In brief
- Earnings Recovery Underpinned by Revenue Growth and Improved Efficiency: CalBank delivered a strong 1H2026 performance, with profit after tax increasing by 37.7% y/y to GHS240.8mn as improved funding conditions and a stronger capital position supported a broad-based recovery in earnings. Total income rose by 81.1% y/y, driven by a 76.4% increase in net interest income following a sharp decline in funding costs and an 86.5% growth in non-funded income, which now accounts for nearly half of total revenue. Fee income and trading income were particularly strong, helping offset lower treasury yields and reinforcing revenue diversification. Strong operating leverage also emerged, with revenue growth significantly outpacing costs, resulting in the cost-to-income ratio improving to 48.1% from 67.8%.
- Capital Position Restored and Asset Quality Normalising: The bank’s balance sheet strengthened significantly following the 4Q2025 capital injection, with shareholders’ funds rising to GHS1.8bn and the capital adequacy ratio recovering to 18.2%, restoring full regulatory compliance. Asset quality also improved materially, with the NPL ratio declining to 10.1%. However, the sharp decline in impairment gains suggests that the recovery-driven earnings tailwind is largely behind the bank.
- Recovery Complete; Sustainable Growth Is the Next Phase: Loan growth resumed at 25.6% y/y but remains measured, while investment securities continued to expand, reflecting management’s conservative capital deployment strategy. We believe CalBank has largely moved beyond the stabilisation phase of its turnaround, with the next stage of growth expected to be driven by prudent credit expansion and continued growth in non-funded income in a lower interest rate environment.
- Revenue Diversification to Sustain Earnings: In a lower interest rate environment, we expect non-funded income to become the primary driver of earnings as pressure on asset yields weighs on funded income. We anticipate growth in transaction banking, digital channels, fees, and trading income, together with low funding costs supported by a strong CASA base and the lower CRR, will sustain profitability and margins.
Rating Summary:
We update our rating on CalBank Plc (“CAL”) to “HOLD”, with fair value nudging down to GHS 0.86 per share against a current market price of GHS 0.79, and an 8.7% upside. The revision stems from a higher risk-free rate of 13.01%, tracking the yield on the recently issued long-term bond. We also moved away from CAPM in favour of a steadier framework, the 7-year bond yield plus a 5.0% risk premium as observed equity betas no longer held up statistically. On the relative valuation side, a tighter peer group has sharpened our multi-factor P/B regression and brought it closer to market-implied pricing. CAL’s improved Capital Adequacy Ratio, following the recent capital injection, puts the bank on a firmer footing and points toward sustainable year-on-year profitability. Although the numbers support the positive earnings outlook, our optimism comes with caveats.
Two constraints stand between CAL and genuine value creation:
We update our rating on CalBank Plc (“CAL”) to “HOLD”, with fair value nudging down to GHS 0.86 per share against a current market price of GHS 0.79, and an 8.7% upside. The revision stems from a higher risk-free rate of 13.01%, tracking the yield on the recently issued long-term bond. We also moved away from CAPM in favour of a steadier framework, the 7-year bond yield plus a 5.0% risk premium as observed equity betas no longer held up statistically. On the relative valuation side, a tighter peer group has sharpened our multi-factor P/B regression and brought it closer to market-implied pricing. CAL’s improved Capital Adequacy Ratio, following the recent capital injection, puts the bank on a firmer footing and points toward sustainable year-on-year profitability. Although the numbers support the positive earnings outlook, our optimism comes with caveats.
Two constraints stand between CAL and genuine value creation:
- Retained earnings remain negative, capping internal capital generation and keeping dividends off the table for now.
- Loan growth is still subdued and needs to pick up meaningfully to unlock further value
These factors suggest that while earnings have improved, core lending activity remains subdued, and this will weigh on the strength and sustainability of future earnings. We expect Earnings Per Share (EPS) to remain stretched, given the enlarged share base following the 4Q2025 capital raise with dividend distribution highly unlikely over the next two to three years. Having steadied the ship, management’s tone on the banks near-term performance is positive, but we hold a more cautious view. The bank has stabilised, but it is not yet operating at the level of its peers. A full recovery will require a rebuild of earnings capacity and a return to positive retained earnings.