to ensure compliance with the Group s risk appetite. These limits are regularly reviewed by the Risk Committee by taking account of changes in our operating environment or within our business segments. The Group has developed a framework for setting concentration limits. Concentration risk is monitored by addressing credit quality deterioration and portfolio diversification. With respect to portfolio quality, the probability of default ( PD ) of each risk factor (e.g.

82 2017 Annual Report 80 Risk Management geography, industry sector, product, etc.) is the main driver for limit setting because any increase in the PD, or loss norms, is an indication of deterioration in portfolio quality; conversely, any decrease indicates an improvement in portfolio quality. In respect of portfolio diversification, concentration risk is measured by the level of statistically unexpected loss associated with each risk factor. Whereas expected losses have a direct impact on Group profitability, unexpected losses affect Group capital and, consequently, future performance. With the unexpected loss concept, Group Risk Management has been able to cap risk factors, which otherwise would have widened the gap between regulatory capital and economic capital. The credit portfolio, net of provisions, amounted to $23.51 billion as at 31 December 2017; a 7% increase from the $22.02 billion recorded a year earlier. This was primarily driven by the securities portfolio which increased by $1.4 billion during the year, and exposure to financial institutions (commercial and central banks) which increased by $0.4 billion. The portfolio consisted of loans and advances to customers ($9.36 billion), securities ($6.46 billion), deposits with central banks ($2.1 billion), loans, advances and placements with banks and financial institutions ($1.7 billion), and off-balance sheet exposures ($3.9 billion) in the form of financial and performance guarantees as shown in the table below. Risk Assets ($ millions) Loans and advances to customers 9,358 9,259 Treasury bills & government bonds 4,996 4,421 Loans and advances to banks and financial institutions 1,686 1,414 Deposits with central banks 2,085 1,918 Other on-balance sheet assets 1, Sub-Total Direct Exposures 19,588 17,688 Import letters of credit 1,377 1,147 Other guarantees & undertakings 2,544 3,183 Sub-Total Contingent Exposures 3,921 4,330 Total Portfolio 23,509 22, Top 20 Exposures per Industry Sector 2016 Top 20 Exposures per Industry Sector Construction 5% Manufacturing 17% Oil & Gas 51% Services Telecommunications 6% 21% Construction 14% Manufacturing 21% Oil & Gas 50% Services 6% Telecommunications 9%

83 Risk Management Obligor Concentration A large exposure is defined as any individual exposure that represents at least 10% of the total portfolio, or at least 10% of the Group s capital at the obligor level. As at December 2016, there was no exposure equal to or greater than 10% of the total portfolio. However, a non-bank obligor had individual outstanding balance above 10% of the Group s capital. The twenty largest non- bank exposures represented 117% of the Group s capital (December 2016: 146%) and 13% of the total non-bank credit exposures (December 2016: 14%). These exposures mainly emanate from the following five industry sectors: Construction, Manufacturing, Oil and Gas, Services and Telecommunications Industry Diversification The credit portfolio remains dominated by the governmental, services and oil and gas sectors, with a notable increase in the proportion of Governments exposure from December 2016 to December These are mainly treasury bills and government bonds held for liquidity management purposes. The three major sectors (government, services and oil and gas) accounted for 54% of the total credit portfolio (December 2016: 53%). Diversification by Industry (Percent of Total Portfolio) Government Services Oil & Gas Wholesale & Retail Trade Commercial Bank Manufacturing Central Bank Construction Telecommunications All Others Coffee & Cocoa Trade Cotton Dec 2017 Dec Exposures by Region of Residence Percent of Total Portfolio 2016 Exposures by Region of Residence Percent of Total Portfolio Nigeria 20% Francophone West Africa 42% Anglophone West Africa, excluding Nigeria 11% Central, Eastern & Southern Africa 19% OECD Countries 7% Others 1% Nigeria 23% Francophone West Africa 39% Anglophone West Africa, excluding Nigeria 12% Central, Eastern & Southern Africa 20% OECD Countries 5% Others 1%

84 2017 Annual Report 82 Risk Management Geographic Diversification The Group has banking operations in 33 African countries and benefits substantially from the geographic diversification of its credit portfolio. As at 31 December 2017, 20% of the Group s credit portfolio was granted to obligors in Nigeria (December 2016: 23%) and 12% to obligors in Côte d Ivoire (December 2016: 13%). Apart from these, no other country represented more than 10% of the portfolio. At regional level, the breakdown of the Group credit portfolio was as follows: Nigeria (20%), Francophone West Africa (42%), Anglophone West Africa, excluding Nigeria (11%), Central, Eastern and Southern Africa ( CESA ) (19%) and OECD Countries (7%) Currency Breakdown The portfolio remained predominantly denominated in 3 major currencies: the CFA Franc (43%), the US Dollar (26%) and the Nigerian Naira (19%). These three currencies accounted for 88% of the lending portfolio Asset Quality Gross Loans and Advances to Customers From December 2016 to December 2017, gross loans and advances to customers remained stable at $9.9 billion, but they increased in Francophone West Africa (+$510 million) and decreased in Anglophone West Africa, excluding Nigeria (-$262 million), Central, Eastern and Southern Africa (-$144 million) and Nigeria (-$51 million). Credit Portfolio per Currency Gross Loans by Business Segment ($ millions) 9,869 1, ,913 1,704 1,033 7,165 7,176 XOF/XAF 41% NGN 19% USD 25% EUR 5% GHS 4% OTHERS 6% Dec 2016 Corporate Banking Consumer Banking Commercial Banking Dec 2017 Geographical Contribution to the Increase in Loans to Customers ($ millions) 9, (51) (144) (262) 15 9, Gross Loans UEMOA NIGERIA CESA AWA EBISA 2017 Gross Loans

85 Risk Management 83 As at 31 December 2017, the Corporate and Investment Banking segment represented 72% (December 2016: 73%) of total gross loans and advances to customers, the Consumer Banking was 11% (December 2016: 10%) and the Commercial Banking accounted for 17% (December 2016: 17%). At product level, contraction in loans were driven by term loans, which reduced to 72% of total loans compared to 77% in Non-Performing Loans Non-performing loans ( NPLs ) increased by 12% from $948 million in December 2016 to $1,060 million in December At regional level, Nigeria recorded the highest level of NPLs, accounting for 37% (29% in December 2016) of total NPLs, followed by CESA and UEMOA which accounted for 28% (22% in December 2016) and 19% (38% in December 2016) of total NPLs, respectively. Loans: Product Concentration (2017) Non-Performing Loans Contribution per Cluster Overdraft 27% Credit Cards <1% Term Loans 72% Mortgage Loans <1% Others <1% NIGERIA 37% UEMOA: Francophone West Africa 19% AWA: Anglophone West Africa, excluding Nigeria 13% CESA: Central, Eastern & Southern Africa 28% EBISA 3% Loans: Product Concentration (2016) NPL Ratio Trend (%) Overdraft 22% Credit Cards <1% Term Loans 77% Mortgage Loans <1% Others <1% Dec 2016 Dec 2017

86 2017 Annual Report 84 Risk Management The 12% increase in non-performing loans resulted in the ratio of non-performing loans to gross loans and advances ( NPL ratio ) deteriorating from 9.6% as of December 2016 to 10.7% as at December The non-performing loans book remains concentrated in Corporate Banking (53%; 54% in December 2016) and Commercial Banking (39%; 39% in December 2016). The NPL provisioning rate ( NPL coverage ) deteriorated from 64.3% in 2016 to 52.4% in 2017, and the unreserved portion of non-performing loans (i.e. the open credit exposure ratio ) also deteriorated to 23.2% of the total equity in December 2016, compared with 19.2% in December 2016, due to lower accumulated loan loss provisions. The total impairment losses on loans and advances to customers for the year amounted to $326 million, a significant decrease compared to the record high of $770 million in Defined as the ratio of impairment losses to average gross loans and advances, the cost of credit therefore improved from 709 basis points in 2016 to 324 basis points in Non-Performing Loans per Business Segment Portfolio Stress Testing Stress tests are an important method of analysing our risk profile because they give management a better understanding of how the Group portfolio is affected by macroeconomic changes, including the effects of negative events on the Group s capital. The tests support compliance with regulatory capital requirements and are an important tool in capital planning, where stress is applied to risks, income and costs. Stressing income affects the Group s capital, whilst stressing risk exposures affects capital requirements. Hence, stress testing quantifies the effect of macroeconomic changes on the capital buffer. For credit risk, the Group uses statistical models that transform macroeconomic scenarios into loss levels. The models are used to stress the probability of default ( PD ), causing higher loan impairment charges and a greater need for capital. The exposure is stressed further by subjecting collateral to stress (ie. a reduction in the collateral value). For other risk types, such as market risk, the Group uses scenario-specific variables on current market positions and this can result in a decline in market values. The changes in market value are considered as losses that reduce Group earnings and capital. The outcomes of stress test scenarios are reviewed on a consolidated basis across all risk types and compared with the Group risk appetite. They are reviewed by the management and the Risk Committee of the Board to ensure that the Group is prepared for worst case scenarios and that appropriate and necessary decisions are taken in the areas of Group risk appetite and capital management. Corporate Banking 53% Consumer Banking 8% Commercial Banking 39% NPL Coverage and Net Open Exposure Several stress testing exercises were undertaken during 2016 to assess the potential impact of various crises on our businesses. The results showed the resilience of the Group s capital Risk Reporting The Group Risk Management framework ensures appropriate and timely delivery of risk management information to the Senior Executives and the Risk Committee. The Risk Committee ensure that the portfolio performs in accordance with approved policies, limits and risk appetite. The Risk Committee refers decisions to the Board for final approval Coverage Ratio (%) Open Credit Exposure (%) Dec 2016 Dec 2017

87 Risk Management Market Risk Market risk comprises both price risk and liquidity risk. Price risk measures the impact of changes in interest rates, foreign exchange rates, equity and commodity prices and their implied volatilities on earnings. Group trading and non-trading books are exposed to price risk. Liquidity risk on the other hand refers to the risk that an organisation is unable, or is perceived to be unable, to meet its financial commitments. The objective of Ecobank s market risk management policy framework is to ensure that all significant market risks are identified, measured and managed in a consistent and effective manner across the Group to stabilise earnings and capital under a broad range of market conditions and to ensure adequate sources of liquidity Organisation Group Market Risk Management oversees market risks related to all assets, liabilities and off-balance sheet items. The Board Risk Committee sets the overall risk policies for Group market risk exposures, including risk limits. Group Internal Audit provides timely and objective assurance regarding the continuing appropriateness of, and the adequacy of compliance with, the policy framework. The Head of Group Market Risk ( HGMR ) performs a coordination, aggregation, facilitation and enabling function. The HGMR drafts market risk policies, defines market risk management standards, develops and distributes tools and techniques and is responsible for training and promoting common risk language across the Group. The HGMR also publicises knowledge on market risk to create awareness and understanding at all staff levels. The HGMR approves price risk limits and liquidity contingency plans for Ecobank s subsidiaries. In addition, the HGMR constantly monitors market risk exposures and ensures that they are always maintained at prudential levels. The HGMR also ensures that market risk management processes (including people, systems, operations, limits and controls) satisfy Group policies Risk Identification Consistent with an independent and centralised risk management function, Ecobank measures, monitors, manages and reports daily on its exposure to market risk. It also conducts intraday spot checks of market risks in individual subsidiaries by calculating risk exposures with internally developed systems that cover all its positions. In addition, conventional risk measures and mathematical and statistical measures, such as Value-at-Risk ( VaR ), are utilised to calculate market risk exposures as well as economic and regulatory capital. At the subsidiary level, trading units maintain blotters for recording movements and balance sheet positions of traded instruments, which include daily monitoring of profit and loss balances on trading and non-trading positions. Internal controllers and market risk managers monitor daily trading activities to ensure that risk exposures taken are within the approved price risk limits and the overall risk tolerance levels set by the Board. Every day ALCO members, treasurers and market risk managers monitor market risk factors that a ffect the value of trading and non-trading positions, as well as income streams on non-trading portfolios. They also track liquidity indicators to ensure that Ecobank s subsidiaries can always meet their financial obligations. The staff and management working within the operational business units are responsible for the day- to-day management and control of market risk.

88 2017 Annual Report 86 Risk Management Risk Measurement Banking Book Ecobank s traditional banking loan and deposit products are non-trading positions and are generally reported at amortised cost. However, given that the Group has banking operations in 33 African countries and exposure to 20 different currencies, the economic values of these positions will vary due to changes in market conditions, primarily fluctuations in interest and foreign exchange rates. The risk of adverse changes in the economic value of our non-trading positions is managed through the bank s Asset and Liability Management activities. The Group currently uses repricing maturity gap analysis to measure exposure to interest rate risk in its non-trading book. Through this analysis, subsidiary banks compare the values of interest rate sensitive assets and liabilities that mature or re-price at various times in the future. In performing this analysis, the Group makes judgmental assumptions about the behaviour of assets and liabilities that do not have specific contractual maturity or re-pricing dates. In general, an asset sensitive institution may expect net interest income to increase when market interest rates rise and to decline when market interest rates fall. Conversely, a liability sensitive institution can expect net interest income to increase when market interest rates fall and to decline when market interest rates Trading Book At Ecobank, trading market risk generally emanates from the Group s market making activities when the Group acts as a principal. It therefore arises from open positions in interest rate and foreign currency positions and it is generally affected by changes in the level and volatilities of yields and foreign exchange rates. Tools used to manage trading risk exposures include: Risk limits, driven by the notional size of net open positions ( NOPs ) by currency and subsidiary; Management Action Triggers ( MATs ); Stop Loss Limits; and Value at Risk. An interest rate sensitive gap is positive, or a gap profile is said to be asset sensitive, when the amount of interest rate sensitive assets exceeds that of interest rate sensitive liabilities maturing or re-pricing within a specified time period. It is negative (liability sensitive) when the amount of interest rate sensitive liabilities exceeds that of interest rate sensitive assets maturing or re-pricing within a specific period.

89 Risk Management Liquidity Risk Liquidity risk is currently managed using a balance sheet approach that estimates all sources and uses of liquidity, including loans, investments, deposits and borrowings, as well as contingent off-balance sheet exposures. Subsidiary treasurers are generally responsible for formulating their liquidity and contingency planning strategies and identifying, monitoring and reporting on all liquidity risks. The main tools used for liquidity risk measurement are the contractual and behavioural maturity gaps, ratio analysis and stress testing. As shown in the graph below, the Group was exposed to liquidity risk at 31 December 2017 for maturities of up to one month. This was mainly due to the overnight contractual maturity of current and savings deposits which accounted for over 73% of total deposits and are included in this maturity bucket. However, the risk is mitigated by the stable nature of these deposits from a behavioural perspective and the Group s ability to pledge its robust investment portfolio for cash at central banks. The Group s liquidity position improved during 2017, with the liquidity ratio ( LR ) increasing from 36.2% to 41.5% while the loan-to-deposit ratio ( LDR ) decreased from 73.1% as at 31 December 2016 to 65.2% as at 31 December Contractual Liquidity Maturity Gap ($ Milion) 5,409 3,666 3, ,848 1,686 (97) (4,868) (6,060) Up to 1 month 1-3 months 3-12 months 1-5 years Over 5 years Dec 2016 Dec 2017 Key Liquidity Indicators Liquid Assets*/Total Assets (%) Demand Deposits/Total Deposits (%) NIB/Total Loans (%) Loans-to-Deposits Ratio (%) Dec 2016 Dec 2017 * Liquid Assets refer to Cash + Balance with Central Bank (excludes minimum regulatory requirements) + Unencumbered Securities + Available Operating Account balances with Other Banks + Interbank Placements

90 2017 Annual Report 88 Risk Management In line with policy, the Group conducts stress tests to measure its immediate liquidity risk and to ensure that it has enough time to respond to potential crises. The stress tests are conducted monthly and cover a time horizon of up to thirty days. The tests estimate liquidity risk under various scenarios, including a name specific scenario and a general market crisis with differing levels of severity. The analyses assume that the Group does not reduce its lending activities. This means that existing lending activities are maintained and require funding. Most of the Group s unencumbered Treasury bill and bond holdings can be used as collateral for loan facilities with central banks and are considered liquid. Scenario specific haircuts are used on deposit outflows, loan reimbursement and the Treasury bill and bond portfolio. Potential liquidity outflows from unutilised, but irrevocable, loan commitments are also factored in. The degree of possible refinancing of funding sources varies depending on the scenario in question as well as on the specific funding source. To analyse the stability of funding, the Group breaks down deposits into Consumer/ Commercial/Corporate, Local Currency/Foreign Currency, Core/Non-core and term/ non-maturing, as well as geographically, according to the Group s position in each market. The Group monitors the diversification of funding sources by product, currency, maturity and counterparty to ensure that its funding base provides the best possible protection if the markets come under pressure. Ecobank was able to remain largely within its internal stress test targets throughout Interest Rate Risk The bank continues to be liability sensitive in the up to the 1-month bucket, and asset sensitive throughout the rest of the time bands. Based on the re-pricing profile as at December 31, 2017, it is estimated that a 200 basis points decrease/ (increase) in rates across the maturity buckets is expected to increase/(decrease) one-year earnings by approximately $18 million ($8 million in 2016). This reflects the re-pricing profile which is liability sensitive on the up to 1-month bucket and asset sensitive on the rest of the tenors. Under rising / (falling) interest rate environments, the expected negative/ (positive) impact on net interest income for the negative gap exposure in the up to 1-month bucket due to its size re-prices more than offsets the positive/ (negative) impact on net interest income accruing from the longer buckets which are asset sensitive. Interest Rate Repricing Profile ($ Milion) 3,964 3, ,652 1,736 2,428 (1,921) (2,179) Up to 1 month 1-3 months 3-12 months 1-5 years Over 5 years Dec 2016 Dec 2017

91 Risk Management 89 To estimate the impact of varying interest rates on the economic value of Ecobank s total equity, durationbased weighting factors (based on an assumption of 200 basis points across the time frame) recommended by the Bank for International Settlements ( BIS ) were applied to exposures in different maturity buckets and the results were expressed as a percentage of the Group capital. The results for the position as at 31 December 2017 are shown in the table below. The aggregate interest rate risk ratio remained stable at 30% of Group s capital as at December Thus, a 200 basis points increase in interest rates, is expected to reduce economic value by 30% (30% in 2016). Conversely, a 200-basis points reduction in rates is anticipated to positively impact the economic value of the Group equity by the same magnitude Foreign Exchange Risk Foreign exchange risk is the risk of losses on foreign currency positions caused by exchange rates fluctuations. Ecobank is exposed to foreign exchange rate fluctuations in 20 currencies. The Group continues to have significant exposure to the Nigeria Naira, the US Dollar and the CFA Franc, accounting for 19%, 26% and 43% of the Group s credit portfolio respectively at the end of It is important to note that, the CFA Franc is a common currency for 14 out of the 40 countries in which the Group operates, and it is pegged to the Euro under financial agreements between the French Treasury and the countries in the Francophone West Africa and Central Africa regions. As at 31 December 2017, the Group had a net onbalance sheet short open position in EUR of $82 million (net long position of $81 million in December 2016), a net short open position in USD of $882 million (net short position of $960 million in 2016) and a net long open position in CFA of $1,170 million ($281 million long position in December 2016) as shown in the graph below. Net Foreign Exchange Position ($ Milion) ,170 (960) (882) Dollar Dec 2017 Euro CFA Dec 2016

92 2017 Annual Report 90 Risk Management Value at Risk The Group measures and manages price risks in its foreign exchange and fixed income trading portfolios by using Value-at-Risk ( VaR ) calculations and stress testing. VaR represents the potential loss in the market value of a position or portfolio at a given confidence interval level and over a pre-defined time horizon and is used for risk monitoring and economic capital assessment. The table below shows basic statistics of the 1-day VaR for the foreign exchange and fixed income trading positions in The average VaR for 2017 was $1.29 million (2016: $1.17 million) Value at Risk ($ Millions) Risk category Average VaR Minimum VaR Maximum VaR Interest rate risk Foreign exchange risk Total VaR Internal Control Ecobank is concentrating on building a world-class risk and internal control system that ensures efficient service delivery and enhances stakeholder value. Our ongoing emphasis on best practice creates a proactive culture of internal control anchored on the three lines of defence organization which ensure appropriate decentralized ownership with business management accountability for risk management and controls across the Group. The board, executives and staff are all active in risk recognition, assessment and mitigation. The Committee of Sponsoring Organisations ( COSO ) of the Treadway Commission s Internal Control Integrated Framework has been adopted as the Group s Internal Control Methodology. The objective is to fully embed the three key objectives of ensuring the effectiveness and efficiency of our operations; improving the reliability of our financial reporting; and strengthening compliance with applicable laws and regulations in our control DNA. Through its foundational components, the framework ensures that management can identify internal control issues and successfully resolve them. Furthermore, dashboards have been developed for key processes to alert management every month about potential anomalies and failures. Technology solutions are deployed to compare transaction details against predetermined thresholds and these also monitor trends and patterns.

93 Risk Management Operational Risk Ecobank defines operational risk as the risk of loss arising from failed or inadequate internal control processes, systems or people, or from events external to the Group. Operational risks include fraud, legal, regulatory, compliance, execution and business practices, but exclude strategic and reputational risk. Other risks (such as reputational, credit and market risk) can be potential consequences of operational risk events. Legal risk is the risk of loss resulting from the failure to comply with laws, prudent ethical standards and contractual obligations. Legal risk also arises when contracts executed with counterparties are not legally enforceable or documented correctly. The Group has established a common risk language to provide a consistent framework for the definition and categorisation of risk. General and specific training through workshops, newsletters and mandatory operational risk awareness are conducted throughout the Group. Group Operational Risk Management ( GORM ) acts as the coordinating point where all significant operational risks are identified, measured, assessed, prioritised, managed, monitored, reported and treated in a consistent and effective manner across the Group. GORM also ensures that existing policies and procedures adequately address risks emerging from changing operating environments. All subsidiaries have adopted the Operational Risk Policies and Procedures Manual ( ORPPM ) approved by the Board Operational Risk Policy The Group s Operational Risk Management policy was approved by ETI Board in March 2017, and covers the following activities: Identifying, monitoring and managing current and potential operational risk exposures; Managing critical risks identified during business unit reviews; Following up on reports from Internal Audit and regulatory authorities and informing the Risk Committee of issues that involve Group operational risks; and Preparing management information on issues such as IT security, physical security, business continuity and compliance with legislation in these areas. The Group enforces security, fraud, control and compliance policies that also support operational risk management Organisation Board Approval/Board Reporting Pursuant to the Group Operational Risk Policies and Procedures Manual, ETI s Board of Directors are advised about Ecobank s Operational Risk Management Framework, alerted to the major aspects of Ecobank s operational risks and receive periodic reporting of Ecobank s operational risk exposures, loss experience and other relevant operational risk information. The Group has an operational risk structure that ensures that the Board of Directors and the Group Chief Executive Officer have direct responsibility for operational risk throughout the Group. The Board acts through the Board Audit and Compliance Committee, whose decisions are implemented by a centralised and independent Internal Control Function Operational Risk Governance Structure Ecobank maintains an Operational Risk Management Framework with a governance structure to support its core operational risk management activities of anticipation, mitigation and recovery. To ensure effective management of operational risk across Ecobank, the Governance Structure presents three lines of defence. First Line of Defence: Each business unit owns its risks, including its operational risk, and is responsible for its management. Second Line of Defence: Ecobank s control functions enhance the effectiveness of controls and manage operational risks across products and business lines. The Second Line of Defence includes Risk Management and specifically Operational Risk Management, Compliance, Internal Control, Finance, Human Resources and Legal. Legal and Compliance also advises on legal and regulatory issues that affect our risk and control environment and provide information related to emerging risks. The Operational Risk Management team within Internal Control oversees the management of the operational risk framework for Ecobank. Group Operational Risk Management works proactively with the businesses and functional units at the Group and Subsidiary levels to embed a strong operational risk management culture and framework across Ecobank through the effective identification, anticipation and mitigation of risks that could impact business objectives to minimise operational risk events and losses. Third Line of Defence: Internal Audit recommends enhancements on an ongoing basis and provides independent assessment and evaluation of the control environment.

94 2017 Annual Report 92 Risk Management Operational risk governance structure: the three lines of defence Business and functional units/departments Control functions Internal audit 1st Line 2nd Line 3rd Line The Group Operational Risk Management ( GORM ) within Group Internal Control, is supported by operational risk officers in subsidiaries and affiliates. GORM drafts operational risk policies, defines operational risk management standards and develops tools, techniques, analysis, reporting, communication and training. GORM also continues to disseminate the operational risk governance structure which has been in existence since During the last year, GORM has worked on enhancing the framework for the effective implementation of the risk and control self-assessment ( RCSA ) programme across the Group Operational Risk Management ( ORM ) Framework An operational risk framework is an essential prerequisite for the effective and efficient implementation of a risk and control assessment. It provides a clear understanding of the structure and process governing the identification of risks and controls and of how the risk and control assessment fits into the overall management of operational risks. The figure below illustrates the ORM framework, which anchor the Group s operational risk management approach and escalation processes. Operational Risk Management Framework RCSA Identify risks Design controls Test controls KRIs Select key risks Design indicators Track breaches Events Capture Casual analysis Back-testing Business Units Risks Owners Controls Owners Corrective Action Plans (CAPs) Reviewing Scenarios, Modelling, Capital Assessments, Reporting Risks and Controls. Governance Assurance

95 Risk Management Risk and Control Self-Assessment ( RCSA ) The Risks and Controls Self-Assessment ( RCSA ) programme provides a range of diagnostic tools that assist Senior Business Managers to: Identify the most significant operational risks to business activities; Assess the overall effectiveness of Key Controls that mitigate significant operational risks; Detect and address specific weaknesses in the design and/or execution of Key Operational Controls and/or related business processes; and Detect and address emerging operational risks to business activities. RCSA also provides a common framework to facilitate Group-wide, comprehensive and consistent Risk and Control Assessments, including control issue materiality, RCSA Entity Ratings and the detection of emerging risks and systemic control weaknesses. A simplified and standardised RCSA programme with enhanced systems, procedures and tool was relaunched group-wide in the fourth quarter of Compliance and Regulatory Risk Given its pan-african footprint, Ecobank needs to deal with significant regulatory requirements in each country in which it operates. These regulatory demands could negatively impact its operations, especially given the state of the world economy and an unrelentingly competitive business environment. Ecobank continues to be impacted by a significant number of new regulatory requirements from multiple sources. Therefore, management continues to give attention and resources to ensure that regulatory reforms and their related requirements are embedded in our policies, processes, products and operations. Ecobank has implemented robust processes to ensure that all business units comply with all relevant laws and regulations, with the support of its Compliance department, which advises business and support functions on regulatory compliance across the footprint. The Group has also designed a compliance programme to ensure that its activities are constantly aligned with the regulatory requirements of all the countries in which it is present. Our primary duty is to ensure that the businesses comply with local regulations, that identified risks are mitigated with appropriate measures and that the Group s risk appetite is adhered to Know-Your-Customer ( KYC ) and Transaction Monitoring The quality of information collected from our customers is a key element in improving overall customer service to ensure that customers get appropriate products and services. Our policies therefore include maintaining updated customer information within our files and systems. The Compliance department ensures that our network is firmly secured and protected against money laundering, corruption and terrorism financing ( AML/ CFT ). Ecobank monitors customers transactions to identify suspicious transactions using an effective and efficient automated system. Ecobank closely collaborates with local law enforcement authorities and financial intelligence units ( FIUs ), who are leading the fight against money laundering and terrorism Business Continuity Management ( BCM ) Ecobank s BCM programme is based on international BCM standards and principles. It outlines core business and function procedures for the recovery of operations or relocation in response to various disruptions. These procedures provide information for key Ecobank personnel to: Ensure staff safety and protect Ecobank property; Recover and resume operations to ensure business continuity; Carry out situation analysis and instigate appropriate action; Provide client access to critical applications; Establish communications with our employees, clients and regulators; and Safeguard Ecobank s records and intellectual property. Subsidiaries and business units are guided to develop, maintain and test comprehensive business continuity plans ( BCPs ) regularly to ensure continuous and reliable service. The BCPs are based on predefined strategies and are designed to ensure provision of critical business processes and applications within predefined recovery time frames. The BCM Programme has assigned roles and responsibilities, which are detailed in our corporate policy and standards. This ensures a unified approach throughout Ecobank and results in effective business continuity capabilities. Business continuity specialists manage the BCM Programme at both local and Group levels. Group BCM provide expertise and guidance to all Ecobank affiliates in developing, implementing, testing and maintaining effective BCPs and recovery procedures.

96 2017 Annual Report 94 Risk Management People Risk People risk is broken down into intentional or dishonest acts (fraud, unauthorised policy and procedure breaches, collusion and sabotage) and unintentional causes (mistakes or errors due to a lack of awareness of policies and procedures), both of which can lead to losses. The Group maintains zero tolerance for all dishonest acts and imposes Codes of Ethics on all staff. Management has implemented many control measures, including more on-site reviews, heightened control awareness training, employee screening and disciplining staff involved in dishonest behaviour. People risk is further managed through the hiring process. Management continues to maintain an appropriate balance in sales and processing staff ratios. Where services are outsourced, subsidiaries have been guided to assign less sensitive roles to such support staff. Employee screening has been extended to cover non-permanent staffing arrangements Reputational Risk In accordance with Ecobank s commitment to ensure social trust and to be regarded as a bank that stands firm on moral uprightness, transparency, integrity and credibility, the Group has set-up the Board Social Ethics and Reputation (SER) Committee to oversee and review the positioning of the Ecobank brand. In doing this, the committee is working with various stakeholders in the bank to ensure that there is a clear strategy being delivered which increases the value of the brand and the Group s standing, reputation and legitimacy in the eyes of all stakeholders, through a periodic customer affinity survey Legal Risk The Ecobank Group is involved in various litigations in the normal course of its business. In addition to cases instigated by members of the Group, the Group is also defending non-recovery litigation cases in various jurisdictions in which it operates. Ecobank has made provisions for these non-recovery litigations across the Group of $142,390, Operational Risk Reporting Operational risk reporting is an integral part of Ecobank s governance structure, with clear mandates established. In addition to the day-to-day monitoring of events and follow-ups, all country Business Unit Risk Committees ( BURCs ) meet at least quarterly to review operational risks specific to those units and to identify emerging risks. Country Operational Risk and Country Internal Control or Internal Audit personnel observe the meetings, whose proceedings are documented and escalated to Group Operational Risk. Functional Heads meet as members of Business Risk and Control Committee (BRCC) on a quarterly basis at the country, regional and group levels respectively to review, discuss, evaluate and manage significant risks that are inherent to the business in line with the RCSA. Various Responsibilities are assigned as appropriate to ensure that outstanding action plans are followed up. Country Operational Risk reports to GORM for escalation of significant issues to Group Internal Control and to the Audit Committee of the Group s Board. NEW Group BRCC Regional BRCC Affiliate BRCC Quarterly Group Business Risk Control and Compliance Commitee (BRCC) Chaired by GCEO Quarterly Regional BRCC held across the Group BURC Minimum quarterly BRCC meetings held by Affiliates Minimum Quarterly Affiliate Business Unit Risk and Control (BURC) meetings

97 Risk Management Events and Losses Group net operational risk losses in 2017 amounted to $7.6 million, against $5 million in Fraud events increased year on year, from $3.5 million in 2016 to $5.3 million. Internal fraud of $1.9 million constituted 25% of the total net loss for the year (compared to $3.3 million, or 65% in 2016). In 2016, external fraud amounted to $3.4 million; this represented 45% of the total net loss for 2017, versus $0.2 million, or 5% in Execution delivery events amounted to $1.7 million, which represented 23% of the total net loss for 2017 (2016: $1.0 million or 22%) and other events constituted $0.5 million or 7%. We are developing stronger and forward-looking risk and control mechanisms that will support our proactive risk and control management vision. These will be driven by scenario, correlation and root cause analysis programs that will support effective management of emerging risks in the bank. Our active participation in the operational risk and control research programs is being championed by the Operational Risk exchange (ORX) Consortium which will be effectively resourced to support these efforts. 4.5 Environmental and Social (E&S) Risk In Ecobank, Environmental risk means the risk of causing pollution or destruction to the natural environment (land, water, air, natural habitats, and animal and plant species) either through accidental or deliberate actions. Similarly, Social risk is the risk of a customer not meeting acceptable standards for employment, working conditions and business ethics, within its own business or by its actions. The implementation of Ecobank s E&S risk is under the direct supervision of the Group Chief Risk Officer with oversight responsibility by the Social, Ethics and Reputation Committee (SER) and the ETI Board. The Group strives to manage E&S risks in line with its commitment to conduct business in an environmentally friendly and socially acceptable manner, while helping its clients to carry out their business operations in a better and sustainable manner. In managing these risks, the Group continues to screen, classify, assess, formulate and monitor transactions in the eligible sectors for compliance with the E&S risks within the acceptable internal and external limits. Net Operational Losses Percentage of total Internal Fraud External Fraud Dec 2016 Dec 2017 Employment Practices & Workplace Safety Clients, Products & Business Practices Damage to Physical Assets Business Disruption & System Failures Execution, Delivery & Process Management

98 2017 Annual Report 96 Risk Management Environmental & Social Management System (ESMS) The procedures for the Ecobank ESMS implementation are as follows: Screening transactions against the Exclusion List activities Reviewing transactions for E&S risks in accordance with E&S sector guidelines Identifying project/transaction sectors for the Environmental and Social (E&S risk classification) Verifying transactions for potential E&S risk identification Classifying transactions for E&S risk into Low, Medium B, Medium A and High risk For E&S low risk transactions, the Relationship Officer (RO) will sign off Environmental and Social Due Diligence (ESDD) forms to be verified by the Country Risk Manager (CRM) For all Medium B, Medium A and High-risk transactions, detailed ESDD is required (RO and CRMs will sign-off all Medium risk rated transactions to be verified by the Group Manager for E&S) in relation to: General Information; Health, Safety & Security; Labour & Working Conditions; Internal Environmental (energy, waste, pollution etc.); Community; Legislation; Internal Environmental and Social Management System (ESMS); and Mitigation & Improvement Action Plan. Actions plans are included in Credit Applications (CAs) in the table related to covenant. As covenant, E&S should be indicated in the loan agreement like other credit covenants and follow up the monitoring on the monthly basis according to the risk triggers and covenant process. ESMS Procedures Exclusion List E&S Checklist E&S Classification criteria Input E&S checklist E&S Sector Guidelines E&S Action Plans Offer Letter Action Plan E&S Risk level Ecobank total exposure Loan conditions Reporting template Stage Screening Classification Due Diligence Formulation & incorporation of agreed Action Plan in offer letter Compliance Monitoring & Reporting Output Decision to proceed or reject Classification Determination of Due Diligence level E&S specific requirements Mitigation measures Action Plan E&S Action Plan E&S monitoring report

