LONDON (Alliance News) - Sub-Saharan Africa banking investor Atlas Mara Ltd on Tuesday reported a slip in annual profit and has announced it will exchange assets in four different countries for a stake in Kenyan financial services firm Equity Group Holdings Ltd.
Atlas Mara will give up its holding in Banque Populaire du Rwanda, African Banking Corp Zambia, African Banking Corp Tanzania, and African Banking Corp Mozambique. In return Atlas Mara will receive 252.5 million shares in Equity Group, which represents a 6.3% stake.
The transaction has a cash equivalent value of USD105.4 million.
Turning to the company's results, Atlas Mara recorded pretax profit of USD47.0 million in 2018 compared to USD53.1 million in 2017, a 12% decrease.
Regionally, Atlas Mara's Southern operations profit nearly tripled to USD35.2 million, while its East businesses saw an 81% decrease to USD600,000. Atlas Mara's West businesses saw a 28% decrease in profit to USD27.8 million.
The Corporate unit posted a USD16.6 million loss, however, dragging group profits lower.
"We are pleased to report a profitable year for the company, including another strong performance from our largest investment, Union Bank of Nigeria, but core operating performance remains below target in many markets. We are disappointed in the decrease in book capital, which resulted primarily from the transition to IFRS 9 and the unrealized currency losses in Zimbabwe and elsewhere," said Executive Chair Michael Wilkerson.
Atlas Mara's net interest income decreased 8.7% to USD132.6 million from USD145.3 million, while non-interest income fell 14% to USD98.8 million from USD115.2 million.
The reduction in interest income was attributed to Atlas Mara's loan book contracting. The company's loans & advances in 2018 decreased 14% to USD1.15 billion from USD1.33 billion the year before.
Atlas Mara's net interest margin on earning assets improved to 7.3% from 6.8%. For total assets, the company's NIM slipped to 4.7% from 7.4%.
Atlas Mara's cost to income ratio in 2018 jumped to 104.0% from 85.8% in 2017. The company's operating expenses increased 7.6% to USD240.5 million from USD223.5 million.
At the end of 2018, Atlas Mara held USD688.9 million in capital, 15% lower than the USD813.2 million held at the end of 2017.
Wilkerson added: "In this challenging environment, we are focused on the priorities we outlined earlier this year from our ongoing strategic review, including partnering in or exiting markets where we do not have a clear near-term path to acceptable scale and profitability. We continue to pursue other levers for value creation, including improving asset quality, reducing our cost of funds, and controlling operating expenses. We remain committed to delivering improving returns for our shareholders."
Shares in Atlas Mara were down 0.9% Tuesday at USD1.65 each.