In brief
- Earnings Momentum Sustained by Core Income Growth: CalBank delivered a strong 9M2026 performance, with profit after tax rising 50.6% y/y to GHS 337.2mn, slightly ahead of our estimates. Total income rose 77.7% y/y, driven by a 66.3% increase in net interest income as funding costs fell sharply, and a 91.6% rise in non-funded income, which now accounts for nearly half of total revenue. Revenue growth outpaced costs, improving the cost-to-income ratio to 50.6% from 70.6%. With impairment gains down to just GHS 3.5mn, earnings are now driven by income generation rather than recoveries.
- Lending Picks Up as Balance Sheet Strengthens: Loans and advances grew 61.0% y/y to GHS 2.1bn, signalling that management has begun deploying its restored capital, while customer deposits rose 24.5% y/y. The capital adequacy ratio improved to 18.4%, and the NPL ratio fell to 8.5%, ahead of the regulator’s 10.0% end-2026 target. Investment securities, however, remain more than three times the size of the loan book.
- Multiple Levers to Sustain Earnings Growth: As inflation trends towards the Bank of Ghana’s 8 ± 2% target, we expect a modest uptick in interest rates to support interest income. Further loan growth and an expanding low-cost deposit base should also help sustain net interest income growth. Non-funded income from fees, transaction banking, digital channels and trading will remain a key earnings driver.
- Growth First, Shareholder Rewards Later: Retained earnings remain negative and must be rebuilt before dividends can resume. We expect management to prioritise prudent credit expansion and stronger earnings capacity over capital distribution in the near term.
Rating Summary:
We upgrade our rating on CalBank Plc (“CAL”) from “HOLD” to “ACCUMULATE”, with fair value easing marginally to GHS 0.85 per share (vs GHS 0.86 prior estimate) against a current market price of GHS 0.73, implying a 16.4% upside. A slightly better-than-expected 9M2026 performance largely offset the impact of a higher risk-free rate of 13.79% (the average yield on the newly issued 7-year and 4-year bonds), leaving our fair value broadly unchanged. The upgrade is therefore driven mainly by a 7.6% decline in the market price since our 1H2026 earnings update, which has widened the upside. We maintain the use of this bond yield plus a 5.0% risk premium over the CAPM approach, as observed equity betas no longer hold 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 (CAR), 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 still stand between CAL and genuine value creation:
Two constraints still stand between CAL and genuine value creation:
- Retained earnings remain negative, capping internal capital generation and keeping dividends off the table for now.
- Despite a significant year-on-year jump in the loan book, treasury securities still dominate the balance sheet, and lending needs to pick up meaningfully to unlock further value.
So, although earnings have improved, core lending still trails the bank’s treasury securities holdings, and this will weigh on the strength and sustainability of future earnings. We expect Earnings Per Share (EPS) to remain stretched because of the enlarged share base following the 4Q2025 capital raise as 9M2026 EPS fell 61.5% y/y to GHS 0.1062, from GHS 0.2757, despite the 50.6% rise in profit, and a dividend payout is highly unlikely over the next two to three years. Having steadied the ship, management’s tone on the bank’s near-term performance is positive, and we share management’s optimism. The bank has stabilised and is rebounding, but we believe it has yet to hit its stride. A full recovery will require pushing the envelope on the loan portfolio and sustaining growth in non-funded income. Ultimately, our fair value for CAL is largely unchanged, easing marginally to GHS 0.85 from GHS 0.86. The upgrade is driven mainly by the wider gap between our fair value and the market price.