99 Risk Management Environmental & Social Management System (ESMS) S/N ESRM Process Risk Factor Impact Mitigation Status Remark 1 Screening of transaction in the sensitive sector for E&S risk Eligible transaction is not screened for E&S risk Compliance with good practice guide, such as IFC ESRM process Transactions properly screened for Exclusion List activities Very satisfactory 2 Classification Improper classification of transaction for E&S risk Expose the bank to E&S risk as well as breach of the DFI lenders covenants E&S risk classification categories reviewed in line with the level of impact severity Satisfactory 3 Conduct of E&S due diligence assessment Improper completion of E&S due diligence assessment form Pertinent E&S risks are not identified and remain hidden risks issue Country Risk Managers need to be more involved in the E&S due diligence assessment Room for improvement Convert E&S designates in large affiliates to E&S officers to enhance focus 4 Formulation & incorporation of E&S Action Plan in offer letter Lack of level playing field and standard on E&S risk management in our markets ESRM process is undermined Reputation and deviation from the international standard practices Develop initiative for creating the industry standards for ESRM in our market Enhance collaboration amongst the risk management, legal and business units Fairly satisfactory (given the operating market circumstance) 5 Monitoring of E&S practices in client operations in lieu of the E&S Action Plans Breach of Ecobank E&S risk policy Breach of Ecobank E&S policy Non-conformity to the Environmental, Social & Governance (ESG) standards, which the bank has subscribed to their principles E&S portfolio review and monitoring Reinforced support of Internal Audit on E&S risk management as part of ARR Work-in progress

100 2017 Annual Report Compliance All the obligatory reports to the Environmental and Social Governance (ESG) frameworks, which Ecobank has either adopted or is signatory to, were successfully submitted, including the Equator Principles and the United Nations Global Compact (UNGC) as well as the contractual environmental and social compliance reports to lenders, such as the IFC Annual Environmental Performance Reviews (AEPR). The Group participated in the Annual Meeting of the Equator Principles Financial Association and the IFC Community of Learning, held jointly in Sao Paolo, Brazil in October It also participated in the Annual Meeting of the United Nations Environment Programme Finance Initiative (UNEPFI) in Geneva, Switzerland in October E&S Portfolio Review As at 31 December 2017, the Group reviewed a total of 1,755 transactions which were in sectors with significant E&S risks. These sectors include: soft and hard commodities, e.g. oil, gas, mining, heavy construction, manufacturing, real estate and power generation/transmission/distribution. The combined exposures to the severe (Medium B) and more severe (Medium A) E&S categories stood at 59%. Furthermore, a total of 40% of the screened transactions in 2017, were in the Low E&S risk category. The Low risk category signifies that the qualifying transactions pose less severe and negligible impact on the aesthetic quality of Environmental and Social standards. Furthermore, E&S eligible transactions in various categories as at December 2017 are presented below: Activity 2017 Number of transactions screened in ,755 Number of High risk 23 Number of Medium (A&B) risk 1,038 Number. of Low risk 694 Exclusion List transaction Major Activities in 2017 Activities of the Environmental and Sustainability management within the Group Risk Management, included, engaging and supporting our clients as they work to improve the environmental and social impacts of their businesses, through environmental and social risk management. This means the E&S team is helping clients and the bank in their efforts towards attainment of the Sustainable Development Goals (SDG), by working with internal and external stakeholders to exchange best practice ideas and knowledge sharing on the implementation of ESRM. During 2017, the Group leveraged its environmental and sustainability activities to improve outreach and business positioning in Ghana. As Chair of the Bank of Ghana Sustainable Banking Committee, Ecobank participated in a joint knowledge exchange visit on sustainable banking in Dhaka, Bangladesh in October The visit was organised by the IFC Sustainable Banking Network and was attended by representatives from the Central Bank of Nigeria, the Central Bank of Nepal, the Central Bank of Ghana (Bank of Ghana), and the Central Bank of Bangladesh (Bangladesh Bank). Similarly, Ecobank Ghana was selected by the Ministry of Finance, Ghana as the National Implementing Entity (NIE) for Ghana s application for the Green Climate Fund (GCF). The selection was assisted by Ecobank s track record and its active participation in the environmental sustainability discussion at national, regional and global levels. In recognition of Ecobank s commitment to promoting the environment and sustainability in the banking industry, especially in Africa, Ecobank was appointed to the Global Steering Committee of the United Nations Environment Programme Finance Initiative (UNEPFI) through a competitive election process in November 2017 In 2017, the major highlight of the E&S team is presented as follows:

101 Risk Management 99 Facilitated Green Finance Conference organised by African Guarantee Fund & International Trade Centre in Ghana, November 2017 Participated in the IFC Annual Community of Learning in Sao Paulo, Brazil, October 2017 Panel discussant at the UNEPFI Africa Roundtable meeting, Johannesburg, South Africa, November 2017 Attended the Equator Principles Association s Annul Meeting as a member in Sao Paulo, Brazil, October 2017 Submitted application for the Green Climate Fund Attended the UNEPFI Annual General Meeting in Geneva, as a member, October, 2017 Managed 1,755 transactions for E&S risks and impacts As Chair of the Bank of Ghana Sustainable Banking Principle Committee, Ecobank participated in the joint study visit to understand the development and implementation of Bangladesh Sustainable Banking Initiative, Dhaka, Bangladesh October 2017 Elected to the UNEPFI Global Steering Committee, representing Africa & Middle East Region, November 2017 Contributed to the discussion on Sustainable Livelihood Restroration at the IFC Sustainability Exchange, Columbia, June 2017 In the fourth quarter of 2017, the ESMS team collaborated with the business units and the development financial institution (DFI) partners of Ecobank and positioned the bank to explore opportunities in the emerging green banking finance initiatives such as the green bond, the Green Climate Fund and the financing of renewable energy and energy efficiency businesses. The team is also positioning Ecobank in the global league of Sustainable banking institutions.

102 2017 Annual Report Capital Adequacy 5.1 Group Level Our capital management policies support business strategy and ensure that the Group is sufficiently capitalised to withstand severe macroeconomic downturns. In addition, they are designed to ensure compliance with regulatory capital requirements and to support the Group s credit rating objectives. Ecobank has two approaches to the measurement of its capital requirements: a regulatory approach and an internal approach. The regulatory approach is based on fixed uniform rules for holding adequate capital to support the risk that the Group assumes. Therefore, in each of Ecobank s countries of operation, subsidiaries are required to hold a minimum capital level, which is determined by the regulators and is consistent with the recommendations of the Basel Committee on Banking Supervision. Under the original Basel accord, banks had to maintain a ratio of regulatory capital to risk-weighted assets of 8%. This ratio has been increased in some countries to 10% and, in some cases, 15%. Since 2007, the Group has also been using an internal model based on Basel II standards for assessment of capital adequacy on a consolidated basis. In line with evolving capital management frameworks and best practice recommendations, in 2010 the Board approved the adoption of the economic capital concept as an additional internal method for capital assessment. At Ecobank, economic capital is defined as the amount of capital required to absorb unexpected losses arising from credit, operational and market risks over a period of one year at a 95% confidence level. Under Basel I standards, risk-weighted assets decreased slightly by 1% from $12.94 billion at year-end 2016 to $12.80 billion in December On the other hand, the group s Total Regulatory Capital increased by $0.42 billion to $3.69 billion in December 2016, whilst Tier I capital increased by $0.15 billion to $3.18 billion. Accordingly, the capital adequacy ratio under Basel I increased from 25.3% as at 31 December 2016 to 28.8% as at 31 December 2017, and the core Tier-1 capital adequacy ratio also increased from 23.4% to 24.8%. 5.2 Capital Adequacy in Affiliates In line with our commitment to comply with local regulations and to ensure that our subsidiaries are well capitalised, the Group continues to monitor the capital adequacy of its subsidiaries. When a shortage arises, appropriate actions are taken to ensure immediate compliance with regulations. The UMOA (West Africa Monetary Union WAMU) recently approved prudential guidelines for credit institutions and financial companies, referred to as Basel II/III, and is effective in UMOA countries in January Its full implementation will span a 5-year period, from January 2018 to January The Group works closely with the BCEAO (Central Bank of West African States) and expects full compliance for both the Group and all its affiliates in the UEMOA region without breaching any regulatory capital adequacy ratios. Eric Odhiambo Group Chief Risk Officer Risk-Weighted Assets ($ million) Capital Adequacy Ratio (%) Liquid assets Loans to customers 9,358 9,259 Other on-balance sheet assets 2,284 2,486 Off-balance sheet assets Total 12,799 12, Capital Adequacy Ratio Tier-1 Capital Adequacy Ratio Dec 2016 Dec 2017

103 Risk Management Instant and easy mobile banking means more power for everyone Whoever you bank with, enjoy our instant digital services: SEND money instantly to 33 countries SHOP cash-free with Scan+Pay QR PAY bills on-the-go quickly and easily GO XPRESS open an account instantly on your phone with zero account fees LINK and use any card with the app Download it now Our app is_on Ecobank_on ecobank.com

104 2017 Annual Report 102 Business and Financial Review Technology is the key to providing our customers with the full benefits of our pan-african operations and we are very encouraged by the speed and scale of the uptake of our new digital offerings. Our successful placement of $400 million of convertible loans illustrate the confidence that the financial industry has in our aim of generating superior equity returns.

105 Business and Financial Review 103 Select Service Scan+Pay Amount: $20.00 PAY

106 2017 Annual Report 104 Business and Financial Review Ecobank Transnational Inc. (ETI) and its subsidiaries and affiliates are collectively known as Ecobank Group, or Ecobank, or The Group. Ecobank is the leading pan-african institution in Africa, present in 36 African countries, with international offices in Paris, London, Dubai and Beijing. Ecobank serves approximately 14 million customers and has $22.4 billion in asset and $2.2 billion in total equity as of 31 December For management purposes, the Group s activities are organised into three major business segments, namely Consumer Bank, Commercial Bank and Corporate and Investment Bank and four geographical regions, namely, Nigeria, Francophone West Africa (UEMOA), Anglophone West Africa (AWA) and Central, Eastern and Southern Africa (CESA). Ecobank prepares its consolidated financial statements in accordance with International Financial Reporting Standards (FRS). The following Business and Financial Review provide a comparative discussion of the consolidated financial results of the Ecobank Group for the periods ended 31 December 2017 and 31 December Income Statement Analysis Summary Consolidated Income Statement Year ended 31 December In thousands of $ % Change Net revenue 1,831,202 1,972,263 (7)% Operating expenses 1,131,551 1,237,211 (9)% Pre-impairment income 699, ,052 (5)% Impairment losses on financial assets 411, ,851 (52)% Profit/(loss) before income tax 288,340 (131,341) NM Taxation (60,757) (70,924) (14)% Profit/(loss) for the year from continuing operations 227,583 (202,265) NM Profit/(loss) for the year 228,534 (204,958) NM Effective tax rate 21.1% (54)% 139% Attributable to: Owners of the parent 178,585 (249,898) NM Profit/(loss) for the year from continuing operations 178,071 (248,444) NM Profit/(loss) for the year from discontinued operations 514 (1,454) NM Non-controlling interest 49,949 44,940 11% Profit/(loss) for the year from continuing operations 49,512 46,179 7% Profit/(loss) for the year from discontinued operations 437 (1,239) NM Profit/(loss) for the year 228,534 (204,958) NM Return on average total assets (ROAA) 1.1% (0.9)% Return on average equity (ROAE) 11.6% (9.6)% Basic earnings per share (EPS) ($) 0.01 (0.01) Diluted earnings per share (EPS) ($) 0.01 (0.01) NM not meaningful Net revenue Net revenue, that is the sum of net interest income and non-interest revenue, amounted to $1.8 billion, a year-on-year decrease of 7% or $141 million. This decrease was mainly driven by the strong US dollar, our reporting currency, which appreciated against the Nigerian Naira and Ghanaian Cedi. Excluding these currency effects, net revenue would have decreased marginally to $2.0 billion, thanks to growth in non-interest revenue partially offsetting a decline in net interest income. Net interest income Net interest income is the interest earned on loans and advances to customers and other financial institutions, debt securities and other interest-earning assets less the interest paid on customer deposits, other deposits and short- and long-term borrowings. For 2017, net interest income of $977 million, decreased by $129 million, or 12%, if compared with the $1.1 billion in 2016, partly due to currency movements. Adjusting for these effects of currency translation, net interest income fell by $48 million, or 4%, primarily driven by a compression in net interest spreads coupled with a decrease in customer loans. The net interest margin, which is the average interest rate on earning assets less the average interest rate paid for deposits and other funding sources, declined in 2017 to 6.5% versus 6.9% in The decrease was largely due to net interest spread compression, notably in Nigeria and Ghana.

107 Business and Financial Review 105 Non-interest revenue Non-interest revenue of $854 million represented 47% of total net revenue for 2017, compared with $866 million, which represented 44% of 2016 total revenues. The decrease of $12 million, or 1%, in non-interest revenue was largely a result of currency translation effects. Excluding these, non-interest revenue increased 4%. That increase was primarily driven by client-related FX sales and trading, which significantly benefited from improvements in FX liquidity and client momentum in the NAFEX window in Nigeria. That was partially offset by a decrease in fees and commissions associated with the lending business, a reflection of our decision to curb customer loan growth. Importantly, the growth in cash management and cards, demonstrate the strategic progress we are making to grow these businesses and their associated revenues. Fees and commission income Business and client activity in most of our markets was fairly subdued even though there was a gradual recovery in GDP growth in most of sub-saharan Africa in This reduced activity in client momentum resulted in a decline in net fees and commission income by $33 million, or 8%, to $400 million. Also, our deliberate decision to curb the extension of customer loans resulted in the fees related to credit origination falling by 15% year-on-year. Cash management and trade finance, which we have pivoted as engines of growth, due to their more consistent and sustainable revenue streams, increased by 5% from This increase was driven by the improved use of technology to drive our collections and payments services for our Commercial and Corporate clients. Additional benefits to fees and commission came from an increase use in the Ecobank Mobile App helping to grow remittances and payments. The increased issuances of debit cards, especially for our Advantage customers, helped increase by 13% card management fees from $71 million in 2016 to $80 million in Net trading income Trading income equates to the income we earn from buying and selling foreign exchange on behalf of our clients to meet their trade finance, payments and cash management needs. Securities trading income, on the other hand, is largely derived from trading in government debt. Net trading income increased by $12 million, or by 3% to $416 million primarily due to growth in fees and commissions from client-related foreign-exchange sales and trading, which benefited significantly from the improving foreign-exchange liquidity and increased client activity in the investors and exporters foreign exchange (I&E FX) window in Nigeria. Revenue Year ended 31 December In thousands of $ % Change Interest income 1,570,320 1,672,852 (6)% Interest expense (593,001) (566,406) 5% Net interest income (NII) 977,319 1,106,446 (12)% Fees and commission income Credit related fees and commissions 141, ,287 (15)% Corporate finance fees 10,299 23,768 (57)% Portfolio and other management fees 16,935 11,044 53% Brokerage fees and commissions 3,364 3,223 4% Cash management and related fees 203, ,582 6% Card management fees 79,901 70,529 13% Others 13,610 17,688 (23)% Fees and commission income 469, ,121 (3)% Fees and commission expense (69,140) (52,492) 32% Net fees and commission income 400, ,629 (8)% Foreign-exchange income 360, ,017 (0.2)% Securities trading income 55,600 42,538 31% Net trading income 415, ,555 3% Net losses from investment securities (5) 26,381 NM Other operating income 37,783 2,252 1,578% Non-interest revenue (NIR) 853, ,817 (1)% Net revenue (NII + NIR) 1,831,202 1,972,263 (7)% Net interest margin (NIM) 6.5% 6.9% Contribution of NIR to net revenues 46.6% 43.9% NM not meaningful

108 2017 Annual Report 106 Business and Financial Review Operating expenses Operating expenses of $1.1 billion, decreased by $106 million, or by 9% (in constant currency by 2%), from 2016, despite incurring one-off restructuring costs of approximately $10 million in CESA. The key drivers were a reduction in staff expenses from the ongoing optimisation exercises and a reduction in discretionary expenditure. Overall, we are meeting our cost reduction targets, and we expect further reductions in Despite the cost reduction programme, we will be continually making investments, particularly in technology, to improve the customer experience. The cost-to-income ratio of 61.8% was an improvement on the 62.7% in 2016, and it would have been lower but for the one-off restructuring cost. Operating expenses Year ended 31 December In thousands of $ % Change Staff expenses 515, ,061 (4)% Depreciation and amortisation 95,820 99,197 (3)% Communications and technology 130, ,755 1% Professional fees 51,028 74,780 (32)% Rent and utilities 66,668 70,155 (5)% Repairs and maintenance 34,354 37,133 (7)% Insurance 33,261 34,204 (3)% Others 1 204, ,926 (20)% Other operating expenses 520, ,953 (14)% Total operating expenses 1,131,551 1,237,211 (9)% Cost-to-income ratio 61.8% 62.7% (1) Others include operational losses and fines, advertising and promotion, business travels, supplies and services, fuel, etc: Impairment losses Impairment losses on financial assets totalled $411 million in 2017, of which $326 million were related to impairment charges on loans and advances. This represented a significant decrease in comparison to 2016 s impairment losses of $864 million, of which $770 million were related to loans and advances. The substantial decrease in impairment losses was due mainly to management s decision in 2016 to address legacy challenged loans which led to substantial impairments. These impairments did not fully address all of the historic challenged loans, which led management to maintain that non-performing loans and cost-of-risk will remain elevated in Thus the impairment losses for 2017, were due provision builds to address residual challenged loans. The cost-of-risk was 3.3% compared to 7.1% in The impairment losses on other financial assets of $85 million, down 9% from the prior year, were largely related to legacy assets. Impairment losses Year ended 31 December In thousands of $ Change Provision for loan impairment 385,697 1,012,823 (62)% Provision no longer required 73, ,607 (74)% Specific impairment losses on loans and advances 312, ,216 (57)% Collective impairment losses on loans and advances 13,753 42,052 (67)% Impairment losses on loans and advances 326, ,268 (58)% Impairment losses on other financial assets 84,806 93,583 (9)% Impairment losses on financial assets 411, ,851 (52)% Cost-of-risk 3.3% 7.1%

109 Business and Financial Review 107 Taxation The tax charge for 2017 was $61 million, equating to an effective tax rate of 21%, compared with $71 million in 2016 (effective tax rate of 54%). The lower tax charge in 2017 primarily reflected tax exemptions received on government investment securities particularly in the Francophone West Africa region. Profits Ecobank generated a profit before tax of $288 million, compared with a pre-tax loss of $131 million in The improved performance in profitability was primarily driven by a decrease in provisions. Profit after tax was $229 million, compared to a net loss of $205 million in The profit attributable to ETI shareholders for 2017 was $179 million, or a diluted earnings per ordinary share of $0.01, compared with a loss of $250 million, or diluted loss per ordinary share of $0.01 in Balance Sheet Analysis Consolidated balance sheets overview The Group s assets totalled $22.4 billion at year-end, an increase of $1.9 billion from 31 December The increase in the balance sheet value was mainly due to an increase in government treasury bills and bonds holdings, driven by broad-based deposits growth of 13% year-on-year. There follows a year-on-year analysis of significant changes to specific items within the Consolidated Balance Sheet. Consolidated Balance Sheet data At 31 December (In thousands of $) Change Earning assets Investment securities : Treasury bills and other eligible bills 1,718,977 1,228,492 40% Financial assets for trading 36,557 77,408 (53)% Investment securities: available-for-sale 4,405,240 3,272,824 35% Pleged assets 298, ,205 (42)% Loans and advances to banks 1,685,806 1,413,699 19% Loans and advances to customers 9,357,864 9,259,374 1% 17,503,005 15,770,002 11% Non-earning assets Cash and balances with central banks 2,661,745 2,462,302 8% Intangible assets 283, ,766 1% Property and equipment 924, ,047 7% Investment property 43,514 35,819 Derivative financial instruments 39,267 68,204 (42)% Other non-earning assets 976,246 1,032,834 (5)% 4,928,599 4,740,972 4% Total assets 22,431,604 20,510,974 9% Liabilities Deposits from other banks 1,772,414 2,022,352 (12)% Deposits from customers 15,203,271 13,496,720 13% Borrowed funds 1,728,756 1,608,564 7% Other liabilities 1,555,080 1,619,260 (4)% Total liabilities 20,259,521 18,746,896 8% Equity Share capital 2,113,957 2,114,332 Retained earnings 216, ,847 (6)% Reserves (449,355) (767,255) (41)% Total equity and reserves attributable 1,880,744 1,577,924 19% Non-controlling interest in equity 291, ,154 57% Total equity 2,172,083 1,764,078 23% Total liabilities and shareholders equity 22,431,604 20,510,974 9%

110 2017 Annual Report 108 Business and Financial Review Assets Cash and balances with central banks We deposit cash with central banks to meet reserve requirements and to facilitate liquidity management as part of the normal course of our business. As at 31 December 2017, cash and balances held with central banks amounted to $2.7 billion, an increase of $199 million in comparison with The increase in cash was primarily driven by an in increase in deposits. Loans and advances to banks Loans and advances to banks largely constitute deposits held with other banks to facilitate correspondent banking relationships and manage our liquidity and interest rate risks. At year-end 2017, loans and advances to banks amounted to $1.7 billion, an increase of $272 million if compared to 2016, driven by higher deposit balances and management s decision to curb lending. Investment securities We hold trading and investment securities in the normal course of our business. We also hold securities for the purpose of cash, liquidity, and asset and liability management. Treasury bills and other eligible bills The Group holds deposits that are not immediately loaned to clients in treasury and other eligible bills. These holdings amounted to $1.7 billion, up $490 million from the previous year, driven by higher customer deposit balances and our decision to increase liquidity buffers. Available-for-sale ( AFS ) investment securities These are investment securities, other than treasury bills, comprised of listed and non-listed debt and equity instruments, with debt securities accounting for about 90% of the AFS portfolio. At 31 December 2017, the available-for-sale investment securities portfolio amounted to $4.4 billion, an increase of $1.1 billion from The increase in AFS investment securities was primarily driven by Francophone West Africa, partially offset by Nigeria. Our decision to significantly decrease credit origination, coupled with an increase in customer deposits, drove the sharp increase in AFS in the Francophone West Africa region. Trading securities These are securities held for trading purposes, mostly government fixed-income securities in Nigeria. They amounted to $36 million, down $41 million from the previous year. The decline in interest rates in Nigeria precipitated the sales of securities held for trading to realise profits.

111 Business and Financial Review 109 Loans and advances to customers The Group provides loans to customers, ranging from households and small businesses to regional and multinational corporates. Net customer loans of $9.4 billion at 31 December 2017 were up by $98 million compared to The increase partly benefited from the US dollar depreciation against the CFA franc, helping to boost loan growth in the Francophone West Africa region. If we were to adjust for currency movements, group customer loans would have declined by 4% from the previous year, which underpins management s decision to curb lending. In the individual business lines, loans in Corporate Bank and Consumer Bank, both rose $57 million, to $6.9 billion and $0.95 billion, respectively, in But on an underlying basis, both were marginally lower. For Commercial Bank, loans declined by $16 million to $1.6 billion from the previous year. This was due to, on one hand, the challenging operating environment for most small and medium-sized businesses to grow and our decision to curb lending. On a regional basis, customer loans declined on a constant currency basis in Nigeria, Anglophone West Africa, and Central, Eastern and Southern Africa regions, by 4%, 19% and 14%, respectively. In Francophone West Africa region, underlying loans grew by 6%, thanks to a gradual pick-up in economic activity, particularly in Cote d Ivoire. The allowance account for loan losses decreased $55 million, or by 9%, to $555 million. This decrease was due to the fact that in 2016 management s decision to address legacy challenged assets enabled a disproportionately higher acceleration in impairments, which was not the case in The amount of recovered loans in 2017 stood at $115 million compared with $355 million in Nonperforming loans as a percentage of total loans was 10.7%, compared with 9.6% in The current year s non-performing loans ratio resulted from large single-name past due obligations migrating into non-performing loans. Loans and advances to customers At 31 December (In thousands of $) Change Group Loans and advances to customers (gross) 9,912,778 9,868, % Less: allowance for impairment (554,914) (609,497) (9)% Loans and advances to customers (net) 9,357,864 9,259,375 1% Non-performing loans 1,059, ,185 12% Loans-to-deposits ratio 65.2% 73.1% Non-performing loan ratio 10.7% 9.6% NPL coverage ratio 52.4% 64.3% Loans and advances by business segments: Corporate Bank Loans and advances to customers (gross) 7,176,109 7,165, % Less: allowance for impairment (293,681) (339,416) (13)% Loans and advances to customers (net) 6,882,428 6,825,775 1% Non-performing loans 563, ,659 11% Loans-to-deposits ratio 102.6% 118.0% Non-performing loan ratio 7.9% 7.1% NPL coverage ratio 52.1% 66.6% Commerical Bank Loans and advances to customers (gross) 1,703,984 1,733,341 (2)% Less: allowance for impairment (182,295) (196,052) (7)% Loans and advances to customers (net) 1,521,689 1,537,289 (1)% Non-performing loans 414, ,015 11% Loans-to-deposits ratio 55.6% 61.1% Non-performing loan ratio 24.3% 21.5% NPL coverage ratio 44.0% 52.6% Consumer Bank Loans and advances to customers (gross) 1,032, ,340 6% Less: allowance for impairment (78,938) (74,030) 7% Loans and advances to customers (net) 953, ,310 6% Non-performing loans 81,654 65,511 25% Loans-to-deposits ratio 20.1% 21.1% Non-performing loan ratio 7.9% 6.8% NPL coverage ratio 96.7% 113.0%

112 2017 Annual Report 110 Business and Financial Review Liabilities and Equity Deposits from banks We take deposits from other banks to facilitate correspondent banking relationships and manage liquidity, interest rate, and currency risks. Deposits from other banks decreased by $250 million year-on-year to $1.8 billion. Customer deposits Customer deposits accounts for about 75% of the Group s liabilities and equity. In 2017, customer deposits increased $1.7 billion to $15.2 billion, driven by strong deposit growth in Corporate Bank and Consumer Bank from deeper customer engagements. On a regional basis, customer deposits increased 5%, 12%, and 14%, in constant currency, in Francophone West Africa, Anglophone West Africa, and Central and Eastern Africa, respectively. In Nigeria, customer deposits fell marginally in constant currency, due to a fiercely competitive deposit market. Borrowed funds Borrowed funds are an alternate source of relatively long-term funding and a critical component of the Group s liquidity and capital management activities. ETI, the parent company of the Ecobank Group, oversees capital planning and funding strategy for the Group. As at 31 December 2017, total borrowed funds for the Group were $1.7 billion, an increase of $120 million from For further information on the composition of our borrowed funds, please refer to Note 32: Borrowed Funds on page 195 of this annual report. Total equity Total equity as at 31 December 2017 stood at $2.2 billion, up $408 million, or 23%, year-on-year. The increase was primarily driven by a return to profits in 2017 from the losses reported in Consequently, retained earnings almost doubled to $452 million. And to a lesser extent, a moderation in the negative currency translation movements, as the CFA franc appreciated against the US dollar in The Central Bank of West African States (BCEAO) adopted Basel II/III standards with effect from January All banks within the eight (8) member countries of the L Union Monétaire Ouest Africaine (UMOA), or West African Monetary Union (WAMU), are required to adopt the new regulations. Ecobank has licensed banks in all eight member countries as represented by our Francophone West Africa regional segmentation -UEMOA. Additionally, Ecobank Transnational Inc., (ETI), the bank-holding parent company of the Ecobank Group, is expected to comply with the rules on a group-wide consolidated basis given that it is headquartered in Togo and regulated by the BCEAO. As such, capital adequacy ratios for the consolidated Group will be calculated according to UMOA Basel II/III regulations from January 2018, with initial results due to BCEAO in April The implementation of Basel II/III standards is a significant change in the prudential regulatory environment of ETI and its UMOA subsidiaries/ affiliates. Minimum capital adequacy requirements will increase over the next five years with the phase-in of a 2.5% capital conservation buffer and the increase in minimum total capital adequacy ratio from 8% to 9%. The regulations will result in substantially lower capital adequacy ratios for the Group given that; The foreign currency translation reserve which arise on consolidation will become an adjustment to Tier 1 capital The addition of operational risk weighted assets will increase the quantum of risk weighted assets by approximately 20% Customer Deposits At 31 December In thousands of $ % Change Corporate Bank 6,991,973 6,073,590 15% Commerical Bank 3,066,252 2,834,757 8% Consumer Bank 5,145,046 4,588,373 12% Total customer deposits 15,203,271 13,496,720 13%

113 Business and Financial Review 111 Here we provide a comparative analysis of Ecobank s full year financial results for 2017 and 2016 by geographical region. In millions of $ except for ratios Nigeria UEMOA AWA CESA ETI & Others Subtotals Ecobank Entities RV (1) Group Income Statement Highlights Net interest income (27) Non-interest revenue Net revenue ,831 1,831 Staff expense Other operating expenses (0) Total operating expenses , ,132 Pre-impairment income (33) 700 (0.5) 700 Impairment losses (205) (81) (58) (56) (31) (432) 21 (411) Profit before tax (64) Profit after tax (70) Balance Sheet Highlights Net loans 2,718 3, , ,358 9,358 Total assets 6,056 9,222 2,951 4,657 (461) 22, ,432 Customer deposits 3,517 5,698 2,228 3, ,203 15,203 Total equity (190) 2, ,172 Ratios ROA 1.1% 1.3% 2.5% 0.6% 1.1% 1.1% ROE 7.8% 22.7% 22.8% 6.0% 11.6% 11.6% Cost-to-income ratio 51.2% 59.7% 54.2% 73.1% 61.8% 61.8% NPL ratio 14.5% 5.2% 14.7% 15.8% 10.7% 10.7% NPL coverage 65.0% 32.2% 58.8% 53.2% 52.4% 52.4% Loans-to-deposits ratio 85.3% 68.5% 41.6% 52.8% 65.2% 65.2% (1) The Resolution Vehicle (RV), a structured entity that was set up in Nigeria to purchase and hold the challenged legacy assets from Ecobank Nigeria s core assets.

114 2017 Annual Report 112 Business and Financial Review Nigeria Performance overview Ecobank Nigeria s profit before tax increased by $44 million, or by 191%, year-on-year to $67 million, mainly as a result of lower impairment losses. Adjusting for the impact of foreign currency translation effects the Naira depreciated by approximately 13% against the US Dollar in 2017 its underlying pre-tax profits would have risen by 249% to $80 million. Net revenue of $557 million fell by $169 million, or by 23% (in constant currency it decreased 8%), primarily driven by the net impact of lower interest rates, a decline in volume growth, and lower-thanexpected business activity. Net interest income decreased by $129 million, or by 28%, (in constant currency it decreased by $64 million, or by 14%) from the previous. This was due to the net impact of lower rates and lower interest-earning asset balances. Non-interest revenue decreased by $40 million, or by 15% (in constant currency increased by $4 million, or by 2% ), to $225 million, driven by income from fixed income and currency trading due to improved liquidity and volumes in the NAFEX window. Operating expenses decreased by $95 million, or by 25%, (in constant currency it decreased by $40 million, or by 10%) from 2016, reflecting the non-recurrence of restructuring costs from 2016 and efficiency gains in personnel costs, associated staff expenses, and rent and utilities. As a result, the cost-to-income ratio improved to 51.2% from 52.4% in Impairment losses were $205 million in 2017 compared with $323 million in Included in the period s impairment losses is a $42 million exceptional charge on other assets booked in the second-quarter driven by a claw back from AMCON linked to loans previously sold. Nigeria Financial Highlights and Key Ratios Year ended 31 (in millions of $) % change In Constant $ Net interest income (28)% 398 Non-interest revenue (15)% 269 Net revenue (23)% 667 Operating expenses (25)% 341 Pre-impairment income (21)% 326 Impairment losses (36)% 246 Profit before tax % 80 Taxation % Profit after tax % 79 Customer loans (net) 2,718 2,854 (5)% 2,726 Total assets 6,056 6,183 (2)% 6,076 Customer deposits 3,517 3,537 (1)% 3,528 Total equity % 930 Cost-to-income ratio 51.2% 52.4% ROE 7.8% 3.0% Loans-to-deposits ratio 85.3% 85.1% NPL ratio 14.5% 9.1% NPL coverage ratio 65.0% 57.6% Note: selected income statement lines only and thus may not sum up (1) Reflects the impact of FX translation into U.S. dollars assuming average and end-of-period exchange rates for 2016

115 Business and Financial Review Business and Financial Review Francophone West Africa 113 Performance Overview Francophone West Africa registered a pre-tax profit of $111 million, an increase of $8 million, or 8%, (flat in constant currency) in comparison to 2016, primarily driven by lower impairment losses. Net revenue rose by $34 million, or by 8%, (in constant currency, a marginal decrease of 0.2%) to $477 million, primarily due to lower fees and commissions income. An increase in interest earning balances, especially in government securities, led to an 8% increase in net interest income to $260 million. On the other hand, moderate client momentum and a gradual pick-up in economic activity, particularly in Côte d Ivoire, helped non-interest revenue to grow by 7% to $217 million. An increase in staff salaries and benefits, and depreciation and amortisation costs, led to operating expenses increasing by $22 million, or by 8%, to $285 million. The cost-to-income ratio declined slightly to 59.7%, versus 59.4% in Net impairment losses were $81 million for 2017 compared with $77 million in 2016, representing a 6% year-on-year growth. The period s impairment losses reflected higher reserve builds to address challenged non-performing loans, particularly in Benin. Francophone West Africa (UEMOA) Financial Highlights and Key Ratios Year ended 31 (in millions of $) change In Constant $ Net interest income % 241 Non-interest revenue % 202 Net revenue % 443 Operating expenses % 264 Pre-impairment income % 179 Impairment losses % 75 Profit before tax % 103 Tax expense 3 (7) NM Profit after tax % 106 Customer loans (net) 3,836 3,169 21% 3,371 Total assets 9,222 7,891 17% 8,106 Customer deposits 5,698 4,750 20% 5,008 Total equity % 536 Cost-to-income ratio 59.7% 59.4% ROE 22.7% 24.3% Loans-to-deposits ratio 68.5% 71.4% NPL ratio 5.2% 10.5% NPL coverage ratio 32.2% 62.4% NM not meaningful Note: selected income statement lines only and thus may not sum up (1) Reflects the impact of FX translation into U.S. dollars assuming average and end-of-period exchange rates for 2016

116 2017 Annual Report 114 Business and Financial Review Anglophone West Africa Performance Overview Anglophone West Africa s pre-tax profits decreased by $35 million, or by 25%, (in constant currency it decreased by $23 million, or by 17%) to $105 million, primarily due to lower revenues. Net revenues fell $52 million, or 13%, (flat year-onyear in constant currency) to $354 million, thanks to the impact of lower rates and lower earning asset balances on net interest income. Net interest income declined by $58 million, or 21%, (in constant currency it fell by $28 million, or by 10%) to $219 million, due to the net impact of lower interest rates in Ghana and a decrease in customer loan balances. A pick-up in trade finance volumes and fees and commission income led to a $6 million, or 5%, increase in non-interest revenue to $135 million (in constant currency it increased by $28 million, or by 22%). Operating expenses decreased by $17 million, or by 8%, (in constant currency it increased by $13 million, or by 6%) to $192 million, reflecting higher staffrelated allowances and ICT-related costs. Consequently the cost-to-income ratio deteriorated to 54.2%, versus 51.3% in 2016, as revenue growth lagged increases in fixed costs. Impairment losses for the period were contained at $58 million unchanged from the previous year (in constant currency it increased by $10 million, or by18%) from The increase in impairments for 2017 was primarily driven by loan loss reserve builds for mostly energy-related exposures in Ghana and Liberia. Anglophone West Africa (AWA) Financial Highlights and Key Ratios Year ended 31 (in millions of $) change In Constant $ Net interest income (21)% 249 Non-interest revenue % 157 Net revenue (13)% 407 Operating expenses (8)% 222 Pre-impairment income (18)% 185 Impairment losses Profit before tax (25)% 117 Tax expense (34) (43) (20)% Profit after tax (27)% 78 Customer loans (net) 847 1,113 (24)% 902 Total assets 2,951 2,751 7% 3,110 Customer deposits 2,228 1,940 15% 2,347 Total equity % 309 Cost-to-income ratio 54.2% 51.3% ROE 22.8% 32.3% Loans-to-deposits ratio 41.6% 61.3% NPL ratio 14.7% 6.1% NPL coverage ratio 58.8% 104.5% Note: selected income statement lines only and thus may not sum up (1) Reflects the impact of FX translation into U.S. dollars assuming average and end-of-period exchange rates for 2016

117 Business and Financial Review Business and Financial Review Central, Eastern and Southern Africa (CESA) 115 Performance overview Pre-tax profits for the Central, East, and Southern Africa region increased by $47 million, or by 103% year-onyear to $25 million (in constant currency it increased by $23 million, or by 94%) due to strong revenue growth, partially offset by a one-off restructuring cost of approximately $10 million. Excluding the impact of the one-off restructuring costs, the profit before tax would have been $59 million. Net revenue increased by $36 million, or by 10%, to $393 million (in constant currency an increase of $66 million, or 19%), due to substantial growth in noninterest revenues. Net interest income increased by $4 million, or by 2%, (in constant currency an increase of $11 million, or 6%), driven by an increase in investment securities balances. Non-interest revenue increased by $32 million, or by 19% (in constant currency it increased by $55 million, or by 33%) to $200 million, driven by client-related foreign-exchange sales and cash management fees, partly offset by a decline in fees and commissions on loans. Operating expenses increased by $9 million, or by 3% (in constant currency, it increased by $29 million, or by 14%), to $288 million, predominately due to one-off restructuring costs. The cost-to-income ratio was 73.1% compared with 78.2% in Impairment losses for the year were $56 million ($59 million in constant currency), compared to $54 million in Higher impairments in Tanzania, Kenya, and Rwanda were offset by asset quality improvements in Chad and Congo Brazzaville, as a result of loan restructuring, and the reversal of provisions in Zimbabwe and Mozambique. Central, East, and Southern Africa (CESA) Financial Highlights and Key Ratios Year ended 31 (in millions of $) change In Constant $ Net interest income % 200 Non-interest revenue % 223 Net revenue % 423 Operating expenses % 317 Pre-impairment income % 105 Impairment losses % 58 Profit before tax % 47 Tax expense (21) (14) 48% Profit after tax % 27 Customer loans (net) 1,711 1,894 (10%) 1,637 Total assets 4,657 4,059 15% 4,567 Customer deposits 3,542 3,065 16% 3,478 Total equity % 494 Cost-to-income ratio 73.1% 78.2% ROE 6.0% 2.3% Loans-to-deposits ratio 52.8% 65.7% NPL ratio 15.8% 10.4% NPL coverage ratio 53.2% 56.6% Note: selected income statement lines only and thus may not sum up (1) Reflects the impact of FX translation into U.S. dollars assuming average and end-of-period exchange rates for 2016

118 2017 Annual Report 116 Business and Financial Review Here we provide a comparative analysis of Ecobank s full year financial results for 2017 and 2016 by business segments. Corporate and Investment Bank In millions of $ % Change Net interest income (14)% Non-interest revenue (5)% Net revenue 970 1,074 (10)% Operating expenses (472) (506) (7)% Pre-impairment income (12)% Impairment losses (230) (608) (62)% Operating profit 268 (40) NM Profit before tax 268 (40) NM Total assets 14,863 11,098 34% Total liabilities 11,549 10, % Cost-to-income ratio 48.6% 47.1% NPL ratio 7.9% 7.1% NPL coverage ratio 52.1% 66.6% NM not meaningful Performance overview Corporate and Investment Bank reported a profit before tax of $268 million for 2017 compared with a pre-tax loss of $40 million for 2016 largely driven by a significant reduction in impairment losses. Revenue for the period was $970 million, a decrease of $104 million, or 10%, from the previous year. The decision to significantly curb loan advances to clients coupled with a reduction in net interest spreads, led to a $82 million, or 14% decline in net interest income to $511 million. Non-interest revenue fell by $22 million, or by 5%, from the previous year, due to the impact of currency movements. Adjusting for currency movements, underlying non-interest revenue grew, driven by higher client activity in our foreign-exchange sales and trading income, particularly in Nigeria, growth in our trade finance business, and strong performance from our securities, wealth and asset management businesses. Operating expenses fell by $35 million, or by 7% to $472 million driven by continued focus on expense discipline. The cost-to-income ratio remained largely flat at 47%. Impairment losses for 2017 were $230 million, significantly down from the $608 million charge in the prior year. The lower impairments this year reflected progress we have made in addressing historic loan portfolio challenges. But also, 2016 impairments were significantly higher from the prudent actions we took by accelerating provisions on legacy-challenged loans.

119 Business and Financial Review 117 Commercial Bank In millions of $ % Change Net interest income (16)% Non-interest revenue % Net revenue (3)% Operating expenses (268) (284) (6)% Pre-impairment income % Impairment losses (125) (126) (1)% Operating profit (32) (36) (11)% Profit before tax (32) (36) (11)% Total assets 1,522 1,546 (2)% Total liabilities 3,066 2,835 8% Cost-to-income ratio 74.1% 75.9% NPL ratio 24.3% 21.5% NPL coverage ratio 44.0% 52.6% Performance overview Commercial Bank reduced its pre-tax losses from $36 million in 2016 to $32 million in 2017, driven by positive operating leverage and a 4% increase in its income before provisions. The higher pre-provision income for the year was driven by a healthy increase in the amount of loans recovered and portfolio adjustments. Additionally, our strategic focus on collections has yielded good results and helping to grow deposits by 8%, despite the headwinds faced during Revenue of $361 million was down $13 million, or 3%, from 2016, primarily driven by a decrease in net interest income, partially offset by an increase in non-interest revenue. Net interest income decreased by $36 million, or by 16%, to $190 million predominantly due to our decision to curb customer loan growth. Contrastingly, our focus on driving fees and commissions from our cash management and trade finance business boosted growth in non-interest revenue by $23 million, or by 16%, to $171 million year-on-year. The focus on cost containment and expense discipline drove operating expenses down by $16 million, or by 6%, to $268 million in As a result, the cost-to-income ratio improved to 74% from 76% in the previous year, yet still high. We are continuing to take actions to further reduce costs further in Impairment losses for 2017 were $125 million, compared with $126 million in the previous year.

120 2017 Annual Report 118 Business and Financial Review Consumer Bank In millions of $ % Change Net interest income (8)% Non-interest revenue (7)% Net revenue (8)% Operating expenses (371) (404) (8)% Pre-impairment income (7)% Impairment losses (30) (51) (42)% Operating profit % Profit before tax % Total assets % Total liabilities 5,145 4,568 13% Cost-to-income ratio 83.1% 83.4% NPL ratio 7.9% 6.8% NPL coverage ratio 96.7% 113.0% Performance overview Consumer Bank reported profit before tax of $46 million, up $16 million, or 53%, from The increase was driven by a reduction in impairments. Revenue of $447 million was down $38 million, or 8%, from The decrease primarily reflected the impact of currency translation effects and reduced client activity within some of our consumer loan products. Net interest income fell by $22 million, or by 8%, to $248 million on significantly lower earning asset balances, partially offset by higher deposit margins. Similarly, non-interest income decreased by $16 million, or by 7% to $199 million, driven by lower consumer activity. Encouragingly, strong performances in our remittance and cards businesses and, engaged client activity with our Ecobank Mobile App and other related digital products, pointed to higher revenue expectation going forward. Operating expense of $371 million, fell 8% from 2016 on account on efficiency gains. The cost-to-income ratio was flat at 83%. The ongoing restructuring efforts, particularly around branch rationalisation and increasing use of digitisation through our business is expected to drive the cost-to-income ratio down further. Impairment losses for 2017 were $30 million compared to $24 million in 2016, driven by lower non-performing loans and reduced credit origination.

121 COMMERCIAL BANKING Tailored solutions for local corporates Grow faster. Go further. With Ecobank Commercial Bank. Discover how our tailor-made services and easyto-work-with solutions can help you streamline your payment and collection processes and extend the reach of your organisation. Wether you re running a local government office, NGO, hospital, school or faith-based organisation, get our customer-first focus and powerful Pan-African platform working for you starting today. Our dedicated Relationship Managers with Local Corporate expertise are waiting to help. Find out more at ecobank.com/commercial ecobank.com

122 2017 Annual Report 120 Financial Statements Our return to profitability was largely due to the significant reduction in impairment losses and the cost savings we made by right-sizing our business. During the last two years we have strengthened Ecobank s competitiveness and this has positioned the Group to create shareholder value on a sustainable basis.

123 Financial Statements 121 Select Service Card Linking Type VISA Number Expiry date ADD CARD

124 2017 Annual Report 122 Statement of directors responsibilities Responsibility for annual consolidated financial statements The Directors are responsible for the preparation of the consolidated financial statements for each financial period that give a true and fair view of the financial position of the Group as at 31 December 2017 and the results of its operations, statement of cash flow, income statement and changes in equity for the period ended in compliance with International Financial Reporting Standards ( IFRS ). This responsibility includes ensuring that the Group: (a) keeps proper accounting records that disclose, with reasonable accuracy, the financial position of the group; (b) establishes adequate internal controls to safeguard its assets and to prevent and detect fraud and other irregularities; and (c) prepares its consolidated financial statements using suitable accounting policies supported by reasonable and prudent judgments and estimates, that are consistently applied. The Directors accept responsibility for the consolidated financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgments and estimates, in conformity with International Financial Reporting Standards. Nothing has come to the attention of the Directors to indicate that the group will not remain a going concern for at least twelve months from the date of this statement. The Directors are of the opinion that the consolidated financial statements give a true and fair view of the state of the financial affairs of the company and its subsidiaries and of its profit or loss. The Directors further accept responsibility for the maintenance of accounting records that may be relied upon in the preparation of the financial statements, as well as adequate systems of internal financial control. Due to the listing of Ecobank Transnational Incorporated on the Nigerian Stock Exchange, the Financial Reporting Council of Nigeria (FRCN) requires that the signatories to the financial statements should be registered members of the FRCN. However, since ETI is not an incorporated entity in Nigeria, the signatories to the financial statements of our Nigerian entity, Ecobank Nigeria Limited, (whose results are consolidated in the group financial statements) are registered with the FRCN and details shown below: Designation Name FRC registration number MD/CEO Charles Kie FRC/2016/IODN/ Acting Chief Financial Officer Abiola Aderinola FRC/2018/ICAN/ The Group CEO and Group CFO who are both signatories to the financial statements of ETI, were granted a waiver by the Financial Reporting Council (FRC) of Nigeria allowing them to sign the 2017 ETI financial statements (without indicating their FRC registration numbers) together with the Chairman on behalf of the board. Approval of annual consolidated financial statements The annual consolidated financial statements were approved by the Board of Directors on 22 February 2018 and signed on its behalf by: Emmanuel Ikazoboh Group Chairman Greg Davis Group Chief Financial Officer Ade Ayeyemi Group Chief Executive Officer

125 Financial Statements Report of the Independent Auditors to the Members of Ecobank Transnational Incorporated 123 Report on the Consolidated Financial Statements Opinion We have audited the consolidated financial statements of Ecobank Transnational Incorporated and its subsidiaries (together referred to as the Group ) which comprise the consolidated statement of financial position as at 31 December 2017, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Ecobank Transnational Incorporated as at 31 December 2017, and its consolidated financial performance and consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs). Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in line with the requirements of the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (Part A and B), together with other ethical requirements that are relevant to our audit of the consolidated financial statements, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

126 2017 Annual Report 124 Report of the Independent Auditors to the Members of Ecobank Transnational Incorporated Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current year. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. The key audit matters noted below relate to the consolidated financial statements. Key audit matter Impairment of loans and advances to customers Loans and advances to customers constitute a significant portion of the total assets of Ecobank Transnational Incorporated. At 31 December 2017, gross loans and advances were US$9,913 million against which total loan impairment provisions of US$555 million were recorded, thus leaving a net loan balance of US$9,358 million which represents about 42% of the total assets as at the reporting date (see note 20). The basis of the provisions is summarised in the Accounting policies in the consolidated financial statements. In accordance with the provisions of IAS 39, Financial Instruments: Recognition and Measurement, the Directors have established the group s loan loss impairment methodology that addresses the two types of impairment allowances, specific and collective (which also includes latent or IBNR) impairments. The Directors exercise significant judgement when determining both when and how much to record as loan impairment provisions. This is due to the fact that a number of significant assumptions and inputs go into the determination of the specific and collective impairment amounts on loans and advances to customers. Some of these include: i. Estimate of probability of default ii. Estimate of loss given default iii. Loss emergence period iv. Exposure at default v. Credit rating or classification vi. Estimates of projected cash flows vii. Determination of effective interest rates Because of the significance of these estimates, judgements and the size of loans and advances portfolio, the audit of loan impairment provisions is considered a key audit matter. How our audit addressed the key audit matter We focused our testing of the impairment of loans and advances to customers on the key assumptions and inputs made by management and Directors. Specifically, our audit procedures included: We tested the design and operating effectiveness of the key controls to determine which loans and advances are impaired and provisions against those assets. These included testing: System-based and manual controls over the timely recognition of impaired loans and advances; Controls over the impairment calculation models including data inputs; Controls over collateral valuation estimates; and Governance controls, including attending key meetings that form part of the approval process for loan impairment provisions and assessing management s analysis and challenge in the actions taken as a result of the meetings. We tested a sample of loans and advances (including loans that had not been identified by management as potentially impaired) to form our own assessment as to whether impairment events had occurred and to assess whether impairments had been identified in a timely manner. We challenged management s judgement and we increased the focus on loans that were not reported as being impaired in sectors that are currently experiencing difficult economic and market conditions, such as the oil and gas sector. For the collective and latent impairment models used by the Group, we tested a sample of the data used in the models as well as assessing the model methodology and tested the calculations within the models. We involved our credit risk specialists who assessed whether the modelling assumptions used considered all relevant risks, and whether the additional adjustments to reflect un-modelled risks were reasonable in light of historical experience, economic climate, current operational processes and the circumstances of the customers as well as our own knowledge of practices used by other similar banks. We also tested the extraction from underlying systems of historical data used in the models. For individually assessed loans, sample of loans were selected for a review of their performance status. Where the loans were deemed to be impaired, a detailed evaluation of the estimates of the future expected cash flows from customers including amounts from realization of collateral held was done. This work involved assessing the work performed by external experts used by the Group to value the collateral or to assess the estimates of future cash flows. Where we determined that a more appropriate assumption or input in provision measurement could be made, we recalculated the provision on that basis and compared the results in order to assess whether there was any indication of error or management bias. Based on our review, we found that the group s impairment methodology, including the model, assumptions and key inputs used by management and Directors to estimate the amount of loan impairment losses were comparable with historical performance, and prevailing economic situations and that the estimated loan impairment losses determined was appropriate in the circumstances.

127 Financial Statements Report of the Independent Auditors to the Members of Ecobank Transnational Incorporated 125 Key audit matter Valuation of goodwill Goodwill carrying value was US$232.7 million on the group s statement of financial position as at 31 December This asset has been recognised in the consolidated statement of financial position as a consequence of the acquisitive nature of the Group. How our audit addressed the key audit matter We focused our attention on auditing the valuation of unlisted investment securities by looking specifically into the valuation model, inputs and key assumptions made by the management. Our audit procedures included: In line with the requirements of the applicable accounting standard, IAS 36, Impairment of Assets, management conducts annual impairment tests to assess the recoverability of the carrying value of goodwill. This is performed using discounted cash flow models. As disclosed in note 26, there are a number of key sensitive judgements adopted by management in determining the inputs into these models which include: Revenue growth Operating margins Exchange rate fluctuations and The discount rates applied to the projected future cash flows. Accordingly, the impairment test of this asset is considered to be a key audit matter. The Management have developed a valuation model to enable a fair determination of the discounted cash flows for the significant Cash Generating Units (CGUs) to which the goodwill relates. We tested all relevant controls over the generation of the key inputs, e.g. financial forecasts, discount rate, revenue growth rate, etc. that go into the valuation calculation. Engaging our internal specialists to assist with: Critically evaluating whether the model used by management to calculate the value in use of the individual Cash Generating Units complies with the requirements of IAS 36, Impairment of Assets. Validating the assumptions used to calculate the discount rates, projected cash flows and recalculating these rates. Analysing the future projected cash flows used in the models to determine whether they are reasonable and supportable given the current macroeconomic climate and expected future performance of the Cash Generating Unit. Subjecting the key assumptions to sensitivity analyses. Comparing the projected cash flows, including the assumptions relating to revenue growth rates and operating margins, against historical performance to test the accuracy of management s projections. Checking mathematical accuracy of the calculations We found that the assumptions used by management were comparable with historical performance and the expected future outlook and the discount rates used were appropriate in the circumstances. We consider the disclosure of the goodwill to be relevant and useful. Valuation of investment properties The group s interest in investment properties is made up of landed properties and buildings (see note 28). Investment properties are carried at fair value in line with the group s accounting policies and in compliance with IAS 40, Investment Property. However, due to the non-current nature of the asset class, the materiality of the carrying amount to the ETI Group financial statements, and determination of their fair value which involve the exercise of significant management judgement, and use of several key inputs and assumptions, we consider this to be a key audit matter. The Directors have engaged some Specialists, mostly professional Estate Surveyors and Valuers, to assist with the determination of the fair value of the properties and produce report of the assets fair valuation detailing the relevant assumptions used, key inputs and data that go into the valuation of the properties. Our audit approach consisted of a combination of test of controls and specific test of details. We focused on testing and reviewing details of management assumptions and controls over generation of key inputs that go into the fair value determination of the investment properties and the carrying amount of related indebtedness. Our audit procedures included: Critically evaluating whether the model used by management to arrive at the fair value estimate of the investment property complies with the requirements of IAS 40, Investment Property. Validating the assumptions used to estimate the fair value and recalculating the valuation. Analysing future projected cash flows that underlie the fair value determination used in the models to determine whether they are reasonable and supportable given the current macroeconomic climate and prevailing market data vis-à-vis historical patterns. Subjecting the key assumptions to sensitivity analyses. We found that the assumptions used by management were comparable with historical performance and expected future outlook and the estimated fair value determined was appropriate in the circumstances.

128 2017 Annual Report 126 Report of the Independent Auditors to the Members of Ecobank Transnational Incorporated Key audit matter How our audit addressed the key audit matter Valuation of unquoted investments The Group s investment securities include unlisted equities for which there are no liquid market. As contained in note 22, the assets are designated as available-for-sale instruments and are carried at fair value in line with the group s accounting policies and requirements of IAS 39, Financial Instruments Recognition and Measurement. Given the non-availability of market prices for these securities, determination of their fair valuation by management involve exercise of significant assumptions and judgements regarding the cash flow forecasts, growth rate and discount rate utilised in the valuation model. This is why it is considered a key audit matter. The Directors have done a valuation to determine the fair value of the unquoted investment securities and details of the valuation work including all relevant assumptions used, key inputs and data that go into the estimate of the fair value of the unquoted investments was made available for our review. We focused our attention on auditing the valuation of unlisted investment securities by looking specifically into the valuation model, inputs and key assumptions made by the management. Our audit procedures included: Our audit procedures included: Evaluated the operating effectiveness of controls over generation of key inputs that went into the valuation model. Critically evaluating whether the model used by management to calculate the fair value of the unquoted securities complies with the requirements of IAS 39, Financial Instruments Recognition and Measurement. Validating the assumptions used to calculate the discount rates used and recalculating these rates. Subjecting the key assumptions to sensitivity analyses. Obtaining direct confirmation of the existence and units of the different holdings with the investees registrars and/or secretariats. Checking mathematical accuracy of the valuation calculations. We found that the assumptions used by management were comparable with the market, accord with best practice, key data and the discount rates used in estimating the fair value of the instruments were appropriate in the circumstances. We consider the disclosure relating to these instruments to be appropriate in the circumstances. Other Information The directors are responsible for the other information. The other information comprises the Statement of Directors Responsibilities. The other information does not include the consolidated financial statements and our auditors report thereon. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance or conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. Based on the work we have performed on the other information that we obtained prior to the date of this auditor s report, if we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the consolidated financial statements The directors are responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the directors are responsible for assessing the Group s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

129 Financial Statements Report of the Independent Auditors to the Members of Ecobank Transnational Incorporated 127 Auditors responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of the directors use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the audit committee and the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the audit committee and directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the benefits derivable from such communication. For: Deloitte & Touche Chartered Accountants Lagos, Nigeria 7 March 2018 Engagement Partner: David Achugamonu For: Grant Thorton Côte d Ivoire Chartered Accountants Abidjan, Côte d Ivoire 7 March 2018 Engagement Partner: Moustapha Coulibaly FRC/2013/ICAN/

130 2017 Annual Report 128 Consolidated income statement (All amounts in US dollar thousands unless otherwise stated) For the year ended 31 December Notes Interest income 6 1,570,320 1,672,852 Interest expense 6 (593,001) (566,406) Net interest income 977,319 1,106,446 Fee and commission income 7 469, ,121 Fee and commission expense 7 (69,140) (52,492) Net trading income 8 415, ,555 Net losses from investment securities 9 (5) 26,381 Other operating income 10 37,783 2,252 Non-interest revenue 853, ,817 Operating income 1,831,202 1,972,263 Staff expenses 11 (515,040) (535,061) Depreciation and amortization 11 (95,820) (99,197) Other operating expenses 11 (520,691) (602,953) Operating expenses (1,131,551) (1,237,211) Operating profit before impairment losses and taxation 699, ,052 Impairment losses on : loans and advances 12 (326,248) (770,268) other financial assets 13 (84,806) (93,583) Impairment losses on financial assets (411,054) (863,851) Operating profit after impairment losses 288,597 (128,799) Share of loss of associates 25 (257) (2,542) Profit/(loss) before tax 288,340 (131,341) Taxation 14 (60,757) (70,924) Profit/(loss) for the year from continuing operations 227,583 (202,265) Profit/(loss) for the year from discontinued operations (2,693) Profit/(loss) for the year 228,534 (204,958) Profit/(loss) attributable to: Owners of the parent 178,585 (249,898) Continuing operations 178,071 (248,444) Discontinued operations 514 (1,454) Non-controlling interests 49,949 44,940 Continuing operations 49,512 46,179 Discontinued operations 437 (1,239) 228,534 (204,958) Earnings/(loss) per share from continuing operations attributable to owners of the parent during the period (expressed in United States cents per share): Basic (1.01) Diluted (1.01) Earnings/(loss) per share from discontinued operations attributable to owners of the parent during the period (expressed in United States cents per share): Basic (0.01) Diluted (0.01) The accompanying notes are an integral part of these financial statements

131 Financial Statements Consolidated statement of comprehensive income 129 (All amounts in thousands of U.S. dollars unless otherwise stated) For the year ended 31 December Notes Profit/(loss) for the year 228,534 (204,958) Other comprehensive income: Items that may be subsequently reclassed to profit or loss: Exchange difference on translation of foreign operations 101,172 (624,797) Net fair value loss on available-for-sale financial assets 39 43,970 (54,135) Taxation relating to components of other comprehensive income that may be subsequently reclassed to profit or loss 39 (1,805) 22, ,337 (656,274) Items that will not be reclassed to profit or loss: Property and equipment net revaluation gain 27 6,255 6,221 Remeasurements of defined benefit obligations 39 (6,064) (6,153) Taxation relating to components of other comprehensive income 39 (3,144) (5,704) (2,953) (5,636) Other comprehensive Profit/(loss) for the year net of tax 140,384 (661,910) Total comprehensive Profit/(loss) for the year 368,918 (866,868) Total comprehensive Profit/(loss) attributable to: Owners of the parent 304,611 (908,501) Continuing operations 304,097 (907,047) Discontinued operations 514 (1,454) Non-controlling interests 63,870 41,633 Continuing operations 64,307 42,872 Discontinued operations 437 (1,239) 368,918 (866,868) Items in the statement above are disclosed net of tax. The deferred income tax relating to each component of other comprehensive income is disclosed in Note 35. The accompanying notes are an integral part of these financial statements

132 2017 Annual Report 130 Consolidated statement of financial position (All amounts in US dollar thousands unless otherwise stated) As at 31 December Notes Assets Cash and balances with central banks 16 2,661,745 2,462,302 Financial assets held for trading 17 36,557 77,408 Derivative financial instruments 18 39,267 68,204 Loans and advances to banks 19 1,685,806 1,413,699 Loans and advances to customers 20 9,357,864 9,259,374 Treasury bills and other eligible bills 21 1,718,977 1,228,492 Investment securities: available-for-sale 22 4,405,240 3,272,824 Pledged assets , ,205 Other assets , ,821 Investment in associates 25 9,964 10,135 Intangible assets , ,766 Property and equipment , ,047 Investment properties 28 43,514 35,819 Deferred income tax assets , ,007 22,347,761 20,441,103 Assets held for sale and discontinued operations 29 83,843 69,871 Total assets 22,431,604 20,510,974 Liabilities Deposits from banks 30 1,772,414 2,022,352 Deposits from customers 31 15,203,271 13,496,720 Derivative financial instruments 18 32,497 23,102 Borrowed funds 32 1,728,756 1,608,564 Other liabilities 33 1,210,908 1,342,635 Provisions 34 52,450 28,782 Current income tax liabilities 58,107 54,539 Deferred income tax liabilities 35 64,269 60,169 Retirement benefit obligations 36 24,064 15,731 20,146,736 18,652,594 Liabilities held for sale and discontinued operations ,785 94,302 Total liabilities 20,259,521 18,746,896 Equity Share capital and premium 38 2,113,957 2,114,332 Retained earnings and reserves 39 (233,213) (536,408) Equity attributable to owners of the parents 1,880,744 1,577,924 Non-controlling interests 291, ,154 Total equity 2,172,083 1,764,078 Total liabilities and equity 22,431,604 20,510,974 The accompaying notes are an integral part of these financial statements The financial statements were approved for issue by the board of directors on 22 February 2018 and signed on its behalf by: Emmanuel Ikazoboh Group Chairman Greg Davis Group Chief Financial Officer Ade Ayeyemi Group Chief Executive Officer

133 Financial Statements Consolidated statement of changes in equity 131 (All amounts in US dollar thousands unless otherwise stated) Note Share capital and premium Attributable to equity holders of the Company Retained earnings Other reserves Total Noncontrolling interests Total equity At 1 January ,029, ,427 (213,116) 2,346, ,236 2,523,245 Net changes in available for sale investments, net of taxes 39 (31,477) (31,477) (31,477) Foreign currency translation differences 40 (621,490) (621,490) (3,307) (624,797) Remeasurements of post-employment benefit obligations 36 (6,153) (6,153) (6,153) Net gains on revaluation of property Other comprehensive loss for the year (658,603) (658,603) (3,307) (661,910) Loss for the year (249,898) (249,898) 44,940 (204,958) Total comprehensive loss for the year (249,898) (658,603) (908,501) 41,633 (866,868) Transfer to other group reserve 104, , ,281 Dividend relating to (48,200) (48,200) (32,715) (80,915) Treasury shares Transfer from share option reserve 39 12,037 (12,037) Transfer to general banking reserves 39 6,827 (6,827) Transfer to statutory reserve 39 - (19,346) 19,346 Net proceeds from shares issued: Conversion of Preference shares 39 84,564 84,564 84,564 Convertible loans equity component 39 (299) (299) (299) At 31 December 2016 / 1 January ,114, ,847 (767,255) 1,577, ,154 1,764,078 Net changes in available for sale investments, net of taxes 40 42,165 42,165 42,165 Foreign currency translation differences 40 86,814 86,814 14, ,172 Remeasurements of post-employment benefit obligations 36 (6,064) (6,064) (6,064) Net gains on revaluation of property 40 3,111 3,111 3,111 Other comprehensive income for the year 126, ,026 14, ,384 Profit for the year 178, ,585 49, ,534 Total comprehensive income for the year 178, , ,611 64, ,918 Transfer to other group reserves (130,447) 130,447 Dividend relating to (23,378) (23,378) Change in minority interest 64,256 64,256 Treasury shares 39 (375) (375) (375) Transfer from share option reserve 39 (344) 344 Transfer to general banking reserves 39 (17,049) 17,049 Transfer to statutory reserve 39 (45,450) 45,450 Convertible loans equity component 39 (1,416) (1,416) (1,416) At 31 December ,113, ,142 (449,355) 1,880, ,339 2,172,083 The accompaying notes are an integral part of these financial statements

134 2017 Annual Report 132 Consolidated statement of cash flows (All amounts in US dollar thousands unless otherwise stated) For the year ended 31 December Notes Cash flows from operating activities Profit/(loss) before tax 288,340 (131,341) Adjustments for: Net trading income - foreign exchange (37,498) (82,938) Net losses/(gain) from investment securities 9 5 (26,381) Fair value loss on investment properties ,672 Impairment losses on loans and advances , ,268 Impairment losses on other financial assets 13 84,806 93,583 Depreciation of property and equipment 11 80,557 85,113 Net interest income (977,319) (1,106,446) Amortisation of software and other intangibles 11 15,263 14,084 Profit on sale of property and equipment (3,253) (938) Share of loss of associates ,542 Income taxes paid (77,608) (121,712) Changes in operating assets and liabilities Trading assets 40,851 93,926 Derivative financial assets 28,937 76,021 Other treasury bills (542,527) (30,695) Loans and advances to banks (156,834) 371,394 Loans and advances to customers (244,255) 1,988,569 Pledged assets 219, ,881 Other assets 33,931 (337,193) Mandatory reserve deposits (163,158) 440,073 Due to customers 1,706,551 (2,930,833) Derivative liabilities 9,395 21,766 Other provisions 23, Other liabilities (131,727) 293,576 Interest received 1,570,320 1,672,852 Interest paid (593,001) (566,406) Net cashflow from operating activities 1,502, ,525 Cash flows from investing activities Purchase of software 26 (26,355) (31,321) Purchase of property and equipment 27 (256,194) (227,390) Proceeds from sale of property and equipment 147,896 20,860 Purchase of investment securities 22 (1,631,773) (1,513,241) Purchase of investment properties (8,688) (1,101) Proceeds from sale and redemption of securities 809, ,046 Net cashflow used in investing activities (965,774) (1,365,147) Cash flows from financing activities Net repayment of borrowed funds (533,110) (505,938) Net proceeds from borrowed funds 410, ,999 Dividends paid to non-controlling shareholders (23,378) (32,715) Dividends paid to owners of the parent (48,200) Net cashflow (used in)/from financing activities (145,508) 158,146 Net increase/(decrease) in cash and cash equivalents 391,138 (347,478) Cash and cash equivalents at start of year 40 2,020,838 2,610,050 Effects of exchange differences on cash and cash equivalents (446,365) (241,734) Cash and cash equivalents at end of year 40 1,965,611 2,020,838 The accompanying notes are an integral part of these financial statements

135 Financial Statements Notes to consolidated financial statements 133 (All amounts in US dollar thousands unless otherwise stated) 1 General information Ecobank Transnational Incorporated (ETI) and its subsidiaries (together, the group ) provide retail, corporate and investment banking services throughout sub Saharan Africa outside South Africa. The Group had operations in 40 countries and employed over 15,930 people (31 December 2016: 17,343) as at 31 December Ecobank Transnational Incorporated is a limited liability company and is incorporated and domiciled in the Republic of Togo. The address of its registered office is as follows: 2365 Boulevard du Mono, Lomé, Togo. The company has a primary listing on the Ghana Stock Exchange, the Nigerian Stock Exchange and the Bourse Regionale Des Valeurs Mobilieres (Abidjan) Cote D Ivoire. The consolidated financial statements for the period year 31 December 2017 have been approved by the Board of Directors on 22 February Summary of significant accounting policies This note provides a list of the significant accounting policies applied in the preparation of these consolidated financial statements to the extent they have not already been disclosed in the other notes above. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the group consisting of Ecobank Transnational Incorporated and its subsidiaries. 2.1 Basis of presentation and measurement The Group s consolidated financial statements for the period ended 31 December 2017 have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS. The financial statements comply with IFRS as issued by the International Accounting Standards Board (IASB). The consolidated financial statements have been prepared under the historical cost convention, except for the following: available-for-sale financial assets, financial assets and financial liabilities (including derivative instruments), investment properties measured at fair value assets held for sale - measured at fair value less cost of disposal; and defined benefit pension plans - plan assets measured at fair value The Group s consolidated financial statements for the year ended 31 December 2017 have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS. The financial statements comply with IFRS as issued by the International Accounting Standards Board (IASB). The consolidated financial statements have been prepared under the historical cost convention, except for the following: available-for-sale financial assets, financial assets and financial liabilities (including derivative instruments), investment properties measured at fair value assets held for sale - measured at fair value less cost of disposal; and defined benefit pension plans - plan assets measured at fair value The consolidated financial statements are presented in US Dollars, which is the group s presentation currency. The figures shown in the consolidated financial statements are stated in US Dollar thousands. The consolidated financial statements comprise the consolidated statement of comprehensive income (shown as two statements), the statement of financial position, the statement of changes in equity, the statement of cash flows and the accompanying notes. The consolidated statement of cash flows shows the changes in cash and cash equivalents arising during the period from operating activities, investing activities and financing activities. Included in cash and cash equivalents are highly liquid investments. The cash flows from operating activities are determined by using the indirect method. The Group s assignment of the cash flows to operating, investing and financing category depends on the Group s business model. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires Directors to exercise judgment in the process of applying the Group s accounting policies. Changes in assumptions may have a significant impact on the financial statements in the period the assumptions changed. Management believes that the underlying assumptions are appropriate and that the Group s financial statements therefore present the financial position and results fairly. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in Note 4. (a) New and amended standards adopted by the group The Group has applied a number of amendments to IFRS issued by the International Accounting Standards Board (IASB) that are mandatorily effective for an accounting period that begins on or after 1 January I) Amendments to IAS 12 Income Taxes The IASB issued the amendments to IAS 12 Income Taxes to clarify the accounting for deferred tax assets for unrealised losses on debt instruments measured at fair value. The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of that deductible temporary difference. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount. The amendments are intended to remove existing divergence in practice in recognising deferred tax assets for unrealised losses. The amendment does not impact the bank.v II) Amendments to IAS 7 Statement of Cash Flows The amendments to IAS 7 Statement of Cash Flows are part of the IASB s Disclosure Initiative and help users of financial statements better understand changes in an entity s debt. The amendments require entities to provide disclosures about changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains

136 2017 Annual Report 134 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) or losses). The amendments are intended to provide information to help investors better understand changes in an entity s debt. The amendment results in additional disclosures being made by the Group in its financial statements.. III) Amendments to IFRS 12 Disclosure of Interests in Other Entities The amendments clarify that the disclosure requirements in IFRS 12, other than those in paragraphs B10 B16, apply to an entity s interest in a subsidiary, a joint venture or an associate (or a portion of its interest in a joint venture or an associate) that is classified (or included in a disposal group that is classified) as held for sale. The amendment has been adopted by the bank. b) New standards and interpretations not yet adopted The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group s financial statements are disclosed below. The Group intends to adopt these standards, if applicable, when they become effective. I) IFRS 9 Financial Instruments In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments that replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. IFRS 9 brings together all three aspects of the accounting for the financial instruments project: classification and measurement; impairment; and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Except for hedge accounting, retrospective application is required, but providing comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions. The Group will not restate comparatives on initial application of IFRS 9 on 1 January 2018 but will provide detailed transitional disclosures in accordance with the amended requirements of IFRS 7 Financial Instruments: Disclosures. Any change in the carrying value of financial instruments upon initial application of IFRS 9 will be recognised in equity. The Group s project for the adoption of the new standard remains on track. Based on the preliminary impact assessment performed by the Group in 2017 and the work completed to date, the Group does not expect a significant impact on its balance sheet or equity except for the effect of applying the impairment requirements of IFRS 9. This may however be subject to change arising from further detailed analysis or further regulatory guidance to be issued in Overall, the Group expects a higher impairment allowance resulting in a negative impact on equity. IFRS 9 is being considered in the Group s capital planning. Further disclosures will be made in the half year 2018 financial statements. Classification and measurement IFRS 9 replaces the multiple classification and measurement models in IAS 39 with a single model that has only three classification categories: amortised cost, fair value through OCI and fair value through profit or loss. It includes the guidance on accounting for and presentation of financial liabilities and derecognition of financial instruments which was previously in IAS 39. Furthermore for non-derivative financial liabilities designated at fair value through profit or loss, it requires that the credit risk component of fair value gains and losses be separated and included in OCI rather than in the income statement. The Group does not expect a significant impact on its balance sheet or equity on applying the classification and measurement requirements of IFRS 9. Impairment IFRS 9 introduces a revised impairment model which requires entities to recognise expected credit losses ( ECL ) on loans, debt securities and loan commitments not held at fair value through profit based on unbiased forward-looking information. The measurement of expected loss will involve increased complexity and judgment including estimation of lifetime probabilities of default, loss given default, a range of unbiased future economic scenarios, estimation of expected lives, estimation of exposures at default and assessing increases in credit risk. The Group is in the process of quantifying the impact of this change, it is however expected to lead to an increased impairment charge compared to that recognised under IAS 39. The increase in impairment charge is likely to be driven by: The removal of the emergence period that was necessitated by the incurred loss model of IAS 39. All stage 1 assets will carry a 12-month expected credit loss provision. This differs from IAS 39 where unidentified impairments were typically measured with an emergence period of between three to twelve months. The provisioning for lifetime expected credit losses on stage 2 assets; where some of these assets would not have attracted a lifetime expected credit loss measurement under IAS 39. The inclusion of forecasted macroeconomic scenarios in the determination of the ECL in components such as Probability of Default (PD) The inclusion of expected credit losses on items that would not have been impaired under IAS 39, such as loan commitments and financial guarantees. The Group is currently performing a more detailed analysis which considers all reasonable and supportable information, including forward-looking elements to determine the extent of the impact. Hedge accounting The Group believes that all existing hedge relationships that are currently designated in effective hedging relationships will still qualify for hedge accounting under IFRS 9. As IFRS 9 does not change the general principles of how an entity accounts for effective hedges, the Group does not expect a significant impact as a result of applying IFRS 9. The Group is assessing possible changes related to the accounting for the time value of options, forward points or the currency basis spread in more detail in the future. II) IFRS 15 Revenue from Contracts with Customers In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers, effective for periods beginning on 1 January 2018 with early adoption permitted. IFRS 15 defines principles for recognising revenue and will be applicable to all contracts with customers. However, interest and fee income integral to financial instruments and leases will continue to fall outside the scope of IFRS 15 and will be regulated by the other applicable standards (e.g., IFRS 9, and IFRS 16 Leases).

137 Financial Statements 135 Revenue under IFRS 15 will need to be recognised as goods and services are transferred, to the extent that the transferor anticipates entitlement to goods and services. The standard also specifies a comprehensive set of disclosure requirements regarding the nature, extent and timing as well as any uncertainty of revenue and the corresponding cash flows with customers. The Group will consider deleting this coloured part as the Standard is effective 1 Jan 2018 is currently evaluating its impact. III) Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Ventur The amendments address the conflict between IFRS 10 and IAS 28 in dealing with the loss of control of a subsidiary that is sold or contributed to an associate or joint venture. The amendments clarify that the gain or loss resulting from the sale or contribution of assets that constitute a business, as defined in IFRS 3, between an investor and its associate or joint venture, is recognised in full. Any gain or loss resulting from the sale or contribution of assets that do not constitute a business, however, is recognised only to the extent of unrelated investors interests in the associate or joint venture. The IASB has deferred the effective date of these amendments indefinitely, but an entity that early adopts the amendments must apply them prospectively. The Group will apply these amendments when they become effective. IV) IFRS 2 Classification and Measurement of Share-based Payment Transactions Amendments to IFRS 2 The IASB issued amendments to IFRS 2 Share-based Payment that address three main areas: the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash settled to equity settled. On adoption, entities are required to apply the amendments without restating prior periods, but retrospective application is permitted if elected for all three amendments and other criteria are met. The amendments are effective for annual periods beginning on or after 1 January 2018, with early application permitted. The Group is assessing the potential effect of the amendments on its consolidated financial statements. V) IFRS 16 Leases IFRS 16 was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17. The standard includes two recognition exemptions for lessees leases of low-value assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset. Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognise the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset. Lessor accounting under IFRS 16 is substantially unchanged from today s accounting under IAS 17. Lessors will continue to classify all leases using the same classification principle as in IAS 17 and distinguish between two types of leases: operating and finance leases. IFRS 16 also requires lessees and lessors to make more extensive disclosures than under IAS 17. IFRS 16 is effective for annual periods beginning on or after 1 January Early application is permitted, but not before an entity applies IFRS 15. A lessee can choose to apply the standard using either a full retrospective or a modified retrospective approach. The standard s transition provisions permit certain reliefs. In 2017, the Group plans to assess the potential effect of IFRS 16 on its consolidated financial statements. VI) IAS 7 Statement of Cash Flows Effective 1 January Amends IAS 7 to include disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities. The amendment specifies that the following changes arising from financing activities are disclosed (to the extent necessary): (i) changes from financing cash flows; (ii) changes arising from obtaining or losing control of subsidiaries or other businesses; (iii) the effect of changes in foreign exchange rates; (iv) changes in fair values; and (v) other changes. VII) IAS 40 Investment Property The amendments clarify when an entity should transfer property, including property under construction or development into, or out of investment property. The amendments state that a change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. A mere change in management s intentions for the use of a property does not provide evidence of a change in use. Entities should apply the amendments prospectively to changes in use that occur on or after the beginning of the annual reporting period in which the entity first applies the amendments. An entity should reassess the classification of property held at that date and, if applicable, reclassify property to reflect the conditions that exist at that date. Retrospective application in accordance with IAS 8 is only permitted if that is possible without the use of hindsight. Early application of the amendments is permitted and must be disclosed. The amendments will eliminate diversity in practice. The impact of this standard is currently being assessed. VIII) IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration The interpretation clarifies that in determining the spot exchange rate

138 2017 Annual Report 136 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or nonmonetary liability relating to advance consideration, the date of the transaction is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, then the entity must determine a date of the transactions for each payment or receipt of advance consideration. The amendments are intended to eliminate diversity in practice, when recognising the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or nonmonetary liability relating to advance consideration received or paid in foreign currency. The impact of this standard is currently being assessed. IX) Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28) The amendments clarify that an entity applies IFRS 9 Financial Instruments to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture but to which the equity method is not applied. The amendments are effective for periods beginning on or after 1 January Earlier application is permitted. This will enable entities to apply the amendments together with IFRS 9 if they wish so but leaves other entities the additional implementation time they had asked for. The amendments are to be applied retrospectively but they provide transition requirements similar to those in IFRS 9 for entities that apply the amendments after they first apply IFRS 9. They also include relief from restating prior periods for entities electing, in accordance with IFRS 4 Insurance Contracts, to apply the temporary exemption from IFRS 9. Full retrospective application is permitted if that is possible without the use of hindsight. The impact of this standard is currently being assessed. X) IFRIC 23 Uncertainty over Income Tax Treatment The interpretation sets out how to determine taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates when there is uncertainty over income tax treatments under IAS 12 Income Taxes. The Interpretation requires an entity to: determine whether uncertain tax positions are assessed separately or as a group; and assess whether it is probable that a tax authority will accept an uncertain tax treatment used, or proposed to be used, by an entity in its income tax filings: If yes, the entity should determine its accounting tax position consistently with the tax treatment used or planned to be used in its income tax filings. If no, the entity should reflect the effect of uncertainty in determining its accounting tax position. Effective date: annual periods beginning on or after 1 January Entities can apply the Interpretation either on a fully retrospective or modified retrospective approach (where comparatives are not permitted or required to be restated). The impact of this standard is currently being assessed by Group insurance associates XI) IFRS 17 Insurance Contracts IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts within the scope of the standard. The objective of IFRS 17 is to ensure that an entity provides relevant information that faithfully represents those contracts. This information gives a basis for users of financial statements to assess the effect that insurance contracts have on the entity s financial position, financial performance and cash flows. IFRS 17 requires insurance liabilities to be measured at a current fulfillment value and provides a more uniform measurement and presentation approach for all insurance contracts. These requirements are designed to achieve the goal of a consistent, principle-based accounting for insurance contracts. IFRS 17 supersedes IFRS 4 Insurance Contracts as of 1 January 2021 The impact of this standard is currently being assessed. 2.2 Principles of Consolidation and Equity Accounting a) Subsidiaries Subsidiaries are all entities (including structured entities) over which the group has control. The Group controls and hence consolidates an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. The Group will only consider potential voting rights that are substantive when assessing whether it controls another entity. In order for the right to be substantive, the holder must have the practical ability to exercise the right. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. The consolidation of structured entities is considered at inception, based on the arrangements in place and the assessed risk exposures at the time. The assessment of controls is based on the consideration of all facts and circumstances. The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the: fair values of the assets transferred; liabilities incurred to the former owners of the acquired business; equity interests issued by the group; fair value of any asset or liability resulting from a contingent consideration arrangement; and fair value of any pre-existing equity interest in the subsidiary. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest s proportionate share of the acquired entity s net identifiable assets. Acquisition-related costs are expensed as incurred. The excess of the consideration transferred, amount of any non-

139 Financial Statements 137 controlling interest in the acquired entity and acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired, the difference is recognised directly in profit or loss as a bargain purchase. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss. If the business combination is achieved in stages, the acquisition date carrying value of the acquirer s previously held equity interest in the acquire is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognised in profit or loss. Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. When necessary amounts reported by subsidiaries have been adjusted to conform with the group s accounting policies. Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of profit or loss, statement of comprehensive income, statement of changes in equity and balance sheet respectively. b) Changes in ownership interests in subsidiaries without change of control Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to noncontrolling interests are also recorded in equity. c) Disposal of subsidiaries When the Group ceases to have control, any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. d) Associates Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting, after initially being recognised at cost. Under the equity method, the investment is initially recognised at cost and adjusted thereafter to recognise the Group s share of the post-acquisition profits or losses of the investee in the income statement, and the Group s share of movements in other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates are recognised as a reduction in the carrying amount of the investment. The Group s investment in associates includes goodwill identified on acquisition. If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to the income statement where appropriate. When the Group s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate. The Group determines at each reporting date whether there is any objective evidence that the investment in associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount adjacent to share of profit/(loss) of associates in the income statement. 2.3 Foreign currency translation a) Functional and presentation currency Items included in the financial statements of each of the Group s entities are measured using the currency of the primary economic environment in which the entity operates ( the functional currency ). The consolidated financial statements are presented in United States dollars, which is the Group s presentation currency. b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the income statement. All other foreign exchange gains and losses are presented in the income statement on a net basis within other income and other expenses. Changes in the fair value of monetary securities denominated in foreign currency classified as available for sale are analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in other comprehensive income.

140 2017 Annual Report 138 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on nonmonetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in the income statement as part of the fair value gain or loss. Translation differences on nonmonetary financial assets, such as equities classified as available for sale, are included in other comprehensive income. c) Group companies The results and financial position of all group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: i) Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position; ii) Income and expenses for each income statement are translated at average exchange rates; (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions) and iii) All resulting exchange differences are recognised in other comprehensive income. Exchange differences arising from the above process are reported in shareholders equity as Foreign currency translation differences. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. 2.4 Sale and repurchase agreements Securities sold subject to repurchase agreements ( repos ) are reclassified in the financial statements as pledged assets when the transferee has the right by contract or custom to sell or repledge the collateral; the counterparty liability is included in deposits from banks or deposits from customers, as appropriate. Securities purchased under agreements to resell ( reverse repos ) are recorded as loans and advances to other banks or customers, as appropriate. The difference between sale and repurchase price is treated as interest and accrued over the life of the agreements using the effective interest method. Securities lent to counterparties are also retained in the financial statements. 2.5 Financial assets and liabilities All financial assets and liabilities which include derivative financial instruments have to be recognised in the consolidated statement of financial position and measured in accordance with their assigned category Financial assets The Group allocates financial assets to the following IAS 39 categories: financial assets at fair value through profit or loss; loans and receivables; held-to-maturity investments; and available-forsale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its financial instruments at initial recognition. Financial assets are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument. a) Financial assets at fair value through profit or loss This category comprises two sub-categories: financial assets classified as held for trading, and financial assets designated by the Group as at fair value through profit or loss upon initial recognition. A financial asset is classified as held for trading if it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term or if it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking. Derivatives are also categorized as held for trading unless they are designated and effective as hedging instruments. Financial assets held for trading consist of debt instruments, including money-market paper, traded corporate and bank loans, and equity instruments, as well as financial assets with embedded derivatives. They are recognised in the consolidated statement of financial position as Financial assets held for trading. Financial assets and financial liabilities are designated at fair value through profit or loss when: (i) Doing so significantly reduces measurement inconsistencies that would arise if the related derivative were treated as held for trading and the underlying financial instruments were carried at amortised cost for such loans and advances to customers or banks and debt securities in issue; (ii) Certain investments, such as equity investments, are managed and evaluated on a fair value basis in accordance with a documented risk management or investment strategy and reported to key management personnel on that basis are designated at fair value through profit or loss; and (iii) Financial instruments, such as debt securities held, containing one or more embedded derivatives significantly modify the cash flows, are designated at fair value through profit or loss. Gains and losses arising from changes in the fair value of derivatives that are managed in conjunction with designated financial assets or financial liabilities are included in net income from financial instruments designated at fair value. Derivative financial instruments included in this category are recognised initially at fair value; transaction costs are taken directly to the consolidated income statement. Gains and losses arising from changes in fair value are included directly in the consolidated income statement and are reported as Net trading income. Interest income and expense and dividend income and expenses on financial assets held for trading are included in Net interest income or Dividend income, respectively. The instruments are derecognised when the rights to receive cash flows have expired or the Group has transferred substantially all the risks and rewards of ownership and the transfer qualifies for derecognizing Financial assets for which the fair value option is applied are recognised in the consolidated statement of financial position as Financial assets designated at fair value. Fair value changes relating

141 Financial Statements 139 to financial assets designated at fair value through profit or loss are recognised in Net trading income. b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than: (a) those that the Group intends to sell immediately or in the short term, which are classified as held for trading, and those that the entity upon initial recognition designates as at fair value through profit or loss; (b) those that the Group upon initial recognition designates as available for sale; or (c) those for which the holder may not recover substantially all of its initial investment, other than because of credit deterioration. Loans and receivables are initially recognised at fair value which is the cash consideration to originate or purchase the loan including any transaction costs and measured subsequently at amortised cost using the effective interest rate method. Loans and receivables are reported in the consolidated statement of financial position as loans and advances to banks and financial assets in other assets. Interest on loans is included in the consolidated income statement and is reported as Interest income. In the case of an impairment, the impairment loss is reported as a deduction from the carrying value of the loan and recognised in the consolidated income statement as impairment losses for loans and advances, impairment on other financial assets. c) Held-to maturity financial assets Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group s management has the positive intention and ability to hold to maturity, other than: (a) those that the Group upon initial recognition designates as at fair value through profit or loss; (b) those that the Group designates as available for sale; and (c) those that meet the definition of loans and receivables. These are initially recognised at fair value including direct and incremental transaction costs and measured subsequently at amortised cost, using the effective interest method. Interest on held-to-maturity investments is included in the consolidated income statement and reported as Interest income. In the case of an impairment, the impairment loss is reported as a deduction from the carrying value of the investment and recognised in the consolidated income statement as net gains/(losses) on investment securities. There were no held-to-maturity financial assets as at the reporting date. d) Available-for-sale Available-for-sale investments are financial assets that are intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices or that are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss. Available-for-sale financial assets are initially recognised at fair value, which is the cash consideration including any transaction costs, and measured subsequently at fair value with gains and losses being recognised in other comprehensive income, except for impairment losses and foreign exchange gains and losses, until the financial asset is derecognised. If an available-for-sale financial asset is determined to be impaired, the cumulative gain or loss previously recognised in the equity is recognised in the income statement. However, interest is calculated using the effective interest method, and foreign currency gains and losses on monetary assets classified as available for sale are recognised in the consolidated statement of comprehensive income. Dividends on available-for-sale equity instruments are recognised in the consolidated income statement in Dividend income when the Group s right to receive payment is established. Treasury bills and pledged assets are classified as available for sale financial assets Financial liabilities The Group s holding in financial liabilities is in financial liabilities at fair value through profit or loss (including financial liabilities held for trading and those that are designated at fair value) and financial liabilities at amortised cost. Financial liabilities are derecognised when extinguished. a) Financial liabilities at fair value through profit or loss This category comprises two sub-categories: financial liabilities classified as held for trading, and financial liabilities designated by the Group as at fair value through profit or loss upon initial recognition. A financial liability is classified as held for trading if it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term or if it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking. Derivatives are also categorized as held for trading unless they are designated and effective as hedging instruments. Financial liabilities held for trading also include obligations to deliver financial assets borrowed by a short seller. Those financial instruments are recognised in the consolidated statement of financial position as Financial liabilities held for trading. Gains and losses arising from changes in fair value of financial liabilities classified as held for trading are included in the consolidated income statement and are reported as Net trading income. Interest expenses on financial liabilities held for trading are included in Net interest income. Financial liabilities for which the fair value option is applied are recognised in the consolidated statement of financial position as Financial liabilities designated at fair value. Fair value changes relating to such financial liabilities are passed through the statement of comprehensive income. b) Other liabilities measured at amortised cost Financial liabilities that are not classified as at fair value through

142 2017 Annual Report 140 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) profit or loss fall into this category and are measured at amortised cost. Financial liabilities measured at amortised cost are deposits from banks and customers, other deposits, financial liabilities in other liabilities, borrowed funds which the fair value option is not applied, convertible bonds and subordinated debts. c) Determination of fair value Fair value under IFRS 13 is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) at the measurement date under current market condition (i.e. an exit price) regardless of whether that price is directly observable or estimated using another valuation technique. For financial instruments traded in active markets, the determination of fair values of financial assets and financial liabilities is based on quoted market prices or dealer price quotations. This includes listed equity securities and quoted debt instruments on exchanges (for example, NSE, BVRM, GSE) and quotes from approved bond market makers. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm s length basis. If the above criteria are not met, the market is regarded as being inactive. Indications that a market is inactive are when there is a wide bid-offer spread or significant increase in the bid-offer spread or there are few recent transactions. For all other financial instruments, fair value is determined using valuation techniques. In these techniques, fair values are estimated from observable data in respect of similar financial instruments, using models to estimate the present value of expected future cash flows or other valuation techniques, using inputs existing at the dates of the consolidated statement of financial position. The Group uses widely recognised valuation models for determining fair values of non-standardized financial instruments of lower complexity, such as options or interest rate and currency swaps. For these financial instruments, inputs into models are generally market observable. The output of a model is always an estimate or approximation of a value that cannot be determined with certainty, and valuation techniques employed may not fully reflect all factors relevant to the positions the Group holds. Valuations are therefore adjusted, where appropriate, to allow for additional factors including model risks, liquidity risk and counterparty credit risk. Based on the established fair value model governance policies, and related controls and procedures applied, management believes that these valuation adjustments are necessary and appropriate to fairly state the values of financial instruments carried at fair value in the consolidated statement of financial position. Price data and parameters used in the measurement procedures applied are generally reviewed carefully and adjusted, if necessary particularly in view of the current market developments. The fair value of over-the-counter (OTC) derivatives is determined using valuation methods that are commonly accepted in the financial markets, such as present value techniques and option pricing models. The fair value of foreign exchange forwards is generally based on current forward exchange rates. Structured interest rate derivatives are measured using appropriate option pricing models (for example, the Black-Scholes model) or other procedures such as Monte Carlo simulation. In cases when the fair value of unlisted equity instruments cannot be determined reliably, the instruments are carried at cost less impairment. The fair value for loans and advances as well as liabilities to banks and customers are determined using a present value model on the basis of contractually agreed cash flows, taking into account credit quality, liquidity and costs. The fair values of contingent liabilities and irrevocable loan commitments correspond to their carrying amounts. d) Derecognition Financial assets are derecognised when the contractual rights to receive the cash flows from these assets have ceased to exist or the assets have been transferred and substantially all the risks and rewards of ownership of the assets are also transferred. Financial liabilities are derecognised when they have been redeemed or otherwise extinguished. 2.6 Reclassification of financial assets The Group may choose to reclassify a non-derivative financial asset held for trading out of the held-for-trading category if the financial asset is no longer held for the purpose of selling it in the near-term. Financial assets other than loans and receivables are permitted to be reclassified out of the held for trading category only in rare circumstances arising from a single event that is unusual and highly unlikely to recur in the near-term. In addition, the Group may choose to reclassify financial assets that would meet the definition of loans and receivables out of the held-for-trading or available-for-sale categories if the Group has the intention and ability to hold these financial assets for the foreseeable future or until maturity at the date of reclassification. Reclassifications are made at fair value as of the reclassification date. Fair value becomes the new cost or amortised cost as applicable, and no reversals of fair value gains or losses recorded before reclassification date are subsequently made. Effective interest rates for financial assets reclassified to loans and receivables and heldto-maturity categories are determined at the reclassification date. Further increases in estimates of cash flows adjust effective interest rates prospectively. On reclassification of a financial asset out of the at fair value through profit or loss category, all embedded derivatives are re-assessed and, if necessary, separately accounted for. 2.7 Financial guarantees and loan commitments Financial guarantees are contracts that require the Group to make specified payments to reimburse the holder for a loss that it incurs because a specified debtor fails to make payment when it is due in accordance with the terms of a debt instrument. Loan commitments are firm commitments to provide credit under pre-specified terms and conditions.

143 Financial Statements 141 Liabilities arising from financial guarantees or commitments to provide a loan at a below-market interest rate are initially measured at fair value and the initial fair value is amortised over the life of the guarantee or the commitment. The liability is subsequently carried at the higher of this amortised amount and the present value of any expected payment to settle the liability when a payment under the contract has become probable 2.8 Classes of financial instrument The Group classifies the financial instruments into classes that reflect the nature of information and take into account the characteristics of those financial instruments. The classification made can be seen in the table below: Financial assets Category (as defined by IAS 39) Class (as determined by the Group) Note Financial assets at fair value through profit or loss Financial assets held for trading 17 Derivative financial assets 18 Loans and receivables Cash and balances with central banks 16 Loans and advances to banks 19 Loans and advances to customers 20 Other assets excluding prepayments 24 Held-to-maturity Investments None Not applicable Available-for-sale financial assets Treasury bills and other eligible bills 21 Investment securities available for sale 22 Pledged assets 23 Hedging derivatives None Not applicable Financial liabilities Category (as defined by IAS 39) Class (as determined by the Group) Note Financial liabilities at fair value through profit or loss Derivative financial liabilities 18 Financial liabilities at amortized cost Deposits from banks 30 Deposits from customers 31 Borrowed funds 32 Other liabilities, excluding non-financial liabilities 33 Off balance sheet financial instruments Category (as defined by IAS 39) Class (as determined by the Group) Note Loan commitments Loan commitments 37 Guarantees, acceptances and other financial facilities Guarantees, acceptances and other financial facilities 37

144 2017 Annual Report 142 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) 2.9 Offsetting financial instruments In accordance with IAS 32, the Group reports financial assets and liabilities on a net basis on the statement of financial position only if there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously Net interest income Interest income on loans and advances at amortised cost, availablefor-sale debt investments, and interest expense on financial liabilities held at amortised cost, are calculated using the effective interest rate method and recognised within interest income and interest expense in the consolidated income statement. The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Group estimates cash flows considering all contractual terms of the financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss Fee and commission income Fees and commissions are generally recognised on an accrual basis when the service has been provided. Loan commitment fees for loans that are likely to be drawn down are deferred (together with related direct costs) and recognised as an adjustment to the effective interest rate on the loan. Loan syndication fees are recognised as revenue when the syndication has been completed and the Group has retained no part of the loan package for itself or has retained a part at the same effective interest rate as the other participants. Commission and fees arising from negotiating, or participating in the negotiation of, a transaction for a third party such as the arrangement of the acquisition of shares or other securities, or the purchase or sale of businesses are recognised on completion of the underlying transaction. Portfolio and other management advisory and service fees are recognised based on the applicable service contracts, usually on a time-apportionment basis. Asset management fees related to investment funds are recognised over the period in which the service is provided. The same principle is applied for wealth management, financial planning and custody services that are continuously provided over an extended period of time. Performancelinked fees or fee components are recognised when the performance criteria are fulfilled Dividend income Dividends are recognised in the consolidated income statement in Dividend income when the entity s right to receive payment is established Impairment of financial assets a) Assets carried at amortized cost The Group assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The criteria that the Group uses to determine that there is objective evidence of an impairment loss include: i) significant financial difficulty of the issuer or obligor; ii) a breach of contract, such as a default or delinquency in interest or principal payments; iii) the lender, for economic or legal reasons relating to the borrower s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider; iv) it becomes probable that the borrower will enter bankruptcy or other financial reorganization; v) the disappearance of an active market for that financial asset because of financial difficulties; or vi) observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio. The estimated period between a loss occurring and its identification is determined by local management for each identified portfolio. In general, the periods used vary between three months and 12 months; in exceptional cases, longer periods are warranted. The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment. The amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not

145 Financial Statements 143 been incurred) discounted at the financial asset s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the consolidated income statement. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument s fair value using an observable market price. Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of the contractual cash flows of the assets in the Group and historical loss experience for assets with credit risk characteristics similar to those in the Group. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not currently exist. Estimates of changes in future cash flows for groups of assets should reflect and be directionally consistent with changes in related observable data from period to period (for example, changes in unemployment rates, property prices, payment status, or other factors indicative of changes in the probability of losses in the Group and their magnitude). The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Group to reduce any differences between loss estimates and actual loss experience. When a loan is uncollectible, it is written off against the related allowance for loan impairment. Such loans are written off after all the necessary procedures have been completed and the amount of the loss has been determined. Impairment charges relating to loans and advances to banks and customers are classified in loan impairment charges whilst impairment charges relating to investment securities (hold to maturity and loans and receivables categories) are classified in Net gains/(losses) on investment securities. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor s credit rating), the previously recognised impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognised in the income statement in impairment charge for credit losses. b) Assets classified as available-for-sale The Group assesses at each date of the consolidated statement of financial position whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is objective evidence of impairment resulting in the recognition of an impairment loss. A decline in value by fifty percent of acquisition value over a period of two consecutive years is also designated as an impairment indicator. If any such evidence exists for available-for-sale financial assets, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss is removed from equity and recognised in the consolidated income statement. Impairment losses recognised in the consolidated income statement on equity instruments are not reversed through the consolidated income statement. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through the consolidated income statement. c) Renegotiated loans Loans that are either subject to collective impairment assessment or individually significant and whose terms have been renegotiated are no longer considered to be past due but are treated as new loans. In subsequent years, the asset is considered to be past due and disclosed only if renegotiated again. Where possible, the Bank seeks to restructure loans rather than to take possession of collateral. This may involve extending the payment arrangements and the agreement of new loan conditions. Once the terms have been renegotiated, any impairment is measured using the original EIR as calculated before the modification of terms and the loan is no longer considered past due. Management continually reviews renegotiated loans to ensure that all criteria are met and that future payments are likely to occur. The loans continue to be subject to an individual or collective impairment assessment, calculated using the loan s original EIR Impairment of non-financial assets Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash flows from other assets or group of assets (cash-generating units). The impairment test also can be performed on a single asset when the fair value less cost to sell or the value in use can be determined reliably. Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date Share-based payments The Group engages in equity settled share-based payment transactions in respect of services received from certain categories of its employees. The fair value of the services received is measured by reference to the fair value of the shares or share options granted on the date of the grant. The cost of the employee services received in respect of the shares or share options granted is recognised in the consolidated income statement over the period that the services are received, which is the vesting period. The fair value of the options granted is determined using option pricing models, which take into account the exercise price of the option, the current share price, the risk free interest rate, the expected volatility of the share price over the life of the option and other

146 2017 Annual Report 144 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) relevant factors. Except for those which include terms related to market conditions, vesting conditions included in the terms of the grant are not taken into account in estimating fair value. Non-market vesting conditions are taken into account by adjusting the number of shares or share options included in the measurement of the cost of employee services so that ultimately, the amount recognised in the consolidated income statement reflects the number of vested shares or share options. Where vesting conditions are related to market conditions, the charges for the services received are recognised regardless of whether or not the market related vesting condition is met, provided that the non-market vesting conditions are met Cash and cash equivalents For purposes of presentation in the statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position Repossessed collateral Repossessed collateral are equities, landed properties or other investments repossessed from customers and used to settle the outstanding obligations. Such investments are classified in accordance with the intention of the Group in the asset class which they belong Leases Leases are accounted for in accordance with IAS 17 and IFRIC 4. They are divided into finance leases and operating leases. (a) A group company is the lessee The Group enters into operating leases. The total payments made under operating leases are charged to other operating expenses in the income statement on a straight-line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place. The Group leases certain property, plant and equipment. Leases of property, plant and equipment where the group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and the lease term. (b) A group company is the lessor When assets are held subject to a finance lease, the present value of the lease payments is recognised as a receivable. The difference between the gross receivable and the present value of the receivable is recognised as unearned finance income. Lease income is recognised over the term of the lease using the net investment method (before tax), which reflects a constant periodic rate of return. (c) Fees paid in connection with arranging leases The Group makes payments to agents for services in connection with negotiating lease contracts with the Group s lessees. For operating leases, the letting fees are capitalized within the carrying amount of the related investment property, and depreciated over the life of the lease Investment properties Properties that are held for long-term rental yields or for capital appreciation or both, and that are not occupied by the entities in the consolidated group, are classified as investment properties. Investment properties comprise office buildings and Domestic Bank parks leased out under operating lease agreements. Some properties may be partially occupied by the Group, with the remainder being held for rental income or capital appreciation. If that part of the property occupied by the Group can be sold separately, the Group accounts for the portions separately. The portion that is owner-occupied is accounted for under IAS 16, and the portion that is held for rental income or capital appreciation or both is treated as investment property under IAS 40. When the portions cannot be sold separately, the whole property is treated as investment property only if an insignificant portion is owner-occupied. Recognition of investment properties takes place only when it is probable that the future economic benefits that are associated with the investment property will flow to the entity and the cost can be measured reliably. This is usually the day when all risks are transferred. Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing parts of an existing investment property at the time the cost has been incurred if the recognition criteria are met; and excludes the costs of day-to-day servicing of an investment property. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the date of the consolidated statement of financial position. Gains or losses arising from changes in the fair value of investment properties are included in the consolidated income statement in the year in which they arise. Subsequent expenditure is included in the asset s carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to the consolidated income statement during the financial period in which they are incurred. Rental income from investment property is recognised in the income statement on a straight-line basis over the term of the lease. The fair value of investment properties is based on the nature, location and condition of the specific asset. The fair value is calculated by discounting the expected net rentals at a rate that reflects the

147 Financial Statements 145 current market conditions as of the valuation date adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. The fair value of investment property does not reflect future capital expenditure that will improve or enhance the property and does not reflect the related future benefits from this future expenditure. These valuations are performed annually by external appraisers. Buildings Leasehold improvements Furniture & equipment and installations Motor vehicles years 25 years, or over the period of the lease if less than 25 years 3 5 years 3 10 years 2.20 Property and equipment Land and buildings comprise mainly branches and offices. All property and equipment used by the parent or its subsidiaries is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset s carrying amount or are recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate assets is derecognised when replaced. All other repair and maintenance costs are charged to other operating expenses during the financial period in which they are incurred. After recognition as an asset, an item of property and equipment whose fair value can be measured reliably shall be carried at a revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations shall be made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the reporting date. If an item of property, plant and equipment is revalued, the entire class of property, plant and equipment to which that asset belongs shall be revalued. The fair value of land and buildings is usually determined from market-based evidence by appraisal that is normally undertaken by professionally qualified valuers. The fair value of items of plant and equipment is usually their market value determined by appraisal. Land and buildings are the class of items that are revalued on a regular basis. The other items are evaluated at cost If an asset s carrying amount is increased as a result of a revaluation, the increase shall be credited directly to other comprehensive income. However, the increase shall be recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss. If an asset s carrying amount is decreased as a result of a revaluation, the decrease shall be recognised in profit or loss. However, the decrease shall be debited directly to equity under the heading of revaluation reserve to the extent of any credit balance existing in the revaluation surplus in respect of that asset. For assets revalued, any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset, and the net amount is restated to the revalued amount of the asset. Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows: The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. Assets are subject to review for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An asset s carrying amount is written down immediately to its recoverable amount if the asset s carrying amount is greater than its estimated recoverable amount. The recoverable amount is the higher of the asset s fair value less costs to sell and value in use. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in other operating expenses in the consolidated income statement Intangible assets a) Goodwill Goodwill represents the excess of the cost of acquisition over the fair value of the Group s share of the net identifiable assets of the acquired subsidiaries and associates at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates is included in investments in associates. Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each of those cash-generating units is represented by each primary reporting segment. Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in circumstance indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Impairment is tested by comparing the present value of the expected future cash flows from a cash generating unit with the carrying value of its net assets, including attributable goodwill. Impairment losses on goodwill are not reversed. b) Computer software licences Acquired computer software licences are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised on the basis of the expected useful lives. Costs associated with maintaining computer software programs are recognised as an expense incurred. Development costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs include software development employee costs and an appropriate portion of relevant overheads. Computer software development costs recognised as assets are amortised using the straight-line method over their useful lives (not exceeding three years).

148 2017 Annual Report 146 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) 2.22 Income tax a) Current income tax Income tax payable (receivable) is calculated on the basis of the applicable tax law in the respective jurisdiction and is recognised as an expense (income) for the period except to the extent that current tax related to items that are charged or credited in other comprehensive income or directly to equity. In these circumstances, current tax is charged or credited to other comprehensive income or to equity (for example, current tax on of available-for-sale investment). Where the Group has tax losses that can be relieved against a tax liability for a previous year, it recognises those losses as an asset, because the tax relief is recoverable by refund of tax previously paid. This asset is offset against an existing current tax balance. Where tax losses can be relieved only by carry-forward against taxable profits of future periods, a deductible temporary difference arises. Those losses carried forward are set off against deferred tax liabilities carried in the consolidated statement of financial position. The Group does not offset income tax liabilities and current income tax assets. b) Deferred income tax Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from the initial recognition of an asset or liability in transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the date of the consolidated statement of financial position and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. The principal temporary differences arise from depreciation of property, plant and equipment, revaluation of certain financial assets and liabilities, provisions for pensions and other post-retirement benefits and carry-forwards; and, in relation to acquisitions, on the difference between the fair values of the net assets acquired and their tax base, fair value changes on available for sale financial assets, tax loss carried forward, revaluation on property and equipment. Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred income tax is provided on temporary differences arising from investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the difference will not reverse in the foreseeable future. The tax effects of carry-forwards of unused losses or unused tax credits are recognised as an asset when it is probable that future taxable profits will be available against which these losses can be utilised. Deferred tax related to fair value re-measurement of available-forsale investments, which are recognised in other comprehensive income, is also recognised in the other comprehensive income and subsequently in the consolidated income statement together with the deferred gain or loss Provisions Provisions for restructuring costs and legal claims are recognised when the Group has a present legal or constructive obligation as a result of past events; it is probable than not that an outflow of resources will be required to settle the obligation; and the amount can be reliably estimated. The Group recognises no provisions for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of management s best estimate of the expenditures required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense Employee benefits a) Pension obligations A defined contribution plan is a pension plan under which the group pays fixed contributions into a separate entity. The group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan. Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. In countries where there is no deep market in such bonds, the market rates on government bonds are used. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Past-service costs are recognised immediately in income.

149 Financial Statements 147 For defined contribution plans, the group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. b) Other post-retirement obligations The Group also provides gratuity benefits to its retirees. The entitlement to these benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment using the same accounting methodology as used for defined benefit pension plans. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. These obligations are valued annually by independent qualified actuaries. c) Termination benefits Termination benefits are payable when employment is terminated by the group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The group recognises termination benefits at the earlier of the following dates: (a) when the group can no longer withdraw the offer of those benefits; and (b) when the entity recognises costs for a restructuring that is within the scope of IAS 37 and involves the payment of termination benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting period are discounted to their present value. d) Profit-sharing and bonus plans The group recognises a liability and an expense for bonuses and profit-sharing, based on a formula that takes into consideration the profit attributable to the company s shareholders after certain adjustments. The group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation. e) Short term benefits The Group seeks to ensure that the compensation arrangements for its employees are fair and provide adequate protection for current and retiring employees. Employee benefits are determined based on individual level and performance within defined salary bands for each employee grade. Individual position and job responsibilities will also be considered in determining employee benefits. Employees will be provided adequate medical benefits and insurance protection against disability and other unforeseen situations. Employees shall be provided with retirement benefits in accordance with the Separation and Termination policies. Details of employee benefits are available with Group or Country Human Resources Borrowings Borrowings are recognised initially at fair value net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between proceeds net of transaction costs and the redemption value is recognised in the income statement over the period of the borrowing using the effective interest method. Borrowings are removed from the balance sheet when the obligation specified in the contracts is discharged, cancelled or expired. The difference between the carrying amount of financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in the income statement as other income or finance costs. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period Borrowing costs General and specific borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of the time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. There were no such borrowing costs capitalised as at the reporting date Compound financial instruments Compound financial instruments issued by the group comprise convertible notes that can be converted to share capital at the option of the holder. The liability component of a compound financial instrument is recognised initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognised initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition except on conversion or expiry.

150 2017 Annual Report 148 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) 2.28 Fiduciary activities Group companies commonly act as trustees and in other fiduciary capacities that result in the holding or placing of assets on behalf of individuals, trusts, retirement benefit plans and other institutions. An assessment of control has been performed and this does result in control for the group. These assets and income arising thereon are excluded from these financial statements, as they are not assets of the Group Share capital a) Share issue costs Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or to the acquisition of a business are shown in equity as a deduction, net of tax, from the proceeds. b) Dividends on ordinary shares Dividends on ordinary shares are recognised in equity in the period in which they are approved by the Company s shareholders. Dividends for the year that are declared after the reporting date are dealt with in the subsequent events note. c) Treasury shares Where the company purchases its equity share capital, the consideration paid is deducted from total shareholders equity as treasury shares until they are cancelled. Where such shares are subsequently sold or reissued, any consideration received is included in shareholders equity Segment reporting The Group s segmental reporting is in accordance with IFRS 8 Operating Segments. Operating segments are reported in a manner consistent with the internal reporting provided to the Group Executive Committee, which is responsible for allocating resources and assessing performance of the operating segments and has been identified by the Group as the Chief Operating Decision Maker (CODM). All transactions between business segments are conducted on an arm s length basis, with intra-segment revenue and costs being eliminated in head office. Income and expenses directly associated with each segment are included in determining business segment performance. In accordance with IFRS 8, the Group has the following business segments: Corporate & Investment Banking, Commercial Banking and Consumer Banking Non-current assets (or disposal groups) held for sale Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. This condition is regarded as met only when the asset (or disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset (or disposal group) and its sale is highly probable. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interests in its former subsidiary after the sale. Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and investment property that are carried at fair value. An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less cost to sell. A gain is recognised for any subsequent increases in fair value less cost to sell of an asset (or disposal group) but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the of the sale of the noncurrent assets held for sale (or disposal group) is recognised at the date of derecognition. Non-current assets (including those that are part of a disposal group) classified as held for sale are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised. Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from other assets in the statement of financial position. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the statement of financial positon. Discontinued operations: As discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operation, is part of single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with the with a view to resale. The Group presents discontinued operations in a separate line in the income statement. Net profit from discontinued operations includes the net total of operating profit and loss before tax from operations, including net gain or loss on sale before tax or measurement to fair value less costs to sell and discontinued operations tax expense. A component of an entity comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the Group s operations and cash flows. If an entity or a component of an entity is classified as a discontinued operation, the Group restates prior periods in the Income statement Comparatives Except when a standard or an interpretation permits or requires otherwise, all amounts are reported or disclosed with comparative information. Where IAS 8 Accounting policies, changes in accounting estimates and errors applies, comparative figures have been adjusted to conform with changes in presentation in the current year.

151 Financial Statements Financial risk management The Group s business involves taking on risks in a targeted manner and managing them professionally. The core functions of the group s risk management are to identify all key risks for the Group, measure these risks, manage the risk positions and determine capital allocations. The Group regularly reviews its risk management policies and systems to reflect changes in markets, products and best market practice. The Group s aim is to achieve an appropriate balance between risk and return and minimise potential adverse effects on the Group s financial performance. The Group defines risk as the possibility of losses or profits foregone, which may be caused by internal or external factors. Risk management is carried out by the Group Risk Management under policies approved by the Board of Directors. Group Risk Management identifies, evaluates and hedges financial risks in close co-operation with the operating units of the Group. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments. In addition, the Group Audit and Compliance is responsible for the independent review of risk management and the control environment. The most important types of risk are credit risk, liquidity risk and market risk. Market risk includes currency risk, interest rate risk and other price risk. 3.1 Credit risk The Group takes on exposure to credit risk, which is the risk that a counterparty will cause a financial loss to the Group by failing to pay amounts in full when due. Credit risk is the most important risk for the Group s business: management therefore carefully manages the exposure to credit risk. Credit exposures arise principally in lending and investment activities. There is also credit risk in off-balance sheet financial instruments, such as loan commitments. Credit risk management and control is centralised in the risk management team, which reports regularly to the Board of Directors Credit risk measurement (i) Probability of default: The Group assesses the probability of default of individual counterparties using internal rating tools tailored to the various categories of counterparty. They have been developed internally and combine statistical analysis with credit officer judgment and are validated, where appropriate, by comparison with externally available data. Clients of the Group are segmented into three rating classes. The Group s rating scale, which is shown below, reflects the range of default probabilities defined for each rating class. This means that, in principle, exposures migrate between classes as the assessment of their probability of default changes. The rating tools are kept under review and upgraded as necessary. The Group regularly validates the performance of the rating and their predictive power with regard to default events. Group s internal ratings scale and mapping of external ratings are as follows; Group s rating Description of grade Mapping to external rating (Standards and Poors) 1 4 Investment Grade AAA to BBB 5 6 Standard Grade BB to B 7 10 Non Investment Grade CCC to D The ratings of the major rating agency shown in the table above are mapped to the group s rating classes based on the long-term average default rates for each external grade. The Group uses the external ratings where available to benchmark our internal credit risk assessment. Observed defaults per rating category vary year on year, especially over an economic cycle The Group s policy requires the review of individual financial assets that are above materiality thresholds at least annually or more regularly when individual circumstances require. Impairment allowances on individually assessed accounts are determined by an evaluation of the incurred loss at the reporting date on a case-bycase basis, and are applied to all individually significant accounts. The assessment normally encompasses collateral held (including re-confirmation of its enforceability) and the anticipated receipts for that individual account. Collectively assessed impairment allowances are provided for: (i) portfolios of homogenous assets that are individually below materiality thresholds; and (ii) losses that have been incurred but have not yet been identified, by using the available historical experience, experienced judgment and statistical techniques. (ii) Exposure at default EAD is based on the amounts the Group expects to be owed at the time of default. For example, for a loan this is the face value. For a commitment, the Group includes any amount already drawn plus the further amount that may have been drawn by the time of default, should it occur. (iii) Loss given default/loss severity Loss given default or loss severity represents the Group s expectation of the extent of loss on a claim should default occur. It is expressed as percentage loss per unit of exposure. It typically varies by type of counterparty, type and seniority of claim and availability of collateral or other credit support. (iv) Debt securities and other bills For debt securities and other bills, external rating such as Standard & Poor s rating or their equivalents are used by Group Treasury for managing the credit risk exposures. The investments in those securities and bills are viewed as a way to gain a better credit quality mapping and maintain a readily available source to meet funding requirements at the same time.

152 2017 Annual Report 150 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) Risk limit control and mitigation policies The Group manages, limits and controls concentrations of credit risk wherever they are identified in particular, to individual counterparties and groups, and to industries and countries. The Group structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower, or groups of borrowers, and to geographical and industry segments. Such risks are monitored on a revolving basis and subject to an annual or more frequent review, when considered necessary. Limits on the level of credit risk by product, industry sector and by country are approved quarterly by the Board of Directors. The exposure to any one borrower including banks and other non bank financial institutions is further restricted by sub-limits covering on- and off-statement of financial position exposures, and daily delivery risk limits in relation to trading items such as forward foreign exchange contracts. Actual exposures against limits are monitored daily. Exposure to credit risk is also managed through regular analysis of the ability of borrowers and potential borrowers to meet interest and capital repayment obligations and by changing these lending limits where appropriate. Some other specific control and mitigation measures are outlined below: (a) Collateral The Group employs a range of policies and practices to mitigate credit risk. The most traditional of these is the taking of security for funds advances, which is common practice. The Group implements guidelines on the acceptability of specific classes of collateral or credit risk mitigation. The principal collateral types for loans and advances are: Mortgages over residential properties; Charges over business assets such as premises, inventory and accounts receivable; Charges over financial instruments such as debt securities and equities. Longer-term finance and lending to corporate entities are generally secured; individual credit facilities are generally unsecured. In addition, in order to minimise the credit loss the Group will seek additional collateral from the counterparty as soon as impairment indicators are noticed for the relevant individual loans and advances. (b) Credit-related commitments The primary purpose of these instruments is to ensure that funds are available to a customer as required. Guarantees and standby letters of credit carry the same credit risk as loans. Documentary and commercial letters of credit which are written undertakings by the Group on behalf of a customer authorising a third party to draw drafts on the Group up to a stipulated amount under specific terms and conditions are collateralised by the underlying shipments of goods to which they relate and therefore carry less risk than a direct loan. Commitments to extend credit represent unused portions of authorisations to extend credit in the form of loans, guarantees or letters of credit. With respect to credit risk on commitments to extend credit, the Group is potentially exposed to loss in an amount equal to the total unused commitments. However, the likely amount of loss is less than the total unused commitments, as most commitments to extend credit are contingent upon customers maintaining specific credit standards. The Group monitors the term to maturity of credit commitments because longer-term commitments generally have a greater degree of credit risk than shorter-term commitments Impairment and provisioning policies The internal rating systems described above focus more on creditquality mapping from the inception of the lending. In contrast, impairment provisions are recognised for financial reporting purposes only for losses that have been incurred at the statement of financial position date based on objective evidence of impairment. Due to the different methodologies applied, the amount of incurred credit losses provided for in the financial statements usually differs from the amount determined from the expected loss model that is used for internal operational management and banking regulation purposes. Current : relate to assets classified as Investment Grade (no evident weakness) and Non Investment Grade (no significant weakness). watchlist : relate to items for which there are evidence of a weakness in the financial or operating condition of the obligor which requires management s close attention. Substandard : there is a well-defined weakness in the financial or operating condition of the obligor which jeopardizes the timely repayment of its obligations. Doubtful : there are all of the weakness that are normally seen in a substandard credit with the additional characteristic that these weaknesses make full repayment unlikely. Loss : These assets are considered uncollectible and of such little value that they should be fully written-off. The impairment provision shown in the statement of financial position at year-end is derived from each of the three rating classes. The internal rating tool assists management to determine whether objective evidence of impairment exists under IAS 39, based on the following criteria set by the Group; Delinquency in contractual payments of principal or interest; Cash flow difficulties experienced by the borrower; Breach of loan covenants or conditions; Initiation of legal proceedings to enforce security; Deterioration of the borrower s competitive position; and Deterioration in the value of collateral. The internal rating systems described above focus more on creditquality mapping from the inception of the lending. In contrast, impairment provisions are recognised for financial reporting purposes only for losses that have been incurred at the statement of financial position date based on objective evidence of impairment. Due to the different methodologies applied, the amount of incurred credit losses provided for in the financial statements usually differs from the amount determined from the expected loss model that is used for internal operational management and banking regulation purposes. Current : relate to assets classified as Investment Grade (no evident weakness) and Non Investment Grade (no significant weakness). watchlist : relate to items for which there are evidence of a weakness in the financial or operating condition of the obligor which

153 Financial Statements 151 requires management s close attention. Substandard : there is a well-defined weakness in the financial or operating condition of the obligor which jeopardizes the timely repayment of its obligations. Doubtful : there are all of the weakness that are normally seen in a substandard credit with the additional characteristic that these weaknesses make full repayment unlikely. Loss : These assets are considered uncollectible and of such little value that they should be fully written-off. The impairment provision shown in the statement of financial position at year-end is derived from each of the three rating classes. The internal rating tool assists management to determine whether objective evidence of impairment exists under IAS 39, based on the following criteria set by the Group; Delinquency in contractual payments of principal or interest; Cash flow difficulties experienced by the borrower; Breach of loan covenants or conditions; Initiation of legal proceedings to enforce security; Deterioration of the borrower s competitive position; and Deterioration in the value of collateral.

154 2017 Annual Report 152 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) 31 December December 2016 Group s rating Loans and advances Impairment provision Loans and advances Impairment provision 1 Current 7,575,258 76% 100,354 1% 7,802,746 79% 89,728 1% 1A. Watchlist 391,773 4% 52,861 13% 536,098 5% 66,201 12% II. Substandard 885,911 9% 16,476 2% 581,843 6% 28,881 5% III. Doubtful 905,929 9% 262,456 29% 775,114 8% 281,589 36% IV. Loss 153,907 2% 122,767 80% 173,071 2% 143,099 83% Credit Concentration 9,912, % 554,914 6% 9,868, % 609,498 6% Maximum exposure Maximum exposure to credit risk before collateral held 31 December December 2016 Credit risk exposures relating to on-statement of financial position assets are as follows: Balances with central banks 2,084,883 1,918,396 Treasury bills and other eligible bills 1,718,977 1,228,492 Loans and advances to banks 1,685,806 1,413,699 Loans and advances to customers: CIB Overdrafts 1,948,955 1,597,664 Term loans 4,909,915 5,227,821 Others 23, Commercial Overdrafts 432, ,340 Credit cards 5 5 Term loans 1,089,117 1,088,896 Others 48 Consumer Overdrafts 80,882 88,685 Credit cards 3,795 3,015 Term loans 768, ,172 Mortgages 100,255 94,438 Financial assets held for trading Debt securities 36,064 77,018 Derivative financial instruments 39,267 68,204 Financial assets designated at fair value: Investment securities - available-for-sale: Debt securities 4,235,312 3,048,735 Pledged assets 298, ,205 Other assets 479, ,359 Credit risk exposures relating to off-balance sheet items are as follows: Financial guarantees 3,207,163 3,853,202 Loan commitments 713, ,246 At 31 December 23,857,419 22,423,836 The above table represents a worse case scenario of credit risk exposure of the Group at 31 December 2017 and December 2016, without taking into account any collateral held or other credit enhancements attached. For on-balance-sheet assets, the exposures set out above are based on net carrying amounts as reported in the statement of financial position. As shown above, 46.3 (2016: 48%) of the total maximum exposure is derived from loans and advances to banks and customers; 17.8 (2016: 14%) represents investments securities available for sale in debt securities. Management is confident in its ability to continue to control and sustain minimal exposure of credit risk to the group resulting from its loan and advances portfolio, debt securities and other assets based on the following: 80.4 (2016: 85%) of the loans and advances portfolio are considered to be neither past due nor impaired; 44% (2016: 70%) of loans and advances are backed by collateral; Investment in debt securities are largely government securities.

155 Financial Statements Loans and advances Loans and advances are summarised as follows: 31 December December 2016 Loans and advances to banks Loans and advances to customers Loans and advances to banks Loans and advances to customers Neither past due nor impaired 1,685,806 7,967,031 1,413,699 8,338,844 Past due but not impaired 885, ,843 Impaired 1,059, ,185 Gross 1,685,806 9,912,778 1,413,699 9,868,872 Less: allowance for impairment (554,914) (609,498) Net 1,685,806 9,357,864 1,413,699 9,259,374 Other financial assets are neither past due nor impaired except for investment securities available for sale and other assets with impairment provision in Note 22 and Note 24 respectively. (a) Loans and advances neither past due nor impaired The credit quality of the portfolio of loans and advances that were neither past due nor impaired can be assessed by reference to the internal rating system adopted by the Group in the Group Credit Policy and Procedure Manual (see the Note Impairment and provisioning policies Group Rating). 31 December 2017 Grades: Overdrafts Loans and advances to customers CIB Commercial Consumer Total Term loans Others Overdrafts Credit cards Term Loans Others Overdrafts Credit cards Term Loans Mortgages Current 1,146,689 4,514,934 23, , ,982-11,332 2, ,095 99,307 7,575,258 Watchlist 72, ,130 9,848 57,712 1,496 7, ,773 Total 1,219,588 4,756,064 23, , ,694 12,828 2, , ,223 7,967, December 2016 Grades: Overdrafts Loans and advances to customers CIB Commercial Consumer Total Term loans Others Overdrafts Credit cards Term Loans Others Overdrafts Credit cards Term Loans Mortgages Current 1,170,735 4,662,813 8, , , ,239 1, ,960 91,984 7,799,975 Watchlist 97, ,613 30,203 52,885 1,422 6,782 2, ,869 Total 1,268,510 5,010,426 8, , , ,661 1, ,742 94,173 8,338,844 All loans and advances to banks are neither past due nor impaired and all fall under the current grade.

156 2017 Annual Report 154 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) (b) Loans and advances past due but not impaired Loans and advances less than 90 days past due are not considered impaired, unless other information is available to indicate the contrary. Gross amount of loans and advances by class of customers that were past due but not impaired were as follows: 31 December 2017 Past due: Overdrafts Loans and advances to customers CIB Commercial Consumer Total Term loans Others Overdrafts Credit cards Term Loans Others Overdrafts Credit cards Term Loans Mortgages Past due up to 30 days 29, ,771 3,527 19, , ,298 Past due days 36,896 16,669 7,864 15,833 1,405 3, ,056 Past due days 373,645 25, , ,813 55,421 1,697 41, ,557 Total 439, , , ,778 57,763 1,697 46, ,911 Fair value of collateral 36,901 61, ,643 8,109 4, ,340 Amount of (over)/under collateralisation 402, ,522 (110,331) 5 40,669 52,819 1,697 46, , December 2016 Past due: Overdrafts Loans and advances to customers CIB Commercial Consumer Total Term loans Others Overdrafts Credit cards Term Loans Mortgages Overdrafts Credit cards Term Loans Mortgages Past due up to 30 days 26, ,588 14,390 24,471 1, ,564 Past due days 45,811 84,624 12,489 18,534 1,498 1, ,315 Past due days 55,038 2,939 5,586 88, ,702 25,566 1, ,964 Total 127, ,151 5, , ,707 28,772 1,546 2, ,843 Fair value of collateral 37, ,845 12,644 13, ,431 Amount of (over)/under collateralisation 90,525 58,306 5, , ,623 27,975 1,546 2, ,412 Upon initial recognition of loans and advances, the fair value of collateral is based on valuation techniques commonly used for the corresponding assets. In subsequent periods, the fair value is updated by reference to market price.

157 Financial Statements 155 c) Loans and advances individually impaired i) Loans and advances to customers The breakdown of the gross amount of individually impaired loans and advances by class, along with the fair value of related collateral held by the Group as security, are as follows: 31 December 2017 Past due: Overdrafts Loans and advances to customers CIB Commercial Consumer Total Term loans Others Overdrafts Credit cards Term Loans Mortgages Overdrafts Credit cards Term Loans Mortgages Gross 334, , , ,499 57, , ,059,836 Impairment allowance (121,963) (171,718) (42,907) (139,388) (57,199) (21691) (48) (554,914) 212,825 57, , , , ,922 Fair value of collateral (220,116) (149,300) (109,260) (93,154) (600) (12,933) (206) (585,569) Amount of (over)/under collateralisation (7,291) (91,896) 10,606 18,957 (354) 48 (10,998) 281 (80,647) 31 December 2016 Past due: Overdrafts Loans and advances to customers CIB Commercial Consumer Total Term loans Others Overdrafts Credit cards Term Loans Mortgages Overdrafts Credit cards Term Loans Mortgages Gross 220, , , ,927 24, , ,185 Impairment allowance (5,327) (232,452) (35,670) (104,830) (11,136) (34,811) (462) (424,688) 215,137 56, ,418 98,097 13, ,442 (45) 523,497 Fair value of collateral (5,477) (93,931) (21,157) (63,995) (1,287) (8,412) (194,259) Amount of (over)/under collateralisation 209,660 (37,188) - 113,261 34,102 12, (2,970) (45) 329,238

158 2017 Annual Report 156 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) (d) Other assets with exposure to credit risks Balances with central banks Financial assets held for trading debt securities Derivative financial instruments Treasury bills and other eligible bills AFS debt securities Pledged assets Other assets less prepayments Total 31 December 2017 Neither past due nor impaired (Investment/standard grade) 2,084,883 36,064 39,267 1,718,977 4,235, , ,868 8,892,932 Past due but not impaired Impaired (Non-investment grade) 111, ,796 Gross 2,084,883 36,064 39,267 1,718,977 4,235, , ,664 9,004,728 Less: allowance for impairment (111,796) (111,796) Net 2,084,883 36,064 39,267 1,718,977 4,235, , ,868 8,892,932 Carrying amounts 2,084,883 36,064 39,267 1,718,977 4,235, , ,868 8,892, December 2016 Neither past due nor impaired (Investment/standard grade) 1,918,396 77,018 68,204 1,228,492 3,048, , ,359 7,420,409 Past due but not impaired Impaired (Non-investment grade) 55,630 55,630 Gross 1,918,396 77,018 68,204 1,228,492 3,048, , ,989 7,476,039 Less: allowance for impairment (55,630) (55,630) Net 1,918,396 77,018 68,204 1,228,492 3,048, , ,359 7,420,409 Carrying amounts 1,918,396 77,018 68,204 1,228,492 3,048, , ,359 7,420,409

159 Financial Statements Concentration of risks of financial assets with credit risk exposure a) Geographical sectors The following table breaks down the Group s main credit exposure at their carrying amounts, as categorised by geographical region as of 31 December For this table, the Group has allocated exposures to regions based on the country of domicile of our counterparties. As at 31 December 2017 UEMOA Nigeria AWA CESA Others Total Balances with central banks 158,445 62,523 94, ,636 91, ,316 Financial assets held for trading 12,194 10,614 13,750-36,557 Derivative financial instruments 29,267 10,000 39,267 Loans and advances to banks 418, ,563376, , , ,346 1,685,806 Loans and advances to customers: CIB Overdrafts 545, , , ,928 33,275 1,994,011 Term loans 1,973,099 1,508, , , ,251 5,158,304 Others 23, ,794 Commercial Overdrafts 86, ,858 69,603 89,177 56, ,008 Credit cards 5 5 Term loans 631, , , ,934 16,130 1,209,971 Others Consumer Overdrafts 13,938 89,681 5,802 18, ,036 Credit cards - 1,868 1, ,795 Term loans 552,554 38,006 62, , ,454 Mortgages 74,635 7,708 8,987 10, ,400 Treasury bills and other eligible bills 154, , , , ,953 1,718,977 Investment securities debt securities 2,832, , , ,050 7,816 4,235,312 Pledged assets 298, ,561 Other assets 121, , ,970 71,690 21, ,868 Total 7,598,751 5,053,126 2,234,387 3,543, ,432 19,302,442 Credit commitments 894, , ,458 1,024, ,235 3,920,817

160 2017 Annual Report 158 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) Concentration of risks of financial assets with credit risk exposure (continued) As at 31 December 2016 UEMOA Nigeria AWA CESA Others Total Balances with central banks 245, , , ,711 21, ,987 Financial assets held for trading 10,293 66, ,408 Derivative financial instruments 68,204 68,204 Loans and advances to banks 69, ,642 92, , ,989 1,413,699 Loans and advances to customers: CIB Overdrafts 205, ,797 51, , ,269 1,614,810 Term loans 1,542,836 2,504, , , ,745 5,550,185 Others Commercial Overdrafts 42, ,536 33,668 66, , ,003 Credit cards 5 5 Term loans 621,959 90,759 63, , ,548 1,240,285 Others Consumer Overdrafts 16,241 40,240 3,825 13,043 29, ,886 Credit cards 2, ,016 Term loans 401,948 90,415 16, , , ,968 Mortgages 49,907 16,424 1,993 9,670 17,477 95,471 Treasury bills and other eligible bills 364, , , ,016 1,228,493 Investment securities debt securities 2,113, , , ,795 5,946 3,048,734 Pledged assets 518, ,205 Other assets 118, ,232 86, , , ,360 Total 5,802,059 5,671, ,880 2,881,877 2,395,575 17,676,963 Credit commitments 1,173,747 1,193, ,481 1,505, ,259 4,371,837

161 Financial Statements Concentration of risks of financial assets with credit risk exposure (continued) (b) Industry sectors The following table breaks down the Group s main credit exposure at their carrying amounts, as categorised by the industry sectors of our counterparties. Financial institutions Wholesale & retail trading Manufacturing Government Mining & construction Services & others Total 31 December 2017 Balances with central banks 895, ,316 Financial assets held for trading 1,797 34,760 36,557 Derivative financial instruments 39,267 39,267 Loans and advances to banks 1,393,068 4, ,460 1,685,806 Loans and advances to customers: Overdrafts 147, , ,425 82, , ,628 2,616,054 Credit cards 3,801 3,801 Term loans 162,977 1,571,691 1,032, , ,969 2,643,341 7,167,729 Mortgages 8,520 12,179 1,565 1,915 77, ,400 Others , ,794 Treasury bills and other eligible bills 1,718,977 1,718,977 Investment securities debt securities 1,144,851 8,422 2,943, ,519 4,235,312 Pledged assets 298, ,561 Other assets 141,813 40,000 3, , ,868 Total 3,936,001 2,408,083 1,444,885 6,054,519 1,251,362 4,207,592 19,302,442 Credit commitments 567, , ,518 84, ,348 1,762,674 3,920, December 2016 Balances with central banks 891, ,987 Financial assets held for trading 1,305 76,103 77,408 Derivative financial instruments 68,204 68,204 Loans and advances to banks 1,413,699 1,413,699 Loans and advances to customers: Overdrafts 44, , ,474 35, , ,228 2,210,699 Credit cards 3,020 3,020 Term loans 237,920 1,314,773 1,503, ,615 1,196,622 2,566,074 7,559,439 Mortgages 32 1, ,453 95,470 Others Treasury bills and other eligible bills 1,228,492 1,228,492 Investment securities debt securities 215, ,794 2,598,328 68,696 14,801 3,048,735 Pledged assets 518, ,205 Other assets 82, , , , ,359 Total 2,955,417 2,304,947 1,978,413 5,209,399 1,510,150 3,718,637 17,676,963 Credit commitments 418,797 1,136, , , ,242 1,692,549 4,330,448

162 2017 Annual Report 160 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) 3.2 Market risk Market risk is the risk that changes in market prices, which include currency exchange rates and interest rates, will affect the fair value or future cash flows of a financial instrument. Market risk arises from open positions in interest rates and foreign currencies, both of which are exposed to general and specific market movements and changes in the level of volatility. The objective of market risk management is to manage and control market risk exposures within acceptable limits, while optimising the return on risk. Overall responsibility for managing market risk rests with the Group Risk Management and the Board s Risk Committee. The Group Risk Management is responsible for the development of detailed risk management policies and procedures (subject to review and approval Board s Risk Committee) and for the day to day implementation of those policies. It will be worth noted that due to significant currency evolution, the year end exposure of foreign exchange and and interest rate sensitivity analysis may be unrepresentative of the exposure during the year. The market risks arising from trading and non-trading activities are concentrated in Group Treasury. Regular reports are submitted to the Board of Directors and heads of each business unit. Trading portfolios include those positions arising from market-making transactions where the Group acts as principal with clients or with the market. Non-trading portfolios primarily arise from the interest rate management of the subsidiary s banking assets and liabilities. Non-trading portfolios also consist of foreign exchange and equity risks arising from the Group s held-to-maturity and available-for-sale investments. The Group applies a value at risk methodology (VAR) to its trading portfolios, to estimate the market risk of positions held and the maximum losses expected. 31 December December 2016 Low Average High Low Average High Foreign exchange risk , ,524 Interest risk ,

163 Financial Statements Foreign exchange risk The Group takes on exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows. The Board sets limits on the level of exposure by currency and in total for both overnight and intra-day positions, which are monitored daily. The table below summarises the Group s exposure to foreign currency exchange rate risk at 31 December. Included in the table are the Group s financial instruments at carrying amounts, categorised by currency. 31 December 2017 Dollar Euro CFA Naira Cedis Others Total Assets Cash and balances with central banks 317, , , , , ,847 2,661,745 Financial assets held for trading 15,087 10,613 10,857 36,557 Derivative financial instruments 39,267 39,267 Loans and advances to banks 650, , ,310 98,286 30, ,479 1,685,806 Loans and advances to customers 2,152, ,989 4,808,460 1,271, , ,914 9,357,864 Treasury bills and other eligible bills 185, , ,435 24, ,662 1,718,977 Investment securities available-for-sale 426, ,072, , , ,329 4,405,240 Pledged assets 298, ,561 Other assets 140,717 38, ,782 24,710 54,476 64, ,868 Total financial assets 3,912, ,895 9,477,720 3,797,473 1,156,264 1,428,344 20,683,884 Liabilities Deposits from banks 314, , , ,876 84,994 72,458 1,772,414 Deposit from customers 2,942, ,173 7,221,288 2,480, ,502 1,257,155 15,203,271 Derivative financial instruments 22, ,705 32,497 Other borrowed funds 1,229,071 50, , ,447 11,688 30,108 1,728,756 Other liabilities 286,469 36, , , ,032 14,074 1,162,275 Total financial liabilities 4,794, ,259 8,307,583 3,270,147 1,149,216 1,383,500 19,899,212 Net on-statement of financial position (882,317) (82,364) 1,170, ,325 7,048 44, ,672 Credit commitments 1,546, , , ,661 1, ,732 3,920, December 2016 Dollar Euro CFA Naira Cedis Others Total Assets Cash and balances with central banks 352,491 62, , , , ,626 2,462,301 Financial assets held for trading 10,350 66, ,409 Derivative financial instruments 28, , ,204 Loans and advances to banks 518, , ,975 91,122 85,443 67,744 1,413,699 Loans and advances to customers 2,458, ,434 4,186,017 1,384, , ,757 9,259,375 Treasury bills and other eligible bills 61, , ,644 81, ,232 1,228,492 Investment securities available-for-sale 165, ,420, ,381 11, ,743 3,272,826 Pledged assets 518, ,205 Other assets 198,048 22, ,248 92,751 72,985 66, ,359 Total financial assets 3,782, ,291 8,162,523 3,912, ,454 1,322,863 18,861,870 Liabilities Deposits from banks 449, ,615 1,329, ,385 86,792 2,022,352 Deposit from customers 2,741, ,044 6,164,776 2,538, , ,448 13,496,720 Derivative financial instruments 8,503 1,284 13, ,102 Other borrowed funds 1,311,021 68,213 36, ,247 10,800 27,666 1,608,564 Other liabilities 232,555 16, , , ,911 5,196 1,264,940 Total financial liabilities 4,743, ,945 7,881,179 3,178, ,484 1,075,105 18,415,678 Net on-statement of financial position (960,428) 81, , ,202 61, , ,192 Credit commitments 1,715, ,209 1,097, ,366 3, ,732 4,330,448

164 2017 Annual Report 162 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) Currency Sensitivity Analysis ETI periodically performs sensitivity analysis to determine the impact on Group earnings resulting from a potential appreciation of the United States Dollars (USD) relative to the currencies to which the Group has major exposure namely; CFA Franc (FCFA), the Euro (EUR), the Nigerian Naira (NGN) and the Ghana Cedi (GHS). The results using data as of 31 December 2017 are shown in the table below. December 2017 December 2016 Overall Impact Projected Appreciation of the USD 5% 10% 20% 5% 10% 20% Estimated Impact on Earnings ($ Million) (77) (147) (270) (55) (105) (193) Impact for Naira Projected Appreciation of the USD 5% 10% 20% 5% 10% 20% Estimated Impact on Earnings ($ Million) (25) (48) (87) (35) (67) (122) Interest rate risk Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate because of changes in market interest rates. The Group takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on both its fair value and cash flow risks. Interest margins may increase as a result of such changes but may reduce losses in the event that unexpected movements arise. The Board of Directors sets limits on the level of mismatch of interest rate repricing that may be undertaken, which is monitored daily by Group Treasury. The table below summarises the Group s exposure to interest rate risks. It includes the Group s financial instruments at carrying amounts, categorised by the earlier of contractual repricing or maturity dates. The Group s derivatives will be settled on a net basis.

165 Financial Statements Interest rate risk (continued) As at 31 December 2017 Up to 1 month 1-3 months 3-12 months 1-5 years Over 5 years Non-interest bearing Total Assets Cash and balances with central banks 148,948 8, ,503,789 2,661,745 Financial assets held for trading 36, ,557 Derivative financial instruments 10,000 29,267 39,267 Loans and advances to banks 593, , , ,813 1,685,806 Loans and advances to customers 2,390,127 1,147,811 1,415,887 3,286,874 1,117,166 9,357,864 Treasury bills and other eligible bills 107, ,083 1,332,840 41,902 5,983 1,718,977 Investment securities available-for-sale 76,878 81, ,188 2,043,266 1,513,330 4,405,240 Pledged assets 97, ,477 92, ,561 Other assets 162,254 8,548 70,683 38, , ,868 Total financial assets 3,478,750 1,936,889 3,890,761 5,944,510 2,728,759 2,704,216 20,683,885 Liabilities Deposits from banks 1,442,898 39, ,812 45,350 1,772,414 Deposit from customers 4,092,104 1,115,636 1,534, ,260 97,044 7,537,738 15,203,271 Derivative financial instruments 517 9,705 22,274 32,497 Borrowed funds 108,237 85, ,204 1,192, ,999 1,379 1,728,756 Other liabilities 13,966 89, ,382 33,176 1, ,303 1,162,275 Total financial liabilities 5,657,723 1,340,014 2,239,161 2,051, ,586 8,309,770 19,899,213 Total interest repricing gap (2,178,973) 596,875 1,651,600 3,892,551 2,428,173 (5,605,554) 784,672 As at 31 December 2016 Assets Cash and balances with central banks 815,463 29,585 1,617,254 2,462,302 Financial assets held for trading 10,298 2,544 64,566 77,408 Derivative financial instruments 10,051 8,627 49,526 68,204 Loans and advances to banks 672, , ,145 10, ,293 1,413,701 Loans and advances to customers 2,234,100 1,312,807 1,150,184 3,737, , ,486 9,259,373 Treasury bills and other eligible bills 136, , , ,626 2,834 1,228,492 Investment securities available-for-sale 33,853 21, ,793 1,608,856 1,186, ,172 3,272,825 Pledged assets 18, ,820 98,657 39, ,206 Other assets 26,564 38,185 28,669 14, , ,359 Total financial assets 3,939,938 1,896,002 2,746,506 5,623,241 1,928,033 2,728,150 18,861,870 Liabilities Deposits from banks 1,639,813 25, ,445 11,113 2,022,351 Deposit from customers 3,912,968 1,019, , ,817 89,435 6,792,418 13,496,719 Derivative financial instruments 10,391 6,023 6,688 23,102 Borrowed funds 209,220 10, , , ,381 1,608,564 Other liabilities 88, , ,802 13, ,387 1,342,635 Total financial liabilities 5,861,193 1,630,285 1,905,869 1,659, ,816 7,244,918 18,493,371 Total interest repricing gap (1,921,255) 265, ,637 3,963,949 1,736,217 (4,516,769) 368,499

166 2017 Annual Report 164 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) Interest rate risk (continued) Interest Rate Sensitivity Analysis The Group performs a periodic analysis of the sensitivity of its one-year projected earnings to an increase or decrease in market interest rates assuming a parallel shift in yield curves and a constant balance sheet position and the results using data as of 30 June 2017 and 31 December 2016 are shown below. 31 December 2017 Projected Change in Interest Rates 25 basis points Increase 50 basis points Increase 100 basis points Increase 25 basis points decrease 50 basis points decrease 100 basis points decrease Estimated Impact on Earnings ($ Million) (2.2) (4.5) (9.0) 31 December 2016 Projected Change in Interest Rates 25 basis points Increase 50 basis points Increase 100 basis points Increase 25 basis points decrease 50 basis points decrease 100 basis points decrease Estimated Impact on Earnings ($ Million) (1.7) (3.4) Liquidity risk Liquidity risk is the risk that the Group is unable to meet its payment obligations associated with its financial liabilities when they fall due and to replace funds when they are withdrawn. The consequence may be the failure to meet obligations to repay depositors and fulfil commitments to lend Liquidity risk management process The Group s liquidity management process, as carried out within the Group and monitored by a separate team in Group Treasury, includes: Day-to-day funding, managed by monitoring future cash flows to ensure that requirements can be met. This includes replenishment of funds as they mature or are borrowed by customers; Maintaining a portfolio of highly marketable assets that can easily be liquidated as protection against any unforeseen interruption to cash flow; Monitoring statement of financial position liquidity ratios against internal and regulatory requirements; and Managing the concentration and profile of debt maturities Non-derivative cash flows The table below presents the cash flows payable by the Group under non-derivative financial liabilities by remaining contractual maturities at the statement of financial position date. The amounts disclosed in the table are the contractual undiscounted cash flows, whereas the Group manages the inherent liquidity risk based on expected undiscounted cash inflows.

167 Financial Statements Non-derivative cash flows (continued) As at 31 December 2017 Up to 1 month 1 3 months 3 12 months 1 5 years Over 5 years Total Assets Cash and balances with central banks 2,661,745 2,661,745 Financial Asset held for trading 5,462 2,982 33,682 42,126 Derivative financial instruments 10,078 29,267 39,345 Loans and advances to banks 2,663, ,757 1,149,797 4,443,960 Loans and advances to customers 3,240,788 1,391,683 1,865,723 3,700, ,738 11,019,724 Treasury bills and other eligible bills 108, ,218 1,568,174 58,859 2,845 2,197,282 Investment securities available-for-sale 681,468 94, ,698 2,079, ,295 4,737,944 Pledged assets 98, ,608 93, ,645 Other assets 146, , ,318 33, ,868 Total assets (expected maturity dates) 9,517,272 2,728,237 5,879,663 5,983,557 1,814,910 25,923,639 Liabilities Deposits from banks 1,702, , ,129 4,631 2,303,371 Deposit from customers 11,855,580 1,374, ,769 2,238,263 16,234,022 Other borrowed funds 485, , ,654 50, ,085 2,190,569 Other liabilities 340, , , ,604 1,210,907 Derivative financial instruments ,087 23,981 14,481 50,898 Total liabilities (contractual maturity dates) 14,384,798 2,825,068 2,213,398 2,437, ,085 21,989,767 Gap analysis (4,867,526) (96,832) 3,666,265 3,546,139 1,685,825 3,933,871 As at 31 December 2016 Up to 1 month 1 3 months 3 12 months 1 5 years Over 5 years Total Assets Cash and balances with central banks 2,462,302 2,462,302 Financial Asset held for trading 9,818 5,198 96, ,773 Derivative financial instruments 10,051 8,627 49,526 68,204 Loans and advances to banks 1,031, , ,207 1,911,886 Loans and advances to customers 3,083,408 1,419,675 1,334,839 5,157,989 1,139,976 12,135,887 Treasury bills and other eligible bills 178, , , ,296 1,471,450 Investment securities available-for-sale 157,204 59, ,553 1,801,296 1,692,702 4,172,177 Pledged assets 18, , ,552 39, ,104 Other assets 269, ,855 64,698 20, ,478 Total assets (expected maturity dates) 7,201,911 2,514,864 3,627,804 7,608,971 2,871,711 23,825,261 Liabilities Deposits from banks 1,724, , ,196 4,147 2,255,646 Deposit from customers 11,204,299 1,121,741 2,040,271 2,122,786 16,489,097 Borrowed funds 299, , ,483 69,920 1,480,250 Derivative financial instruments 16,656 2,154 35,729 54,539 Other liabilities 16,231 5,983 11,039 3,449 23,468 60,170 Total liabilities(contractual maturity dates) 13,261,810 1,950,404 2,903,718 2,200,302 23,468 20,339,702 Gap analysis (6,059,899) 564, ,085 5,408,669 2,848,243 3,485,559 Assets available to meet all of the liabilities and to cover outstanding loan commitments include cash, central bank balances, items in the course of collection and treasury and other eligible bills; loans and advances to banks; loans and advances to customers and other assets. In the normal course of business, a proportion of customer loans and advances contractually repayable within one year will be extended. The Group would also be able to meet unexpected net cash outflows by selling investment securities.

168 2017 Annual Report 166 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) Non-derivative cash flows (continued) Offsetting At 31 December 2017 Gross amount Gross amount set-off on SOFP Net amount presented on SOFP Related amount not set-off on SOFP Net amount Derivative financial assets forwards 29,267 29,267 29,267 swaps 10,000 10,000 10,000 options Derivative financial liabilities forwards 22,274 22,274 22,274 swaps 10,223 10,223 10,223 options At 31 December 2016 Gross amount Gross amount set-off on SOFP Net amount presented on SOFP Related amount not set-off on SOFP Net amount Derivative financial assets forwards 67,590 67,590 67,590 swaps options Derivative financial liabilities forwards 10,162 10,162 10,162 swaps 12,940 12,940 12,940 options 3.4 Off-balance sheet items The dates of the contractual amounts of the Group s off-balance sheet financial instruments that commit it to extend credit to customers and other facilities, provide financial guarantees and capital commitments are summarised in the table below. At 31 December 2017 No later than 1 year Over 1 years Total Loan commitments 492, , ,654 Guarantees, acceptances and other financial facilities 2,607, ,982 3,207,163 Total 3,099, ,215 3,920,817 At 31 December 2016 Loan commitments 329, , ,246 Guarantees, acceptances and other financial facilities 2,511,489 1,341,713 3,853,202 Total 2,840,789 1,489,659 4,330,448

169 Financial Statements Fair value of financial assets and liabilities (a) Financial instruments not measured at fair value The table below summarises the carrying amounts and fair values of those financial assets and liabilities not measured at fair value on the group s consolidated statement of financial position. Carrying value Fair value Financial assets: Cash and balances with central banks 2,661,745 2,462,302 2,661,745 2,462,302 Loans and advances to banks 1,685,806 1,413,699 4,443,960 1,911,885 Loans and advances to customers 9,357,864 9,259,280 11,019,724 12,135,887 Other assets (excluding prepayments) 479, , , ,359 Financial liabilities: Deposits from banks 1,772,414 2,022,352 2,303,371 2,255,646 Deposit from customers 15,203,271 13,496,720 16,234,022 13,810,687 Other liabilities (excluding deferred income) 1,162,275 1,279,941 1,162,275 1,279,941 Borrowed funds 1,728,756 1,608,564 1,728,756 1,480,251 All the fair values are determined using the Level 2 fair value hierarchy (i) Cash The carrying amount of cash and balances with banks is a reasonable approximation of fair value. (ii) Loans and advances to banks Loans and advances to banks include inter-bank placements and items in the course of collection. The carrying amount of floating rate placements and overnight deposits is a reasonable approximation of fair value. The estimated fair value of fixed interest bearing deposits is based on discounted cash flows using prevailing money-market interest rates for debts with similar credit risk and remaining maturity. (iii) Loans and advances to customers Loans and advances are net of charges for impairment. The estimated fair value of loans and advances represents the discounted amount of estimated future cash flows expected to be received. Expected cash flows are discounted at current market rates to determine fair value. (iv) Deposit from banks, due to customers and other deposits The estimated fair value of deposits with no stated maturity, which includes non-interest bearing deposits, is the amount repayable on demand. The estimated fair value of fixed interest-bearing deposits not quoted in an active market is based on discounted cash flows using interest rates for new debts with similar remaining maturity. (v) Deposit from banks, due to customers and other deposits For those notes where quoted market prices are not available, a discounted cash flow model is used based on a current yield curve appropriate for the remaining term to maturity. (vi) Other assets The bulk of these financial assets have short term (less than 12 months) maturities and their amounts are a reasonable approximation of fair value. (vii) Other liabilities The carrying amount of financial liabilities in other liabilities is a reasonable approximation of fair value.

170 2017 Annual Report 168 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) (b) Fair value hierarchy IFRS 13 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources; unobservable inputs reflect the Group s market assumptions. These two types of inputs have created the following fair value hierarchy: i) Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities. This level includes listed equity securities and debt instruments on exchanges. ii) Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). iii) Level 3 inputs for the asset or liability that are not based on observable market data (unobservable inputs). This level includes equity investments and debt instruments with significant unobservable components. This hierarchy requires the use of observable market data when available. The Group considers relevant and observable market prices in its valuations where possible. 31 December December 2016 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Treasury and other eligible bills 965, , , ,032 Financial Asset held for trading 25,854 10,703 46,605 30,803 Derivative financial instruments 39,267 68,204 Pledged assets 298, ,205 Investment securities available-for-sale (AFS) 1,980,020 2,365,055 60,165 1,269,969 1,860, ,236 Total financial assets 2,971,520 3,466,917 60,165 1,644,035 3,378, ,236 Derivative financial instruments 32,497 23,102 Total financial liabilities 32,497 23,102 There are no movements between Level 1 and Level 2. The following table presents the changes in Level 3 instruments for the available for sale securities: Level 3 Level 3 Opening balance 142,236 92,258 (losses)/gains recognised in other comprehensive income (82,071) 49,978 Closing balance 60, ,236 Total losses or gains for the period included in profit or loss for assets held at the end of the reporting period Level 3 fair value measurement The table below sets out information about significant unobservable value inputs used at year end in measuring financial instruments categorised as Level 3 in the fair value hierarchy. Type of financial instrument Fair value as at 30 June 2017 Valuation technique Significant unobservable input Range of estimates for unobservable input Fair value measurement sensitivity to unobservable inputs Airtel Network Limited (Airtel) 60,000 Comparable multiples EV/EBITDA multiple Significant increase in multiple would result in a higher fair value. An increase in multiple by 1 will result in increase in fair value by $28 million. Compagnie Aerienne ASKY S.A 165 Discounted cash flow Weighted average cost of capital 11.5% % Significant increase in WACC rate would result in a lower fair value. An increase in multiple by 1 will result in increase in fair value by $0.1 million.

171 Financial Statements Fair value of financial assets and liabilities (continued) (c) Financial instrument classification At 31 December 2017 Assets at fair value through profit or loss Loans and receivables Available-forsale financial assets Liabilities at fair value through profit or loss Liabilities at amortized cost Total Assets Cash and balances with central banks 2,661,745 2,661,745 Financial assets held for trading 36,557 36,557 Derivative financial instruments 39,267 39,267 Loans and advances to banks 1,685,806 1,685,806 Loans and advances to customers 9,357,864 9,357,864 Treasury bills and other eligible bills 1,718,977 1,718,977 Investment securities: available-for-sale 4,405,240 4,405,240 Pledged assets 298, ,561 Other assets, excluding prepayments 479, ,868 Total 75,824 14,185,283 6,422,778 20,683,885 Liabilities Deposits from banks 1,772,414 1,772,414 Deposit from customers 15,203,271 15,203,271 Derivative financial instruments 32,497 32,497 Borrowed funds 1,728,756 1,728,756 Other liabilities, excluding non-financial liabilities 1,210,908 1,210,908 Total 32,497 19,915,349 19,947,846 At 31 December 2016 Assets at fair value through profit or loss Loans and receivables Available-forsale financial assets Liabilities at fair value through profit or loss Liabilities at amortized cost Total Assets Cash and balances with central banks 2,462,302 2,462,302 Financial assets held for trading 77,408 77,408 Derivative financial instruments 68,204 68,204 Loans and advances to banks 1,413,699 1,413,699 Loans and advances to customers 9,259,374 9,259,374 Treasury bills and other eligible bills 1,228,492 1,228,492 Investment securities: available-for-sale 3,272,824 3,272,824 Pledged assets 518, ,205 Other assets, excluding prepayments 850, ,821 Total 145,612 13,986,196 5,019,521 19,151,329 Liabilities Deposits from banks 2,022,352 2,022,352 Deposit from customers 13,496,720 13,496,720 Derivative financial instruments 23,102 23,102 Borrowed funds 1,608,564 1,608,564 Other liabilities, excluding non-financial liabilities 1,342,635 1,342,635 Total 23,102 18,470,271 18,493,373

172 2017 Annual Report 170 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) 3.6 Capital Management The Group s objectives when managing capital, which is a broader concept than the equity on the face of statement of financial positions, are: To comply with the capital requirements set by the banking regulators in the markets where the entities within the Group operate; To safeguard the Group s ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders; and To maintain a strong capital base to support the development of its business. Capital adequacy and the use of regulatory capital by the subsidiaries are monitored daily by the Group s Risk Management, employing techniques based on the guidelines developed by the Basel Committee as implemented by the respective central banks. Monthly reports are submitted to the central banks in the various jurisdictions by the individual subsidiaries. The central banks in the various jurisdictions require each bank to: (a) hold the minimum level of the regulatory capital determined by the banking regulations of the respective country, and (b) maintain a ratio of total regulatory capital to the risk-weighted asset (the Basel ratio ) at or above the internationally agreed minimum of 8%. The Group s capital is divided into two tiers: Tier 1 capital: share capital (net of any book values of the treasury shares), non-controlling interests arising on consolidation from interests in permanent shareholders equity, retained earnings and reserves created by appropriations of retained earnings. The book value of goodwill is deducted in arriving at Tier 1 capital; and Tier 2 capital: subordinated loan capital, unrealised gains arsing on the fair valuation of equity instruments held as available for sale. The risk-weighted assets are measured by means of a hierarchy of risk weights classified according to the nature of the risks associated with each asset class. A similar treatment is adopted for off-statement exposure, with some adjustments to reflect the more contingent nature of the potential losses. The Group s consolidated capital adequacy ratios will be calculated according to UEMOA Basel 2/3 regulations from January The new regulations will result in substantially lower reported ratios for the Group primarily due to the following changes in the calculation methodology: The foreign currency translation reserve which arises on consolidation will become an adjustment to Tier 1 capital; The regulator plans to apply higher risk weightings to the sovereign and central bank exposures of affiliates outside UEMOA; and Operational risk weighted assets and market risk weighted assets will be added. The table below summarises the composition of regulatory capital and the ratios of the Group for the year ended 31 December 2017 and 31 December As at those two reporting dates, the individual entities within the Group complied with all of the externally imposed capital adequacy requirements to which they are subject.

173 Financial Statements December December 2016 Tier 1 capital Share capital 2,113,957 2,114,332 General bank reserves 357, ,295 Statutory reserve 432, ,406 Retained earnings 216, ,847 Non-controlling interests 291, ,154 Less: goodwill (232,682) (232,887) Total qualifying Tier 1 capital 3,178,957 3,026,147 Tier 2 capital Redeemable preference shares 16,531 Convertible loans (including liability and equity portions) 350,784 54,053 Eurobond and Subordinated Term Facility in Nigeria 164, ,114 Revaluation reserve available-for-sale investments 5,513 (36,652) Total qualifying Tier 2 capital 520, ,046 Less investments in associates 9,964 10,135 Total regulatory capital 3,689,431 3,270,058 Risk-weighted assets: On-statement of financial position 12,014,604 12,074,685 Off-statement of financial position 784, ,090 Total risk-weighted assets 12,798,787 12,940,775 Basel I Capital Adequacy Ratio 28.8% 25.3% Tier I Ratio 24.8% 23.4% 4 Critical accounting estimates, and judgements in applying accounting policies The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. a) Impairment losses on loans and advances The Group reviews its loan portfolios to assess impairment at least on a monthly basis. In determining whether an impairment loss should be recorded in the income statement, the Group makes judgements as to whether there is any observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of loans before the decrease can be identified with an individual loan in that porfolio. This evidence may include observable data indicating that there has been an adverse change in the payment status of borrowers in a group, or national or local economic conditions that correlate with defaults on assets in the group. Management uses estimates based on historical loss experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the portfolio when scheduling its future cash flows. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience. b) Fair value of financial instruments The fair value of financial instruments that are not quoted in active markets are determined by using valuation techniques. Where valuation techniques (for example, models) are used to determine fair values, they are validated and periodically reviewed by qualified personnel independent of the area that created them. To the extent practical, models use only observable data; however, areas such as credit risk (both own and counterparty), volatilities and correlations require management to make estimates. Changes in assumptions about these factors could affect reported fair value of financial instruments. Fair value is determined using valuation techniques. In these techniques, fair values are estimated from observable data in respect of similar financial instruments, using models to estimate the present value of expected future cash flows or other valuation techniques, using inputs existing at the dates of the consolidated statement of financial position. c) Impairment of available for-sale equity investments The Group determines that available-for-sale equity investments are impaired when there has been a significant or prolonged decline in the fair value below its cost. This determination of what is significant or prolonged requires judgement. In making this judgement, the Group evaluates among other factors, the normal volatility in share price. In addition, impairment may be appropriate when there is evidence of a deterioration in the financial health of the investee, industry and sector performance, changes in technology, and operational and financing cash flows. d) Goodwill impairment The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2.6. These calculations require the use of estimates. The recoverable amount of all CGUs has been determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a three-year period. Cash flows beyond the three-year period are extrapolated using the estimated growth rates. By adjusting the three main estimates (cashflows, growth rate and discount rates) by 10%, no impairment charge on goodwill will arise.

174 2017 Annual Report 172 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) 4 Critical accounting estimates, and judgements in applying accounting policies (continued) e) Retirement benefits The present value of the pension obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for pensions include the discount rate. Any changes in these assumptions will impact the carrying amount of pension obligations. The Group determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the pension obligations. In determining the appropriate discount rate, the group considers the interest rates of high-quality bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related pension obligation. The Group is of the opinion that there is no deep market in Corporate Bonds in Nigeria and as such assumptions underlying the determination of discount rate are referenced to the yield on Nigerian Government bonds of medium duration, as compiled by the Debt Management Organisation. Other key assumptions for pension obligations are based in part on current market conditions. f) Revaluation of property, plant and equipment Fair value is derived by applying internationally acceptable and appropriately benchmarked valuation techniques such as depreciated replacement cost or market value approach. The depreciated replacement cost approach involves estimating the value of the property in its existing use and the gross replacement cost. For this appropriate deductions are made to allow for age, condition and economic or functional obsolescence, environmental and other factors that might result in the existing property being worth less than a new replacement. The market value approach involves comparing the properties with identical or similar properties, for which evidence of recent transaction is available or alternatively identical or similar properties that are available in the market for sale making adequate adjustments on price information to reflect any differences in terms of actual time of the transaction, including legal, physical and economic characteristics of the properties. Level 2 fair values of land and building have been derived using the sales comparison approach. Sales prices of comparable land and buildings in close proximity are adjusted for differences in key attributes such as property size. The most significant input into this valuation approach is price per square foot. 5 Segment Analysis Following the management approach of IFRS 8, operating segments are reported in accordance with the internal reporting provided to the Group Executive Committee (the chief operating decision-maker), which is responsible for allocating resources to the reportable segments and assesses its performance. All operating segments used by the group meet the definition of a reportable segment under IFRS 8. The group operating segments are described below: a) Corporate & Investment Bank: Focuses on providing one-stop banking services to multinationals, regional companies, government and government agencies, financial institutions and international organizations across the network. This unit provides also Treasury activities. b) Commercial banking: Focuses on serving local corporates, small and medium corporates,smes, Schools, Churches and local NGOs and Public Sector. c) Consumer: Focuses on serving personal banking customers.

175 Financial Statements Segment Analysis (continued) All revenues are external revenues. Attributing revenue to geographical areas is based on affiliate geaographical position and activities. The reconciling items are intercompany adjustments : mainly elimination of intra group dividend income and other intercompany assets and liabilities. Segment assets and liabilities comprise operating assets and liabilities, being the majority of the statement of financial position, but exclude items such as taxation and borrowings. The following table shows the Group s performance by business segments. At 31 December 2017 CIB Commercial Consumer Others Total business segment Consolidation adjustments Ecobank Group Net interest income 511, , ,599 28, , ,319 Net fees and commission income 165,264 86, ,068 14, ,417 (31,037) 400,380 Other income 293,590 85,069 32, , ,423 (182,920) 453,503 Operating income 970, , , ,568 2,045,159 (213,957) 1,831,202 Impairment losses (230,442) (125,293) (29,547) (43,270) (428,552) 17,498 (411,054) Operating expenses (471,528) (267,561) (371,260) (127,211) (1,237,559) 106,008 (1,131,551) Operating profit 268,119 (31,866) 45,707 97, ,048 (90,451) 288,597 Share of profit of associates 147 (404) (257) (257) Profit before tax from continuing operations 268,266 (31,866) 45,707 96, ,791 (90,451) 288,340 Total assets 14,863,433 1,521, ,747 10,325,345 27,664,214 (5,232,610) 22,431,604 Total liabilities 11,548,925 3,066,252 5,145,046 2,881,070 22,641,293 (2,381,772) 20,259,521 At 31 December 2016 Net interest income 592, , ,585 62,910 1,151,496 (45,050) 1,106,446 Net fees and commission income 198,755 85, ,478 37, ,777 (48,147) 433,629 Other income 282,441 62,503 54, , ,149 (128,962) 432,188 Operating income 1,073, , , ,022 2,194,422 (222,159) 1,972,263 Impairment losses (607,804) (126,028) (50,645) (110,494) (894,971) 31,120 (863,851) Operating expenses (506,081) (283,942) (403,810) (66,013) (1,259,846) 22,634 (1,237,211) Operating profit (39,909) (35,914) 29,913 85,515 39,605 (168,404) (128,799) Share of profit of associates 389 (2,249) (1,860) (682) (2,542) Profit before tax from continuing operations (39,520) (35,914) 29,913 83,266 37,745 (169,087) (131,341) Total assets 11,097,535 1,546, ,893 3,645,271 17,188,117 3,322,857 20,510,974 Total liabilities 10,688,728 2,834,757 4,568,363 1,285,890 19,377,738 (630,842) 18,746,896 The reconciling items are intercompany adjustments mainly elimination of intra group dividend income, intercompany assets and liabilities and other adjustments for consolidation.

176 2017 Annual Report 174 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) 5.1 Entity-wide disclosures The group is also further organised under the following geographical clusters: i) Union Economique et Monétaire Ouest Africaine (UEMOA) region comprises all subsidiaries within the UEMOA monetary zone. Countries in this zone share a common currency except Cape Verde. This region currently includes subsidiaries in Benin, Burkina Faso, Cape Verde, Côte d Ivoire, Mali, Niger, Senegal, Togo and Guinea Bissau. ii) Nigeria region is made up of Ecobank Nigeria. iii) Anglophone West Africa (AWA) region comprises all subsidiaries in West African countries not included in the common monetary zone described as UEMOA. This region currently includes subsidiaries in Ghana, Guinea, Liberia, Sierra Leone and Gambia. iv) CESA Central, Eastern and Southern region comprises all subsidiaries within the CEMAC, EAC and SADC with different monetary zone. These countries are : Cameroon, Chad, Central Africa, Congo Brazaville, Gabon, Sao Tome and Equatorial Guinea, Burundi, Kenya, Rwanda, Tanzania, Uganda, South Sudan, Democratic Republic of Congo, Malawi, Zambia, Zimbabwe and Mozambique. Transactions between the business segments are carried out at arm s length. The revenue from external parties reported to the Group Executive Committee is measured in a manner consistent with that in the consolidated income statement. Funds are ordinarily allocated between segments, resulting in funding cost transfers disclosed in inter-segment net interest income. Interest charged for these funds is based on the Group s cost of capital. There are no other material items of income or expense between the business segments. Internal charges and transfer pricing adjustments have been reflected in the performance of each business. Revenue-sharing agreements are used to allocate external customer revenues to a business segment on a reasonable basis. The Group s management reporting is based on a measure of operating profit comprising net interest income, loan impairment charges, net fee and commission income, other income and non-interest expenses. This measurement basis excludes the effects of non-recurring expenditure from the operating segments such as restructuring costs, legal expenses and goodwill impairments when the impairment is the result of an isolated, non-recurring event. As the Group Executive Management Committee reviews operating profit, the results of discontinued operations are not included in the measure of operating profit. The information provided about each segment is based on the internal reports about segment profit or loss, assets and other information, which are regularly reviewed by the Group Executive Management Committee. Segment assets and liabilities comprise operating assets and liabilities, being the majority of the consolidated statement of financial position, but exclude items such as taxation.

177 Financial Statements Entity-wide disclosures (continued) Segment results of operations The segment information provided to the Group Executive Board for the reportable segments for the period ended 31 December 2017 is as follows: UEMOA Nigeria AWA CESA Others and conso adjustment Subtotal entities Non Core Ecobank Group At 31 December 2017 Net interest income 259, , , ,060 (26,960) 977, ,319 Net fees and commission income 126,469 47,033 79, ,365 30, , ,380 Other income 91, ,919 55,861 82,619 46, , ,503 Operating income 477, , , ,044 49,143 1,831,202 1,831,202 Impairment charges (81,055) (205,453) (57,701) (56,308) (31,100) (431,617) 20,563 (411,054) Operating expenses (284,720) (285,182) (191,901) (287,509) (82,536) (1,131,848) 297 (1,131,551) Operating profit 111,472 66, ,772 49,227 (64,493) 267,737 20, ,597 Share of profit of associates (404) (257) (257) Profit before tax 111,472 66, ,882 49,264 (64,897) 267,480 20, ,340 Taxation 2,715 (677) (34,014) (21,086) (7,695) (60,757) (60,757) Profit after tax 114,187 66,082 70,868 28,178 (72,592) 206,723 20, ,583 Total assets 9,222,369 6,056,253 2,950,696 4,656,926 (461,243) 22,425,001 6,603 22,431,604 Total liabilities 8,612,783 5,129,338 2,632,760 4,156,111 (552,218) 19,978, ,747 20,259,521 At 31 December 2016 Net interest income 241, , , ,692 (60,250) 1,108,217 (1,771) 1,106,446 Net fees and commission income 119,777 72,775 73, ,032 44, , ,629 Other income 82, ,099 56,186 44,926 76, ,144 (19,956) 432,188 Operating income 443, , , ,650 60,913 1,993,990 (21,726) 1,972,263 Loan impairment charges (76,654) (322,973) (57,867) (53,640) (19,142) (530,276) (333,575) (863,851) Operating expenses (263,438) (380,510) (208,793) (278,940) (105,238) (1,236,919) (292) (1,237,211) Operating profit 103,340 22, ,089 24,070 (63,467) 226,795 (355,594) (128,799) Share of profit of associates (2,931) (2,542) (2,542) Profit before tax 103,340 22, ,263 24,142 (66,398) 224,253 (355,594) (131,341) Taxation (6,974) 115 (42,676) (14,236) (7,153) (70,924) (70,924) Profit after tax 96,366 23,021 97,587 9,906 (73,551) 153,329 (355,594) (202,265) Total assets 7,891,178 6,183,370 2,750,869 4,059,270 (486,954) 20,397, ,241 20,510,974 Total liabilities 7,495,169 5,405,436 2,448,293 3,621,975 (719,605) 18,251, ,628 18,746,896

178 2017 Annual Report 176 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) 6 Net interest income Year ended 31 December Interest income Loans and advances to banks 51,358 9,359 Loans and advances to customers: Corporate 731, ,764 Commercial 174, ,711 Consumer 101, ,579 Treasury bills and other eligible bills 195, ,049 Investment securities available for sale 211, ,194 Financial assets held for trading 101,235 50,082 Others 4,105 3,114 1,570,320 1,672,852 Interest expense Deposits from banks 103,191 64,805 Due to customers: Corporate 153, ,758 Commercial 48,200 46,430 Consumer 126, ,219 Borrowed funds 151, ,131 Others 10,106 12,063 7 Net fee and commission income 593, ,406 Year ended 31 December Fee and commission income Credit related fees and commissions 141, ,287 Corporate finance fees 10,299 23,768 Portfolio and other management fees 16,935 11,044 Brokerage fees and commissions 3,364 3,223 Cash management and related fees 203, ,582 Card management fees 79,901 70,529 Other fees 13,610 17, , ,121 Fee and commission expense Brokerage fees paid 1,317 1,145 Other fees paid 67,823 51,347 69,140 52,492 The Group provides custody, trustee, investment management and advisory services to third parties, which involve the Group making allocation and purchase and sale decisions in relation to a wide range of financial instruments. Those assets that are held in a fiduciary capacity are not included in these financial statements.

179 Financial Statements Net trading income Year ended 31 December Foreign exchange 360, ,017 Trading income on securities 55,600 42,538 9 Net loss from investment securities 415, ,555 Year ended 31 December Derecognition of available for sale financial assets 45,041 Impairment of available-for-sale equity securities (5) (18,660) 10 Other operating income (5) 26,381 Year ended 31 December i) Lease income Equipment 2,477 1,672 Motor vehicles Other leased assets 31 2,603 1,753 ii) Dividend income Trading securities 1, Available-for-sale securities 4,585 4,667 5,594 5,610 iii) Others Fair value loss on investment properties (828) -29,672 Loss on sale of property and equipment 3, Others 27,161 23,623 29,586 (5,111) Total other operating income 37,783 2,252

180 2017 Annual Report 178 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) 11 Operating expenses Year ended 31 December a) Staff expenses Salaries, allowances and other compensation 455, ,468 Social security costs 39,889 31,852 Pension costs: defined contribution plans 15,110 11,092 Other post retirement benefits 4,226 2, , ,061 b) Depreciation and amortisation Depreciation of property and equipment (Note 27) 80,557 85,113 Amortisation of software and other intangibles (Note 26) 15,263 14,084 95,820 99,197 c) Other operating expenses Directors emoluments 1,498 1,481 Restructuring costs 10, Social responsibility 2,040 2,792 Rent and utilities 66,668 70,155 Insurance 33,261 34,204 Advertising and promotion 22,878 25,775 Professional and legal costs 51,028 74,780 Operational losses and fines 12,551 16,554 Communications and technology 130, ,755 Business travels 18,637 20,436 AGM and board activities 2,636 3,962 Training 11,377 12,773 Employee activities 16,788 30,549 Repairs and maintenance 34,354 37,133 Supplies and services 12,512 14,806 Allocated cost 6,237 5,732 Cash transportation 18,448 19,241 Fuel 13,764 16,313 Other taxes 11,021 21,051 Non capitalised items 733 1,143 Pre-opening expenses Listing fees 2,444 4,303 Banking resolution sinking fund cost (AMCON) 15,141 30,917 Other administrative expenses 25,488 28,418 Total 520, ,953 Total operating expenses 1,131,551 1,237,211

181 Financial Statements Impairment losses on loans and advances Year ended 31 December Loans and advances to customers (Note 20) 441,733 1,124,895 Specific allowance 385,697 1,012,823 Collective allowance 56, ,072 Provisons no longer required (Note 20) (115,485) (354,627) Specific allowance (73,202) (284,607) Collective allowance (42,283) (70,020) 13 Impairment losses on other financial assets 326, ,268 Year ended 31 December Impairment charge on other financial assets (Note 24) 84,806 93,583 The impaired charge on Other financial assets for the year is mainly as a result of $41.4 million, related to a claw back from AMCON linked to loans previously sold by Ecobank Nigeria limited. 14 Taxation Year ended 31 December Current income tax 81,176 84,518 Deferred income tax (Note 35) (20,419) (13,594) The income tax rate applicable to the majority of income of the subsidiaries ranged from 25% to 45% 60,757 70,924 Further information about deferred income tax is presented in Note 35. The tax on the Group s profit before tax differs from the theoretical amount that would arise using the basic tax rate of the parent as follows: Profit before tax 288,340 (131,435) Tax calculated at local tax rates applicable to profits in the respective countries 70,900 95,244 Tax impact on income not subject to tax (2,409) (22,666) Tax impact on expenses not deductible for tax purposes: (3,617) 6,116 Utilisation of previously unrecognised tax losses (4,117) (7,770) Income tax expense 60,757 70,924 Under the Headquarters Agreement between Ecobank Transnational Incorporated (ETI) and the Republic of Togo signed in October 1985, ETI is exempt from tax on all its income arising from operations in Togo.

182 2017 Annual Report 180 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) 15 Earnings per share Basic Basic earnings per share is calculated by dividing the net profit attributable to equity holders of the company by the weighted average number of ordinary shares in issue outstanding during the period. Year ended 31 December Profit attributable to equity holders of the Company from continuing operations 178,071 (248,444) Profit/(loss) attributable to equity holders of the Company from discontinued operations 514 (1,454) Weighted average number of ordinary shares in issue (in thousands) 24,607,640 24,607,640 Basic earnings per share (expressed in US cents per share) from continuing operations 0.72 (1.01) Basic earnings per share (expressed in US cents per share) from discontinued operations 0.00 (0.01) Diluted Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The company has two categories of dilutive potential ordinary shares: convertible debts and share options granted to employees. The convertible debt is assumed to have been converted into ordinary shares, and the net profit is adjusted to eliminate the interest expense less the tax effect. For the share options, a calculation is made to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company s shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options. Profit/(loss) attributable to equity holders of the company from continuing operations 178,071 (248,444) Interest expense on dilutive convertible loans 3,590 Adjusted profit 181,661 (248,444) Profit/(loss) attributable to equity holders of the company from discontinued operations 514 (1,454) Interest expense on dilutive convertible loans Adjusted profit 514 (1,454) Weighted average number of ordinary shares in issue (in thousands) 24,607,640 24,607,640 Adjustment for dilutive convertible loans 706,536 Weighted average number of ordinary shares for diluted earnings per share (in thousands) 25,314,176 24,607,640 Dilutive earnings per share (expressed in US cents per share) from continuing operations 0.72 (1.01) Dilutive earnings per share (expressed in US cents per share) from discontinued operations 0.00 (0.01) 16 Cash and balances with central banks Year ended 31 December Cash in hand 576, ,906 Balances with central banks other than mandatory reserve deposits 895, ,987 Included in cash and cash equivalents (Note 40) 1,472,178 1,435,893 Mandatory reserve deposits with central banks 1,189,567 1,026,409 Mandatory reserve deposits are not available for use in the group s day-to-day operations. All balances are current. 2,661,745 2,462,302

183 Financial Statements Financial assets held for trading Year ended 31 December Debt securities: Government bonds 36,064 77,018 36,064 77,018 Equity securities Listed Unlisted Total financial assets held for trading 36,557 77,408 Current 36,557 77,408 Non current 18 Derivative financial instruments and trading liabilities The Group uses the following derivative instruments for non-hedging purposes. 36,557 77,408 Currency forwards represents commitments to purchase foreign and domestic currency, including undelivered spot transactions. Foreign currency and interest rate futures are contractual obligations to receive or pay a net amount based on changes in currency rates or interest rates or buy or sell foreign currency or financial institution 189,886 on a future date at a specified price. The credit risk is negligible, as futures contracts are collateralised by cash or marketable securities, and changes in the futures contract value are settled daily with the exchange. Currency and interest rate swaps are commitments to exchange one set of cash flows for another. Swaps result in an economic exchange of currencies or interest rate (for example, fixed rate for floating rate). No exchange of principal takes place, except for certain currency swaps. The Group s credit risk represents the potential cost to replace the swap contracts if counterparties fail to perform their obligation. This risk is monitored on an ongoing basis with reference to the current fair value and the liquidity of the market. At 31 December 2017 At 31 December 2016 Assets Assets Derivatives Notional Amount Assets Liabilities Notional Amount Assets Liabilities Currency forwards 75,937 29,267 22,274 67,590 10,162 Currency swaps 113,949 10,000 10, , ,940 Options Total 189,886 39,267 32, ,925 68,204 23,102 The Group has not designated at initial recognition any financial liability as at fair value through profit or loss. All derivative financial instruments, other than the options, are current. 19 Loans and advances to banks Year ended 31 December Items in course of collection from other banks 65,771 49,846 Deposits with other banks (Note 40) 1,036, ,998 Placements with other banks 583, ,855 All loans and advances to banks are current. 1,685,806 1,413,699

184 2017 Annual Report 182 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) 20 Loans and advances to customers 31 December CIB Commercial Consumer Total a) Analysis by type: Overdrafts 1,994,010 1,614, , , , ,886 2,616,054 2,210,699 Credit cards 5 5 3,795 3,015 3,800 3,020 Term loans 5,158,304 5,550,185 1,209,971 1,240, , ,969 7,167,729 7,559,439 Mortgage loans 101,400 95, ,400 95,470 Others 23, , Gross loans and advances 7,176,109 7,165,191 1,703,984 1,733,341 1,032, ,340 9,912,778 9,868,872 Less: allowance for impairment (293,681) (339,416) (182,295) (196,052) (78,938) (74,030) (554,914) (609,498) 6,882,428 6,825,775 1,521,689 1,537, , ,310 9,357,864 9,259,374 b) Analysis by security: Secured against real estate 1,372,527 1,192, , , , ,805 2,221,073 2,044,227 Otherwise secured 5,654,065 3,934, , , , ,963 6,625,692 4,881,858 Unsecured 149,517 2,037, , , , ,572 1,066,013 2,942,787 7,176,109 7,165,191 1,703,984 1,733,341 1,032, ,340 9,912,778 9,868,872 Current 5,735,873 5,223,989 Non current 4,176,905 4,644,883 9,912,778 9,868,872 c) Analysis by performance Non-impaired 6,612,199 6,655,532 1,289,712 1,360, , ,829 8,852,942 8,920,687 Impaired 563, , , ,015 81,654 65,511 1,059, ,185 7,176,109 7,165,191 1,703,984 1,733,341 1,032, ,340 9,912,778 9,868,872

185 Financial Statements Loans and advances to customers (continued) c) Movements in loans and advances Reconciliation of loans and advances by class is as follows: At 31 December 2017 CIB Commercial Consumer Total Overdrafts Term loans Others Overdrafts Credit cards Term loans Others Overdrafts Credit cards Term loans Mortgage At 1 January 1,614,810 5,550, , ,240, ,886 3, ,969 95,470 9,868,872 Disbursed during the period 1,286,710 2,130,793 24, , , ,214 1, ,761 53,281 4,844,819 Paid off during the period (986,582) (2,520,814) (1,073) (252,518) (772,267) (236) (64,121) (1,101) (221,206) (103,309) (4,923,227) Amounts written off as uncollectibles (434) (150,272) (24,086) (68,825) (4,116) (4,458) (798) (252,989) Reclassification 6,971 (1,941) 334 (4,806) (29,582) (94) (542) (1,869) (31,528) Exchange difference 72, , (14,835) 6, ,267 (67) 92,930 58, ,831 At 31 December ,994,010 5,158,304 23, , ,209, ,036 3, , ,400 9,912,778 At 31 December 2016 CIB Commercial Consumer Total Overdrafts Term loans Others Overdrafts Credit cards Term loans Others Overdrafts Credit cards Term loans Mortgage At 1 January 2,155,814 6,057,131 21, ,149 1,661, ,899 6,600 1,030, ,625 11,857,441 Disbursed during the period 1,182,407 2,287, , , , ,097 65,446 4,900,731 Paid off during the period (1,020,824) (1,971,572) (16,870) (329,618) (306,483) (115,406) (2,280) (468,785) (73,827) (4,305,664) Amounts written off as uncollectibles (217,695) (327,396) (5,159) (30) (208) (957) (551,445) Reclassification (149) (219,672) (651) (25,101) 8,517 (861) (32,066) 3,339 4,113 (262,531) Exchange difference (484,743) (275,431) (4,333) (217,307) (727,340) ,242 (1,930) (63,792) (8,887) (1,769,660) At 31 December ,614,810 5,550, , ,240, ,886 3, ,969 95,470 9,868,872

186 2017 Annual Report 184 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) 20 Loans and advances to customers (continued) d) Allowance for impairment Reconciliation of allowance account for losses on loans and advances by class is as follows: At 31 December 2017 CIB Commercial Consumer Total Overdrafts Term loans Others Overdrafts Credit cards Term loans Others Overdrafts Credit cards Term loans Mortgage Specific allowance for impairment At 1 January 11, ,519 41, ,220 12,979 39, ,418 Provision for loan impairment 9, , ,267 48, ,602 14, ,697 Provisons no longer required 3,776 (44,351) (102) (4,882) (16,543) (2) (6,643) (3,656) (798) (73,202) Loans written off during the year (655) (341,173) (8,500) (48,540) (2) (22,116) (1,611) (798) (423,394) Reclassification (1,982) (5,222) (6,783) 8,791 5,196 Exchange difference 162 (19,730) (1,029) 12, (4,473) 761 (11,296) At 31 December , , , ,974 2,207 50, ,223 At 31 December 2017 CIB Commercial Consumer Total Overdrafts Term loans Others Overdrafts Credit cards Term loans Others Overdrafts Credit cards Term loans Mortgage Collective allowance for impairment At 1 January 5,946 39,751 2,964 32,169 1,223 19,005 1, ,080 Provision for loan impairment 4,503 33, , ,245 1,398 56,036 Provisions no longer required (3,998) (22,132) (3,074) (7,470) (1,002) (3,242) (1,365) (42,283) Reclassification ,987 (7,042) (6) 133 Exchange difference 15,368 38,264 11,479 (16,805) 44,128 (38,576) 53,858 At 31 December ,556 89, ,108 12,880 44,947 (19,435) 1, ,691 Total allowance for impairment 45, , , ,854 47,154 30,638 1, ,914

187 Financial Statements 185 d) Allowance for impairment (continued) At 31 December 2016 CIB Commercial Consumer Total Overdrafts Term loans Others Overdrafts Credit cards Term loans Others Overdrafts Credit cards Term loans Mortgage Specific allowance for impairment At 1 January 7, ,861 34, ,843 10, , ,164 Provision for loan impairment 12, , , ,465 9,431 52, ,012,823 Provisons no longer required (2,015) (138,493) (43,819) (75,700) (4,719) (224) (19,381) (257) (284,606) Loans written off during the year (1,568) (422,885) (2,307) (100,676) (3,713) (20,039) (257) (551,445) Reclassification (927) (227,000) 2,082 (1,139) (15) (227,000) Exchange difference (3,760) 95,203 (3) (5,625) (62,794) 2,302 (65) (36,968) 193 (11,518) At 31 December , ,519 41, ,220 12,978 39, ,418 At 31 December 2016 CIB Commercial Consumer Total Overdrafts Term loans Others Overdrafts Credit cards Term loans Others Overdrafts Credit cards Term loans Mortgage Collective allowance for impairment At 1 January 4,458 36, , , ,928 Provision for loan impairment 2,191 79,514 (95) 1,238 20, , ,072 Provisions no longer required (69,038) (473) (254) (100) (155) (70,020) Reclassification (367) 3, (1,888) 75 (1,862) 146 Exchange difference (335) (10,372) (11,273) (51) (6,448) (28) (27,900) At 31 December ,946 39,751 2,964 32,169 1,223 19,005 1, ,080 Total allowance for impairment 17, ,270 44, ,389 14,202 58,796 1, ,498

188 2017 Annual Report 186 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) 20 Loans and advances to customers (continued) At 31 December Loans and advances to customers include finance lease receivables analysed below. Gross investment in finance leases, receivable No later than 1 year Later than 1 year and no later than 5 years 26,255 4,619 26,751 5,034 Unearned future finance income on finance leases - (14) Net investment in finance leases 26,751 5,020 The net investment in finance lease may be analysed as follows: No later than 1 year Later than 1 year and no later than 5 years 26,131 4,300 26,751 5,020

189 Financial Statements Treasury bills and other eligible bills At 31 December Maturing within three months (Note 40) 338, ,294 Maturing after three months 1,380, ,198 1,718,977 1,228,492 Current 338, ,294 Non current 1,380, ,198 1,718,977 1,228,492 Treasury bills and other eligible bills are debt securities issued by the government of various countries in which the Group operates. 22 Investment securities At 31 December Securities available-for-sale Debt securities at fair value: listed 1,774,141 1,280,495 unlisted 2,461,171 1,768,240 Total 4,235,312 3,048,735 Equity securities at fair value: listed 12,689 16,330 unlisted 158, ,525 Total 171, ,855 Total securities available-for-sale before impairment 4,406,774 3,274,590 Allowance for impairment (1,534) (1,766) Total securities available-for-sale 4,405,240 3,272,824 Current 599, ,214 Non current 3,806,090 2,795,610 The Group has not reclassified any financial asset measured at amortised cost to fair value during the period. (2016: nil) 4,405,240 3,272,824

190 2017 Annual Report 188 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) 22 Investment securities (continued) The movement in securities available-for-sale may be summarised as follows: At 1 January 3,272,824 2,669,692 Additions 1,631,773 1,513,241 Disposals (sale and redemption) (809,340) (387,046) Losses from impairment of available-for-sale equity securities Gains/(loss) from changes in fair value 43,970 (54,135) Exchange differences 265,783 (469,004) At 31 December 4,405,240 3,272, Pledged assets At 31 December Treasury bills 74, ,477 Government bonds 224, ,395 Cash Pledged 192,333 Pledged assets have been stated at fair values 298, ,205 Current 97, ,515 Non-current 201, , , ,205

191 Financial Statements Other assets At 31 December Fees receivable 12,867 8,784 Accounts receivable 416, ,718 Prepayments 280, ,462 Sundry receivables 162, , , ,451 Impairment charges on receivable balances (111,796) (55,630) 760, ,821 Current 722, ,280 Non-current 38,036 42,541 The movement in impairment allowance on other assets may be summarised as follows: 760, ,821 1 January 55, ,638 Increase in impairment 84,806 93,583 Write-off (28,640) (197,591) At 31 December 111,796 55, Investment in associates At 31 December At 1 January 10,135 15,802 Share of results (257) (2,542) Exchange differences 86 (3,125) At 31 December 9,964 10,135 Investment in associates balances are non-current.

192 2017 Annual Report 190 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) 25 Investment in associates (continued) OLD MUTUAL Life insurance OLD MUTUAL General insurance At 31 December 2017 At 31 December 2016 EB-ACCION Ghana EB-ACCION Cameroon EB-ACCION Nigeria OLD MUTUAL Life insurance OLD MUTUAL General insurance EB-ACCION Ghana EB-ACCION Cameroon EB-ACCION Nigeria Current assets 21,132 21,678 13,919 11,936 27,685 17,305 18,161 12,573 10,021 32,873 Non- current assets 344 3, ,383 1,457 1,229 4, ,311 1,606 Total assets 21,476 25,110 14,727 13,319 29,142 18,534 22,766 13,246 11,332 34,480 Liabilities 8,984 12,338 12,042 11,472 15,874 7,339 10,216 10,697 9,768 19,012 Total Liabilities 8,984 12,338 12,042 11,472 15,874 7,339 10,216 10,697 9,768 19,012 Revenues 3,795 4,810 6,161 3,529 12,670 3,982 5,660 5,817 3,699 16,183 Profit after tax (2,417) (1,208) ,138 (4,808) (2,848) ,177 None of the associates are listed. There were no published price quotations for any associates of the Group. Furthermore, there are no significant restrictions on the ability of associates to transfer funds to the Group in the form of cash dividends or repayment of loans and advances. These associates are strategic to the Group. The ACCION entities are microfinance banks while Old Mutual entities are in life and general insurance businesses. Principal place of business/country of incorporation At 31 December 2017 At 31 December 2016 Net assets of associate Share Holding (Direct and Indirect) Country of incorporation Net assets of associate Share Holding (Direct and Indirect) EB-ACCION Ghana Ghana 2, % Ghana 2, % EB-ACCION Cameroon Cameroon 1, % Cameroon 1, % EB-ACCION Nigeria Nigeria 13, % Nigeria 15, % OLD MUTUAL Life insurance Nigeria 12, % Nigeria 11, % OLD MUTUAL General insurance Nigeria 12, % Nigeria 12, % Reconciliation of summarised financial information to the carrying amount of its interests in associates At 31 December 2017 OLD MUTUAL Life insurance OLD MUTUAL General insurance EB-ACCION Nigeria EB-ACCION Ghana EB-ACCION Cameroon Total Opening net assets 11,194 12,550 18,645 2,549 1,564 43,324 Profit/(loss) for the year (2,417) (1,208) 3, (187) Exchange differences 3,715 1,430 (8,515) (78) 197 (3,251) Closing net assets 12,492 12,772 13,268 2,685 1,847 39,886 Interest in associates 3,623 3,832 2,883 1, ,327 Notional goodwill 547 3,686 (2,838) 1, ,194 Carrying value 4,170 7, ,432 1,356 15,521

193 Financial Statements Investment in associates (continued) At 31 December 2016 OLD MUTUAL Life insurance OLD MUTUAL General insurance EB-ACCION Nigeria EB-ACCION Ghana EB-ACCION Cameroon Total Opening net assets 19,453 22,210 15,468 2,626 1,458 61,214 Profit/(loss) for the year (4,808) (2,848) 3, (4,107) Exchange differences (3,451) (6,812) (301) (41) (13,782) Closing net assets 11,194 12,550 18,645 2,549 1,564 43,324 Interest in associates 3,246 3,765 4,051 1, ,856 Notional goodwill 924 3,753 (4,006) 1, ,665 Carrying value 4,170 7, ,432 1,356 15,521

194 2017 Annual Report 192 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) 26 Intangible assets At 31 December Goodwill At 1 January 232, ,770 Exchange differences (205) (108,882) At 31 December 232, ,888 Goodwill is tested annually for impairment, or more frequently when there are indications that impairment may have occurred. There was no impairment identified in 2017 (2016 : nil). Software costs At 1 January 47,878 40,681 Purchase 26,355 31,321 Amortisation (Note 11) (15,262) (14,084) Exchange differences (7,989) (10,040) At 31 December 50,981 47,878 Total intangible assets 283, ,766 Impairment testing for cash-generating units containing goodwill For the purpose of impairment testing, goodwill acquired through business combinations is allocated to cash-generating units (CGUs). The recoverable amounts of the CGUs have been determined based on the value-in-use calculations; using cash flow projections based on the financial budgets approved by senior management covering a period of three years. The goodwill is arising on acquisitions in the following subsidiaries: At 31 December Ecobank Nigeria (Oceanic Bank) 200, ,655 Ecobank Ghana (The Trust Bank) 9,155 9,666 Ecobank Rwanda 4,493 4,631 Ecobank Zimbabwe 6,550 6,550 SOFIPE 4,693 4,126 Ecobank Chad 2,798 2,459 Ecobank Central Africa 1,722 1,513 Ecobank Burundi 1,062 1,111 Ecobank Sierra Leone (ProCredit) Ecobank Malawi Ecobank Burkina Faso The calculation of value-in-use was based on the following key assumptions: 232, ,887 the cash flows were projected based on the Bank s approved budget. The cash flows were based on past experiences and were adjusted to reflect expected future performances of the company putting into consideration the country s gross domestic product. a terminal growth rate of between 0% and 4.4% was applied in determining the terminal cash flows depending on the country the entity is domiciled. discount rates of averaging 13.74%, representing pre-tax weighted average cost of capital (WACC), was applied in determining the value in use. The growth rate used to extrapolate terminal cash flows for goodwill impairment testing is consistent with long term average growth rate for industry and countries. the Group expects that through this acquisition, it would create synergy that enhances its ability to tap into opportunities in the respective countries where the entities are domiciled; The key assumptions described above may change as economic and market conditions change. The Group estimates that reasonably possible changes in these assumptions would not cause the recoverable amount of either CGU to decline below the carrying amount.

195 Financial Statements Property and equipment Motor Vehicles Land & Buildings Furniture & Equipment Installations Construction in progress Total At 1 January 2016 Cost or Valuation 94, , , , ,415 1,410,660 Accumulated depreciation 69, , ,297 74, ,805 Net book amount 24, , ,220 72, , ,855 Year ended December January 24, , ,220 72, , ,855 Additions 6,556 54,730 44,945 19, , ,390 Revaluation 6,348 (27) (100) 6,221 Disposals cost (8,133) (6,737) (14,760) (7,739) (3,992) (41,361) Disposals accumulated depreciation 8,664 1,677 8,641 1, ,501 Reclassifications cost (916) 1, ,862 Reclassifications accumulated depreciation (815) (1,857) 811 (1,861) Depreciation charge (8,492) (15,443) (46,918) (14,260) (85,113) Exchange rate adjustments (1,918) (116,374) (13,288) (2,899) (25,968) (160,447) Closing net book amount 21, , ,813 69, , ,047 At 31 December 2016/1 January 2017 Cost or Valuation 75, , , , ,585 1,356,059 Accumulated depreciation 54, , ,930 81, ,012 Net book amount 21, , ,813 69, , ,047 Period ended 31 December January 21, , ,813 69, , ,047 Additions 3, ,848 90,668 9,367 43, ,194 Revaluation 6,360 (19) (86) 6,255 Disposals cost (8,138) (52,453) (52,266) (5,185) (70,483) (188,525) Disposals accumulated depreciation 7,327 4,429 20,779 4, ,534 Reclassifications cost (35) 8,889 2,143 (9,023) (240) 1,734 Reclassifications accumulated depreciation (1,921) (121) 3 (1,729) Depreciation charge (8,282) (14,205) (42,739) (15,331) (80,557) Exchange rate adjustments 2,757 22,979 4,679 6,570 (4,775) 32,210 Closing net book amount 18, , ,137 61, , ,163 At 31 December 2017 Cost 72, , , , ,841 1,489,842 Accumulated depreciation 54, , ,210 99, ,679 Net book amount 18, , ,137 61, , ,163

196 2017 Annual Report 194 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) 27 Property and equipment (continued) An independent valuation of the group s land and buildings was performed by valuers to determine the fair value of the land and buildings as at 31 December The revaluation surplus net of applicable deferred income taxes was credited to other comprehensive income and is shown in revaluation reserve property and equipment in shareholders equity (note 39). Fair value is derived by applying internationally acceptable and appropriately benchmarked valuation techniques such as depreciated replacement cost or market value approach. The depreciated replacement cost approach involves estimating the value of the property in its existing use and the gross replacement cost. For this appropriate deductions are made to allow for age, condition and economic or functional obsolescence, environmental and other factors that might result in the existing property being worth less than a new replacement. The market value approach involves comparing the properties with identical or similar properties, for which evidence of recent transaction is available or alternatively identical or similar properties that are available in the market for sale making adequate adjustments on price information to reflect any differences in terms of actual time of the transaction, including legal, physical and economic characteristics of the properties. If land and buildings were stated at historical costs, the amounts would be as follows: At 31 December Cost 688, ,005 Accumulated depreciation 140, ,294 Net book amount 548, , Investment property At 31 December January 35, ,466 Additions 9,854 1,101 Fair value gains (828) (29,672) Disposal (1,324) (69,008) Exchange rate adjustments (7) (3,068) The following amounts have been recognised in the income statement: 43,514 35,819 Rental income 1,219 Direct operating expenses arising from investment properties that generate rental income (502) Fair value gains/(losses) (828) (29,672) (828) (28,955) Investment properties are carried at fair value. The valuation of investment properties has been done using the level 2 technique (inputs other than quoted prices that are observable for the asset or liability). The values have been derived using the sales comparison approach. The fair value of investment property is based on a valuation by an independent valuer who holds a recognised and relevant professional qualification and has recent experience in the location and category of the investment property being valued.

197 Financial Statements Assets Held for sale and discontinued operations The assets and liabilities of Union Bank of Cameroon (UBC) have been classified as held for sale in line with IFRS 5 (Non current assets held for sale and discontinued operations). UBC was acquired as part of the Oceanic transaction in 2011 but was deemed as non-core to ETI s operations. Regulatory approval has been obtained for the sale and it is expected to be completed during UBC is classified under others in the segment reporting. The assets and performance reviewed by the CODM does not include assets held for sale. At 31 December a) Assets held for sale Cash and balances with central banks 10,206 32,037 Treasury bills and other eligible bills 34,421 7,286 Loans and advances to banks Loans and advances to customers 15,302 16,236 Investment securities available for sale 19,264 12,575 Intangible assets Property and equipment 2,890 1,832 Other assets 936 (596) 83,843 69,871 b) Liabilities classified as held for sale Due to customers 98,052 89,955 Other liabilities 13,535 3,358 Retirement benefit obligation Deferred income tax liabilities ,785 94,302 c) Profit from discontinued operations Revenue 6,780 3,536 Costs (5,829) (6,229) Profit/(loss) before tax of discontinued operations 951 (2,693) Profit/(loss) from discontinued operations after tax 951 (2,693) Profit/(loss) from discontinued operations 951 (2,693) Profit attributable to: Owners of the parent 514 (1,454) Non controlling interests 437 (1,239) 951 (2,693) Cash and Flow statement Cash flow used in operating activities (16,425) (5,047) Cashflow from investing activities (5,101) 456 Total cashflows (21,526) (4,591)

198 2017 Annual Report 196 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) 30 Deposits from other banks At 31 December Operating accounts with banks 881, ,705 Other deposits from banks 891,325 1,133,647 All deposits from banks are current and have variable interest rates. 31 Deposit from customers 1,772,414 2,022,352 At 31 December CIB Current accounts 4,970,428 4,174,861 Term deposits 2,021,545 1,898,729 6,991,973 6,073,590 Commercial Current accounts 2,390,924 2,199,666 Term deposits 610, ,265 Savings deposits 65,103 49,826 3,066,252 2,834,757 Consumer Current accounts 1,705,752 1,556,069 Term deposits 854, ,981 Savings deposits 2,585,062 2,350,323 5,145,046 4,588,373 Total 15,203,271 13,496,720 Current 14,140,406 12,596,468 Non current 1,062, ,252 Customer deposits carry variable interest rates. 15,203,271 13,496,720 At 31 December 2017 CIB Commercial Consumer Total Current account Term deposits Current account Term deposits Savings Current account Term deposits At 1 January 4,174,861 1,898,729 2,199, ,265 49,826 1,556, ,981 2,350,323 13,496,720 Additions 4,630, ,965 1,657, ,150 22, , , ,029 8,553,574 Withdrawals (4,243,523) (473,310) (1,589,163) (105,780) (7,404) (859,818) (71,589) (364,235) (7,714,822) Exchange difference 408,633 79, ,725 23, ,925 29, , ,799 At 31 December ,970,428 2,021,545 2,390, ,225 65,103 1,705, ,232 2,585,062 15,203,271 Savings At 31 December 2016 CIB Commercial Consumer Total Current account Term deposits Current account Term deposits Savings Current account Term deposits At 1 January 5,069,201 3,438,117 2,070, ,227 45,169 1,616, ,556 2,524,378 16,427,553 Additions 1,960, ,950 1,026, ,120 32,518 3,005, , ,970 7,704,834 Withdrawals (2,112,572) (953,891) (686,229) (150,599) (18,567) (2,878,223) (503,402) (659,243) -7,962,726 Reclassification (102,058) (2,507) 81,584 2,507 20,474 Exchange difference (640,244) (743,940) (292,538) (162,990) (9,294) (208,120) (217,033) (398,782) -2,672,941 At 31 December ,174,861 1,898,729 2,199, ,265 49,826 1,556, ,981 2,350,323 13,496,720 Savings

199 Financial Statements Borrowed funds At 31 December a Eurobond Nigeria 254, ,499 b Deutsche Bank 248, ,286 c African Development Bank (AfDB) 214, ,889 d TMFG Services UK Limited 149,265 e Qatar National Bank 147,687 f Bank of Industry of Nigeria (BOI) 131, ,401 g PIC (Public Investment Corporation) 88,879 98,869 h A/B Syndicated Subordinated Term Facility 75,341 75,916 i European Investment Bank 54,381 67,995 j Societe de Promotion et Participation pour la Coopération Economique (PROPARCO) 50,418 62,228 k Nigeria Souvereign Investment Authority -- NSIA 50,114 l Opec Fund for International Development (OFID) 17,629 26,341 m International Finance Corporation 71,832 n 4% Convertible preference shares 16,531 o Keystone Bank, Nigeria 25,000 p Central Bank of Nigeria 9,644 10,272 q Caisse Régionale de Refinancement Hypothécaire (CRRH) 9,047 9,098 r Belgium Investment Company for Developing countries (BIO) 6,748 10,106 Government Bonds (Ivory Coast) 9,047 8,442 Other loans 212, ,859 1,728,756 1,608,564 Current 246, ,415 Non current 1,482,190 1,423,149 1,728,756 1,608,564 a) Eurobond issued by Ecobank Nigeria represents Subordinated Tier 2 Note of $250 million Fixed Rate Limited Recourse Participation Notes maturing in The Note has a tenure of 7 years while interest of 8.5% on the notes will be payable semi-annually in arrear in each year commencing 14 August b) Deutsche AG as original lender and facility agent granted a facility of USD 250million to ETI being PIC s convertible bond on September 5, 2017 for a 5 year tenure maturing on September 5, c) The African Development (AfDB) loan to ETI comprised three subordinated loans: AfDB (I) Loan, with an outstanding amount of $71 million. Interest rate is based on a fixed base rate 3.65% plus a spread. The subsidiaries that benefitted from this loan are: Ecobank Burundi, Congo, Ghana, Kenya, Malawi, Tanzania and Zimbabwe. The loan has matured and paid down in November AfDB (II) Loan, with an outstanding amount of $30 million. Interest rate is based on 6 month LIBOR rate plus margin of 3.65%. The subsidiaries that benefitted from this loan are: Ecobank Burundi, Congo, Ghana, Kenya, Malawi, Tanzania and Zimbabwe. The loan has matured and paid down in November AfDB (III) Loan, with an outstanding amount of $208 million, is repayable in full in two (2) equal installments from Interest rate is based on a fixed base rate of 4.5% plus a spread. The subsidiaries that benefitted from this loan are: Ecobank Burundi, Congo, Ghana, Kenya, Malawi, Nigeria, Tanzania, Uganda and Zimbabwe d) TMF Global Services (UK) ltd as facility agent granted a one year syndicated loan of USD 150million to ETI on November 2, 2017 to be repaid on November 2, e) Qatar National Bank as Convertible Bond granted USD million to ETI together with Convertible Bond Investment Company Mauritius participation to the tune of USD 1.11million on October 19, 2017 for a tenure of 5 years thus maturing on October 19, 2022.

200 2017 Annual Report 198 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) 32 Borrowed funds (continued) f) The Bank of Industry (BOI) loan to Ecobank Nigeria represents CBN (Central Bank of Nigeria) intervention funds on-lent to some of the Bank s customers in the manufacturing sector through Bank of industry (BOI). The fund is administered at an all-in interest rate of 7% per annum payable on a quarterly basis. The maximum tenor of the facility is 15 years. g) Public Investment Corporation (PIC) granted to ETI a USD 98,841,206,79 facility for 3 years Term, on December 29, 2016, with a Margin of 4% per annum plus 3 months Libor, annual revolving deposit. 10million pledged out of the Principal. Net amount USD 88,841, as at December h) The US$75million A/B Syndicated Subordinated Term Facility was obtained by Ecobank Nigeria in 2015 from FMO. It is repayable by Eight (8) Quarterly installment payments commencing on April 15, 2020 after a moratorium period of five (5) years with interest rate at LIBOR plus 6.5%. The maturity date is January 15, i) European Investment Bank (II) Loan is a convertible and subordinated loan repayable in ten equal semi-annual instalments which started from The subsidiaries that benefitted from this loan are: Ecobank Burkina, Cote d Ivoire, DR Congo, Ghana, Guinea Bissau, Mali, Rwanda, Chad, Senegal, Togo, Uganda, and Zambia. European Investment Bank (III) granted a third facility to ETI for on-lending to some affiliates. The sum received on July 6, 2015 was USD 40 million out of USD 100 million as per the contract. The applicable rate is 1.57% plus Floating rate plus 6 months LIBOR for a tenure of 7years and 3 years moratorium. The funds received were on-lent to affiliates as per the following list : Nigeria, eprocess, Tanzania, Rwanda & ETI Holding. j) Societe De Promotion et De Participation Pour La Cooperation Economique S.A. (PROPARCO1) is repayable in eleven (11) equal semi annual installments starting from 2014 to Interest is payable semi-annually at either a fixed rate or a floating rate determined at the instance of the lender. (PROPARCO2) During the year 2013, ETI obtained additional US$50 million loan from Proparco. The loan is repayable in 17 installments starting from 2016 to Interest is payable semi-annually at a floating rate LIBOR 6 Month. k) Nigeria Sovereign Investment Authority (NSIA) extended a USD 50million loan to ETI for a tenure of 9 months on September 20, 2017 repayable on June 4, This facility was on lent to Ecobank Nigeria. l) Opec Fund for International Development (OFID) Loan is a convertible and subordinated loan repayable in seven (7) equal semi-annual installments starting from The subsidiaries that benefitted from this loan are: Ecobank Senegal, Cameroon, Kenya and Cote d Ivoire. m) International Finance Corporation (IFC) Loan was a subordinated loan repayable in seven (7) equal semi-annual installments starting from The subsidiaries that benefitted from this loan are: Ecobank Benin, Burkina, Guinea Bissau, Mali, Niger, Senegal, Togo, Gambia, Ghana, Sierra Leone, Cameroun, Central African Republic, Chad, Rwanda, and Nigeria. ETI has paid down the borrowing in November n) In year 2011, ETI issued 1.07 billion units of convertible, redeemable and cumulative preference shares to the shareholders of Oceanic Bank International Limited at US$ per share. Dividend is payable on the preference shares at the higher of 4% per annum and proposed ordinary dividend per share. In 2015, we have converted 35,085,710 preference shares. In 2016 preference shareholders converted 819,424,548 units into new ordinary shares of 630,325,909 as at December 31, The outstanding number of preference shares as at December 31, 2016, were 212,091,363 which and redeemed in o) The loan from Keystone Bank Nigeria was obtained by Bewcastle Limited for a tenor of 36 months with interest rate at 90 day LIBOR plus 7% has been paid off in p) Central Bank of Nigeria loan represents 7-year intervention funds for on-lending to a customer of the Bank in the agricultural sector. The funds are administered at a maximum interest rate of 9% per annum. q) Caisse Régionale de Refinancement Hypothécaire loan to Ecobank Cote d Ivoire and Ecobank Senegal are is repayable over (10) years in 20 equal semi-annual instalments which started from Interest is payable semi-annually at an annual rate of 6%. The loan is maturing in r) Belgium Developpment Company (BIO) Loan was not for on-lending to affiliates. It started from July 2012 payable in eleven equal semiannual installments. The loan was used to support technological development and program development of its affiliates.

201 Financial Statements Borrowed funds (continued) Analysis of the convertible loans The convertible loans are presented in the consolidated statement of financial position as follows: Name of Institution Contract interest rate Effective interest rate Tenor (Years) Face value Amount European Investment Bank (II) 4.267% + 6 months Libor 6.80% 7 27,712 13,917 OFID 4.75% + 6 months Libor 6.51% 8 26,341 17,629 Deutsche AG 8.15% 5 250, ,453 Qatar National Bank 8.05% 5 148, ,687 CBICMU 14.96% 5 1, Preference shares 4% 5 16, , ,528 At 31 December Initial recognition: Face value of convertible bond issued 470, ,635 Equity conversion component net of deferred tax liability (Note 39) (7,779) (41,869) Liability component 462, ,766 Summary of subordinated loans European Investment Bank (II) 13,917 40,522 Opec Fund for International Development 17,629 30, Other liabilities 31,546 71,262 At 31 December Accrued income 48,633 62,694 Unclaimed dividend 4,018 6,786 Accruals 190, ,964 Obligations under customers' letters of credit 101,314 93,752 Bankers draft 44,980 46,033 Accounts payable 142, ,261 Others liabilities 678, ,145 Other liabilities are expected to be settled within no more than 12 months after the reporting date. 34 Provisions 1,210,908 1,342, At 1 January 28,782 28,694 Additional provisions charged to income statement 32,202 15,745 Provision no longer required (1,253) (16) Utilised during year (6,202) (5,059) Exchange differences (1,079) (10,582) At 31 December 52,450 28,782 Provisions represent amounts provided for in respect of various litigations pending in court. Based on professional advice, the amounts for pending litigations have been set aside to cover the expected losses to the Group on the determination of these litigations.

202 2017 Annual Report 200 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) 35 Deferred income taxes Deferred income taxes are calculated using the enacted tax rate of each subsidiary. The movement on the deferred income tax account is as follows: At 1 January (41,838) (5,592) Income statement charge (20,419) (13,594) Available-for-sale securities (directly in OCI): fair value remeasurement (1,805) (22,658) Revaluation of property and equipment (directly in OCI) (3,144) (5,704) Exchange differences 9,760 5,710 At 31 December (57,446) (41,838) Deferred income tax assets and liabilities are attributable to the following items: Deferred income tax liabilities Accelerated tax depreciation 1,701 2,265 Available-for-sale securities 2,280 3,566 Revaluation of property and equipment 42,859 39,396 Provision for loan impairment (recovery) 14,334 10,746 Other temporary differences 3,095 4,196 64,269 60,169 Deferred income tax assets Pensions and other post retirement benefits Provisions for loan impairment 20,525 13,930 Other provisions 10,393 9,755 Tax loss carried forward 43,236 32,323 Other temporary differences 7,839 3,519 On untilised capital allowances 34,822 34,562 On revaluation PPE Available-for-sale securities 4,335 7, , ,007 Deferred tax liabilities To be recovered within 12 months 62,636 55,102 To be recovered after more than 12 months 1,633 5,067 64,269 60,169 Deferred tax assets To be recovered within 12 months 86,530 91,024 To be recovered after more than 12 months 35,185 10, , ,007 The deferred tax charge in the income statement comprises the following temporary differences: Accelerated tax depreciation (322) 242 Provision for loan impairment (recovery) 4, Pensions and other post retirement benefits Allowances for loan losses (10,157) (3,562) Other provisions (6,479) (5,841) Tax losses carry forward (18,776) (7,863) Other temporary differences 29,692 (1,885) Exchange differences (18,889) 4,636 (20,419) (13,594)

203 Financial Statements Deferred income taxes (continued) Deferred income tax assets are recognised for tax losses carried forward only to the extent that realisation of the related tax benefit is probable. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes related to the same fiscal authority. Income tax effects relating to components of other comprehensive income: 31 December December 2016 Gross Tax Net Gross Tax Net Fair value gains/loss on available for sale 43,970 (1,805) 42,165 (54,135) 22,658 (31,477) Revaluation gains/loss on property and equipment 6,255 (3,144) 3,111 6,221 (5,704) ,225 (4,949) 45,276 (47,914) 16,954 (30,960) 36 Retirement benefit obligations Other post-retirement benefits Apart from the pension schemes, the Group operates a post employment gratuity payment scheme. The method of accounting and the frequency of valuations are as described in Note The Group operates a post employment gratuity payment scheme. The amounts recognised in the statement of financial position are as follows: Present value of funded obligations 55,177 47,817 Fair value of plan assets (47,289) (45,965) 7,888 1,852 Present value of unfunded obligations 16,176 13,879 Liability in the statement of financial position 24,064 15,731 In 2017, the movement in the defined benefit obligation over the year is as follows : Present value of obligation 31 December December 2016 Fair value of plan assets Total Present value of obligation Fair value of plan assets Total At 1 January 61,696 (45,965) 15,731 62,055 (44,619) 17,436 Current service cost 2,019 2,019 3,116 3,116 Interest expense and income 3,197 (2,298) 899 2,821 (2,365) 456 5,216 (2,298) 2,918 5,937 (2,365) 3,572 Remeasurements Return on plan assets (2,108) (2,108) (2,629) (2,629) Actuarial (gain)/losses (3,085) 958 (2,127) (6,078) (75) (6,153) (3,085) (1,150) (4,235) (6,078) (2,704) (8,782) Exchange difference 7,069 7,069 (417) 6,634 6,217 Contributions 457 (4,046) (3,589) (8,989) (8,989) Benefit payments 6,170 6, ,078 6,277 At 31 December 71,353 (47,289) 24,064 61,696 (45,965) 15,731

204 2017 Annual Report 202 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) 36 Retirement benefit obligations (continued) The defined benefit obligation and plan assets are composed by regions/countries as follows: Nigeria 31 December December 2016 ETI UEMOA/ CEMAC Others Total Nigeria ETI UEMOA/ CEMAC Others Total Present value obligation 26,252 16,176 12,520 16,405 71,353 21,002 13,879 18,807 8,008 61,696 Fair value of plan assets (28,520) (15,443) (3,326) (47,289) (27,225) (12,249) (6,492) (45,966) Total liability (2,268) 16,176 (2,923) 13,079 24,064 (6,223) 13,879 6,558 1,516 15,730 Income tax effects relating to components of other comprehensive income At 31 December The amounts recognised in the income statement are as follows: Current service cost 2,019 5,153 Net interest cost 3, Total included in staff costs 5,216 5,272 Other Comprehensive Income Actuarial gain/(losses) on obligations 852 1,790 Actuarial gain/(losses) on plan assets (6,064) 2,046 (5,212) 3,836 As the plan assets include significant investments in government bonds, the Group is also exposed to interest rate risks and impact of changes monetary policies on bond yields. The defined benefit plan does not have any significant impact on the group s cash flows. The net actuarial gain on the fair value of plan assets arose as a result of the actual returns on the assets being greater than the calculated expected return on assets. Plan assets are comprised as follows: 31 December December 2016 % Quoted Unquoted Total % Quoted Unquoted Total Cash 13% 6,148 6,148 18% 8,274 8,274 Equity instruments 23% 10,876 10,876 26% 11,951 11,951 Debt instruments (Bonds) 64% 30,265 30,265 56% 25,741 25, % 41,141 6,148 47, % 37,692 8,274 45,966 The expected return on plan assets is determined by considering the expected returns available on the assets underlying the current investment policy. The principal assumptions used for the subsidiaries operating in the UEMOA region were as follows: Discount rate 3% 3% Expected return on plan assets 1.8% 1.8% Future salary increases 2% 2% The principal assumptions used for the employees of Ecobank Nigeria Plc were as follows: Discount rate 16% 16% Expected return on plan assets 9% 9% Future salary increases 5% 5%

205 Financial Statements Retirement benefit obligations (continued) The principal assumptions used for the employees of Ecobank Transnational Incorporated were as follows: Discount rate 3.0% 3.0% Exit rate 4.85% 4.85% Dismissal rate 1.80% 1.80% 37 Contingent liabilities and commitments a) Legal proceedings The Group is a party to various legal actions arising out of its normal business operations. The Directors believe that, based on currently available information and advice of counsel, none of the outcomes that result from such proceedings will have a material adverse effect on the financial position of the Group, either individually or in the aggregate. The amounts that the directors believe will materialize are disclosed in Note 34. b) Capital commitments At 31 December 2017, the Group had capital commitments of $ 2.0 m (December 2016: $4.2m) in respect of buildings and equipment purchases. The Group s management is confident that future net revenues and funding will be sufficient to cover this commitment. c) Loan commitments, guarantee and other financial facilities At 31 December 2017 the Group had contractual amounts of the off-statement of financial position financial instruments that commit it to extend credit to customers guarantees and other facilities are as follows: Guaranteed commercial papers 101,038 97,111 Documentary and commercial letters of credit 1,377,024 1,147,441 Performance bond, guarantees and indemnities 1,729,101 2,608,650 Loan commitments 713, ,246 3,920,817 4,330,448 d) Tax exposures The Group is exposed to ongoing tax reviews in some subsidiary entities. The Group considers the impact of tax exposures, including whether additional taxes may be due. This assessment relies on estimates and assumptions and may involve series of judgments about future events. New information may become available that causes the Group to change its judgment regarding the adequacy of existing tax liabilities; such changes to tax liabilities would impact tax expense in the period in which such a determination is made. The total amount of tax exposure as at 31 December 2017 is $ 44 million (December 2016: $ 38 million). Based on Group s assessment, the probable liability is not likely to exceed $ 3 million (December 2016: $ 15 million) which provisions have been made in the books in Note 34.

206 2017 Annual Report 204 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) 38 Share capital No of shares ( 000) Ordinary shares Share premium Treasury shares Total At 1 January ,977, ,496 1,430,339 (3,138) 2,029,698 Proceeds from share subscription: Conversion of Preference shares 630,326 15,758 68,806 84,564 Treasury shares At 31 December 2016/ 1 January ,607, ,254 1,499,145 (3,068) 2,114,332 Treasury shares (375) (375) At 31 December ,607, ,254 1,499,145 (3,443) 2,113,957 The total authorised number of ordinary shares at period end was 50 billion (December 2016: 50 billion) with a par value of US$0.025 per share (December 2016: US$0.025 per share). Total issued shares as of 31 December 2017 were billion shares. The adjustment for treasury shares on consolidation resulted in the share count of billion shares. Treasury shares were ETI shares held by subsidiaries and related entities within the Group as at period end. The treasury shares count as at 31 December 2017 is million shares. Share options The Group offers share option to certain employees with more than three years service. Options are conditional on the employee completing three year s service (the vesting period). The options are exercisable starting three years from the grant date. The Group has no legal or constructive obligation to repurchase or settle the options in cash. Movement in the number of share options outstanding are as follows: At 1 January 138, ,665 Forfeited (14,000) Lapsed (309,677) At 31 December 124, ,988 The share options exercised during the period were done at a price of US$0.08. The range of exercise price of outstanding shares as at 31 December 2017 is 6 cents to 9.2 cents (average price 7.6 cents). All of the outstanding shares as at 31 December 2017 were exercisable. New share options totalling 119 million shares were also granted on 16 July 2012 with a contractual life of 5 years. New share options totalling 50 million shares were also granted in September 2015 with a contractual life of 5 years.

207 Financial Statements Share capital (continued) The number of shares outstanding at the end of the year was as follows: Expiry date: ,000 50, ,988 88, , ,988 Measurement of fair values share options The fair value of services received in return for share options granted is based on the fair value of share options granted, measured using the Black-Scholes formula. The service and non-market performance conditions attached to the transactions were not taken into account in measuring fair value.the inputs used in the measurement of the fair values at grant date of the equity-settled share-based payment plans were as follows. Fair value of share options and assumptions 2012 scheme 2015 scheme Fair value at grant date (US$) Share price at grant date (US$) Exercise price (US$) 0.75% Expected volatility % Expected life (number of years) 6% 5 Expected dividends 11.8% 3% Risk-free interest rate 11.8% 11.0% The expected volatility is based on both historical average share price.

208 2017 Annual Report 206 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) 39 Retained earnings and other reserves Retained earnings 216, ,847 Other reserves (449,355) (767,255) a) Retained earnings Movements in retained earnings were as follows: (233,213) (536,408) At 1 January 230, ,427 Profit / (loss) for year 178,585 (249,898) Dividend (48,200) Transfer to general banking reserve (17,049) 6,827 Transfer to statutory reserve (45,450) (19,346) Transfer from share option (344) 12,037 Transfer to other Group reserve (130,447) - At 31 December 216, ,847 b) Other Reserves General banking reserve 357, ,295 Statutory reserve 432, ,406 Revaluation reserve Available-for-sale investments 5,513 (36,652) Convertible bond equity component 7,779 9,195 Revaluation reserve - property and equipment 141, ,454 Share option reserve Remeasurements of post-employment benefit obligations (9,175) (3,111) Translation reserve (1,620,903) (1,707,717) Other Group reserves 234, ,281 Movements in the other reserves were as follows: (449,355) (767,255) i) General banking reserve At 1 January 340, ,122 Transfer from retained earnings 17,049 (6,827) At 31 December 357, ,295 The general banking reserve represents transfers from retained earnings for unforeseeable risks and future losses. General banking reserves can only be distributed following approval by the shareholders in general meeting. ii) Statutory reserve At 1 January 387, ,060 Transfer from retained earnings 45,450 19,346 At 31 December 432, ,406 Statutory reserves represents accumulated transfers from retained earnings in accordance with relevant local banking legislation. These reserves are not distributable.

209 Financial Statements Retained earnings and other reserves (continued) iii) Share option reserve At 1 January ,631 Transfer to retained earnings 344 (12,037) At 31 December Statutory reserves represents accumulated transfers from retained earnings in accordance with relevant local banking legislation. These reserves are not distributable. iv) Remeasurements of post-employment benefit obligations At 1 January (3,111) 3,042 Actuarial gains on retirement benefit (6,064) (6,153) At 31 December (9,175) (3,111) v) Revaluation reserves Available-for-sales At 1 January (36,652) (5,175) Net gain/(loss) from changes in fair value 43,970 (54,135) Deferred income taxes (Note 36) (1,805) 22,658 At 31 December 5,513 (36,652) The revaluation reserve shows the effects from the fair value measurement of available-for-sale investment securities after deduction of deferred taxes. Convertible bond equity component Movement in equity component of convertibles were as follows: At 1 January 9,195 9,494 Exercise of the convertible option (1,416) (299) At 31 December 7,779 9,195 The equity component of the convertible bond is computed as a residual amount after determining the loan amount using the market rate of an equivalent loan. vi) Revaluation Reserve property and equipment At 1 January 138, ,937 Adjustment opening balance Net gains from changes in fair value 6,255 6,221 Deferred income taxes (3,144) (5,704) At 31 December 141, ,454 vii) Translation reserve At 1 January (1,707,717) (1,086,227) Currency translation difference arising during the year 86,814 (621,490) At 31 December (1,620,903) (1,707,717) vii) Other Group reserve At 1 January 104,281 Movement arising during the year 130, ,281 At 31 December 234, ,281

210 2017 Annual Report 208 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) 40 Cash and cash equivalents For the purposes of statement of cash flows, cash and cash equivalents comprise the following balances with less than three months maturity Cash and balances with central banks (Note 16) 1,472,178 1,435,894 Treasury Bills and other eligible bills (Note 21) 338, ,294 Deposits with other banks (Note 19) 1,036, ,998 Deposits from other banks (Note 30) (881,089) (726,347) 41 Group entities a) Significant subsidiaries 1,965,611 2,020,838 Country of incorporation Ownership interests Ecobank Nigeria Limited Nigeria 100% 100% Ecobank Ghana Limited Ghana 69% 69% Ecobank Cote d Ivoire Cote d Ivoire 75% 94% Ecobank Burkina Burkina Faso 85% 85% Ecobank Senegal Senegal 80% 80% Ecobank Benin Benin 79% 79% Ecobank Cameroon Cameroon 80% 80% Ecobank Mali Mali 93% 93% Ecobank Togo Togo 82% 82% b) Non-controlling interests in subsidiaries The following table summarises the information relating to the Group s subsidiary that has material non-controlling interests (NCI), before any intra-group eliminations. Entity Ecobank Ghana Ecobank d Ivoire Ecobank Burkina NCI percentage 31% 31% 25% 4% 15% 15% Period Loans and advances to customers 598, ,447 1,229, , , ,890 Investment securities 546,238 73, , , , ,280 Other assets 912,534 1,001, , , , ,243 Deposits from customers 1,481,955 1,295,572 1,487,239 1,174,366 1,013, ,958 Other liabilities 340, ,238 2,506,881 2,050,658 1,553,448 1,264,097 Net assets 234, , ,698 98,696 97,138 76,316 Carrying amount of NCI 72,979 71,641 51,674 3,948 14,571 11,447 Operating income 256, , , ,577 78,238 68,833 Profit before tax 82, ,170 50,166 41,646 24,265 25,029 Profit after tax 58,246 83,038 49,960 36,605 22,648 21,539 Total comprehensive income 70,232 80,058 55,432 42,471 25,078 18,758 Profit allocated to NCI 18,097 25,800 12,490 1,464 3,397 3,231 Cashflows from operating activities 473,757 91,870 77, ,987 92, ,117 Cashflows from investing activities (565,035) (77,912) (165,845) (319,012) (116,282) (122,625) Cashflows from financing activities (97,196) (48,471) (18,279) 39,092 (15,243) (9,286) Net increase/(decrease) in cash and cash equivalents (188,474) (34,513) (106,140) 366,068 (39,130) 204,206

211 Financial Statements Group entities (continued) c) Significant restrictions The Group does not have significant restrictions on its ability to access or use its assets and settle its liabilities other than those resulting from the supervisory frameworks within which banking subsidiaries operate. The supervisory frameworks require banking subsidiaries to keep certain levels of regulatory capital and liquid assets, limit their exposure to other parts of the Group and comply with other ratios. d) Involvement with unconsolidated structured entities The table below describes the structured entities in which the Group does not hold an interest but is a sponsor. The Group considers itself a sponsor of a structured entity when it facilitates the establishment of the structured entity. These entities were not consolidated in Name Type of structured entity Nature and purpose Investment held by the Group FCP UEMOA DIVERSIFIE (incorporated in Ivory Cost in 2007) FCP UEMOA RENDEMENT (incorporated in Ivory Cost in 2007) Asset-backed structured entity a) Provide investors with an exposure to a referenced asset such as a debt instrument Asset-backed structured entity b) Generate fees for agent activities and funding for the Group s lending activities. None None The table below sets out information as at 31 December 2017 in respect of structured entities that the Group sponsors, but which the Group does not have an interest. Asset-backed structured entities FCP UEMOA DIVERSIFIE FCP UEMOA RENDEMENT Fee income earned from asset-backed structured entities *Carrying amount of assets transferred by third parties to conduit vehicle 59,899 4,194 Carrying amount of the financing received from unrelated third parties 67,488 5,052 The carrying value is stated at book value (costs less impairment) The Group does not have any exposure to any loss arising from these structured entities. 42 Related party transactions The related party is the key management personnel, their related companies and close family relations. The key management personnel included directors (executive and non-executive),and other members of the Group Executive Committee. A number of banking transactions are entered into with related parties in the normal course of business and at commercial terms. These transactions include loans, deposits, and foreign currency transactions. The volumes of related party transactions, outstanding balances at the end of the period, and relating expense and income for the period as follows: Loans and advances to related parties Directors and key management personnel Related companies Loans outstanding at 1 January ,202 Loans issued during the year Loan repayments during the year (268) (17,398) Exchange difference At 31 December (366) Interest income earned (28) 9 No provisions have been recognised in respect of loans given to related parties (2016: nil). The loans issued to executive directors during the year and related companies controlled by directors were given on commercial terms and market rates.

212 2017 Annual Report 210 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) 42 Related party transactions (continued) Deposits from related parties Directors and key management personnel Related companies 31 Dec Dec Dec Dec Deposits at 1 January 2,381 2,204 Deposits received during the year 445 Deposits repaid during the year (268) Exchange difference At 31 December 2,381 2,381 Interest expense on deposits Dec Dec Directors remuneration Total directors fees and allowances 1,498 1,481 Key management compensation Salaries and other short term benefits Related party credits During the period the Group through its subsidiaries granted various credit facilities to directors and companies whose directors are also directors of ETI at rates and terms comparable to other facilities in the Group s portfolio. An aggregate of US$16 million was outstanding on these facilities at the end of the reporting period. The status of performance of each facility is as shown below: Name of company/ individual Relationship Type Status Nature of security Amount BIDC Director related Bonds Non-impaired Unsecured 15,963 Parent The parent company, which is also the ultimate parent company, is Ecobank Transnational Incorporated 15,963

213 Financial Statements Banking subsidiaries Ownership interests Ecobank Cameroon 80% Ecobank Chad 74% Ecobank Sao Tomé 100% Ecobank Central Africa 75% Ecobank Congo Brazzaville 89% Ecobank Gabon 75% Ecobank Guinea Equatoriale 60% Ecobank Benin 79% Ecobank Burkina Faso 85% Ecobank Côte d Ivoire 75% Ecobank Mali 93% Ecobank Niger 70% Ecobank Sénégal 80% Ecobank Togo 82% Ecobank Guinea Bissau 84% Ecobank Cape Verde 99% Ecobank Ghana 69% Ecobank Guinea 83% Ecobank Liberia 100% Ecobank Sierra Leone 100% Ecobank Gambia 97% Ecobank Rwanda 94% Ecobank Tanzania 100% Ecobank Kenya 100% Ecobank Burundi 75% Ecobank Uganda 100% Ecobank South Sudan 100% Ecobank Nigeria 100% Ecobank Malawi 96% Ecobank Congo RDC 100% Ecobank Zambia 100% Ecobank Zimbabwe 100% Ecobank Mozambique 98% Non Banking subsidiaries SOFIPE Burkina 85% Ecobank Micro Finance Sierra Leone 100% EDC Holding 91% EKE Property Limited Kenya 100% Treasury Bond Protected Investment Company (TBPIC) 100% ECB One 100% FCP Obligataire 80% E Process international 100% EBI SA (France) 100% Bewcastle 100% Ecobank Specialised Finance Company LLC 100%

214 2017 Annual Report 212 Notes to consolidated financial statements (All amounts in US dollar thousands unless otherwise stated) 44 Major business acquisitions There were no major business acquisitions in Events after reporting date No significant event has occurred after the reporting date that could have a material impact on the financial statements.

215 Financial Statements Five-year summary financials 213 (All amounts in US dollar thousands unless otherwise stated) At the year end Total assets 22,431,604 20,510,974 23,553,919 24,243,562 22,532,453 Loans and advances to customers 9,357,864 9,259,374 11,200,349 12,311,642 11,421,605 Deposit from customers 15,203,271 13,496,720 16,427,553 17,436,970 16,489,904 Total equity 2,172,083 1,764,078 2,523,245 2,655,085 2,134,648 For the year Revenue 1,831,202 1,972,263 2,105,975 2,279,881 2,003,456 Profit / (loss) before tax 288,340 (131,341) 205, , ,778 Profit / (loss) for the Year 228,534 (204,958) 107, , ,773 Profit / (loss) attributable to owners of the parent 178,585 (249,898) 65, ,863 95,541 Earnings per share basic (cents) 0.72 (1.01) Earnings per share diluted (cents) 0.72 (1.01) Dividend per share (cents) 0.20 Return on average equity (%) 11.6% (9.6%) 4.2% 16.5% 6.9% Return on average assets (%) 1.1% (0.9%) 0.4% 1.7% 0.73% Cost-to-income ratio (%) 61.8% 62.7% 64.9% 65.4% 70.1% * Results for 2013 to 2015 are shown for continuing operations..

216 2017 Annual Report 214 Parent Company s financial statements (All amounts in US dollar thousands unless otherwise stated) Statement of comprehensive income Year ended 31 December Interest income 36,356 25,109 Finance cost (55,502) (51,259) Net interest income (19,146) (26,150) Net fees and commission income 31,674 31,338 Other operating income/(loss) 6,707 (5,841) Personnel expense (33,496) (40,222) Depreciation and amortization expense (4,517) (5,276) Other operating expense (15,307) (17,644) Foreign exchange translation loss (565) (2,615) (34,650) (66,410) Provision for other assets (38,757) (110,494) Operating loss for the year (73,407) (176,904) Share of loss of associates (1,067) (2,249) Share of profit 302, ,211 Share of affiliate s tax (46,174) (51,737) Profit for the year 182,106 (38,679) Other comprehensive income: Items that will be reclassified to profit or loss: Share of affiliates other comprehensive income/(loss) 106,877 (33,949) Net valuation (loss)/gain on available for sale securities (82,966) 36,238 Other comprehensive income for the year 23,911 2,289 Total comprehensive income/(loss) for the year 206,017 (36,390)

217 Financial Statements 215 Statement of financial position As at 31 December 2017 Restated 2016 Restated 2015 Assets Loans and advances to banks 603, , ,075 Investment in securities: available- for-sale 68, , ,911 Share of OCI 72,928 (33,949) Other assets 129, , ,526 Investment properties 11,895 12,144 21,751 Investment in associates 6,836 8,212 12,889 Investment in subsidiaries and structured entities 2,186,088 1,763,390 2,258,265 Goodwill 227, , ,775 Intangible assets Property and equipment 43,780 46,589 50,783 Total assets 3,349,832 2,746,831 3,388,067 Liabilities Other liabilities 49,375 65, ,046 Borrowed funds 1,149, , ,275 Retirement benefit obligations 16,176 13,879 13,107 Total liabilities 1,214,576 1,031, ,428 Equity Share capital 618, , ,497 Share premium 1,499,144 1,499,144 1,430,338 Retained earnings 289, , ,726 Other reserves (271,477) (509,663) 176,078 Total equity 2,135,256 1,714,964 2,390,639 Total liabilities and equity 3,349,832 2,746,831 3,388,067

218 2017 Annual Report 216 Parent Company s financial statements (All amounts in US dollar thousands unless otherwise stated) Statement of changes in equity Share capital Share premium Retained earnings Other reserves Total At 1 January ,497 1,430, , ,078 2,390,639 Profit for the year (38,679) (38,679) Exchange difference on translation of foreign operations (2,428) (2,428) Net unrealized gain on available for sale investments 2,289 2,289 Total Comprehensive loss (38,679) (139) (38,818) Forfeited share 12,381 (12,381) Dividend relating to 2015 (48,200) (48,200) Ajustement due to equity accounting changes (673,565) (673,565) Share option granted Conversion of preference shares 15,758 68,806 84,564 At 31 December ,255 1,499, ,228 (509,663) 1,714,964 Profit for the year 182, ,106 Exchange difference on translation of foreign operations (309) (309) Net unrealized gain on available for sale investments 23,911 23,911 Total comprehensive income 182,106 23, ,708 Adjustment 215, ,656 Share option Equty component on convertible loan issued during the year 5,084 5,084 Redemption of preference shares (6,500) (6,500) At 31 December ,255 1,499, ,334 (271,477) 2,135,256

219 Financial Statements 217 Statement of cash flows Cash flows from operating activities Profit/(loss) for the year 182,106 (38,679) Adjustment for non cash items: Interest income (36,356) (25,109) Finance cost 55,502 51,259 Fair value loss on investment property 249 9,607 Share of associates loss 1,067 2,249 Ajustments (159,454) (42,101) Gain on disposal of property plant and equipment (53) (30) Depreciation and amortization 4,517 5,276 Amortization of government grant (192) (193) Provision for doubtful receivables 38, ,494 Share option vested during the year Foreign exchange loss/(gain) on retirement benefit obligation 1,888 (417) Current service cost and interest on benefit obligation 409 1,188 88,784 73,888 Interest paid (49,178) (44,521) Interest received 36,356 25,109 Changes in working capital other assets 133,441 (250,598) other liabilities (16,226) (130,060) Loans and advances (327,483) 171,476 Net cash used in operating activities (134,306) (154,706) Cash flows from investing activities Purchase of property, plant and equipment and intangible assets (1,715) (1,017) Proceeds from the sale of property, plant and equipment Addition to investment in subsidiaries (46,842) (28,000) Net cash used in investing activities (48,035) (28,417) Cash flows from financing activities Proceeds from borrowings 758, ,999 Repayment of borrowed funds (569,707) (506,205) Dividends paid (45,809) Net cash from financing activities 188, ,985 Net increase in cash and cash equivalents 6,259 9,862 Cash and cash equivalent at start of year 30,283 20,421 Cash and cash equivalents at end of year 36,542 30,283

220 2017 Annual Report 218 Corporate Information We encourage open and constructive dialogue with all our stakeholders about our products, services, financial and business performance, and, also about Ecobank s role in society. Your indispensable feedback helps us to understand your expectations and address issues efficiently. Our aim is always focussed on providing our customers with exactly what they need whilst engendering stakeholder loyalty as we strive to reach our full potential across Africa.

221 Corporate Information 219 Select Service Transactions 30% 50% 75%