In brief
- Trading Strength and Impairment Relief Carry the Year: EGH posted a 7.3% y/y rise in profit after tax (PAT) to GHS 1.8bn, trailing our expectations by 6.0%. A 58.2% y/y surge in net trading income and a 65.4% y/y decline in impairment charges sustained the headline result, offsetting a sharp deterioration in funded income. Net interest income (NII) contracted 28.9% y/y to GHS 2.7bn as cedi appreciation, rising interest expense, and falling asset yields compressed spreads. Cost discipline provided a partial buffer, with operating expenses declining 7.1% y/y to GHS 1.8bn.
- Balance Sheet Strengthens, Earnings Quality Remains Uneven: Total assets grew 2.9% y/y to GHS 47.3bn, supported by a 24.0% loan expansion and a 45.4% increase in investment securities, lifting the loan-to-deposit ratio (LDR) to 41.7%. The non-performing loans ratio (NPL) improved to 17.9% from 21.1%, aided by the resumption of government contractor payments and cedi-driven reduction in foreign currency NPL balances. Capital adequacy ratio (CAR) strengthened to 21.5% from 17.2%. Headline profitability holds, but earnings quality remains heavily dependent on non-funded income.
- Rate Pressure Persists, but a Credit Upcycle Is forming: We believe declining treasury yields and policy rate cuts will continue to weigh on asset pricing, but we anticipate improving macroeconomic conditions with inflation at 3.3% and strengthening business confidence, will support a credit upcycle. We forecast loan book growth of 21.0% per annum over the medium term, though we anticipate NPL management will remain a binding constraint on the pace of expansion.
- Non-Funded Income and Cost Discipline Anchor the Outlook: We believe trading income will receive a boost from the reopening of the primary bond market, while digital platforms and the ETI network underpin fee income growth. We anticipate deposit mobilisation will become a strategic priority as government bond issuance competes for institutional liquidity. With operating expenses on a declining trend and inflation remaining favourable, we foresee the cost base providing a credible earnings floor, though external risks, particularly Middle Eastern tensions, could disrupt this outlook.
We amend our rating on Ecobank Ghana (EGH) to “HOLD”, with a higher revised fair value of GHS 49.9 per share, reflecting sustained earnings strength, and improved asset quality. Given the market price of GHS 49.5, this implies an upside of 0.8%. The upward adjustment reflects a lower risk-free rate of 12.8%, down from 15.6% at 9M2025, driven by compressed yields on restructured domestic bonds. We have transitioned from the capital asset pricing model (CAPM) to a Build-Up approach, using the average of 3-year and 5-year bond yields plus a 5.0% risk premium, given the lack of statistical robustness in observed equity betas. We also refined our relative valuation by narrowing the peer group to a more comparable subset, enhancing the integrity of our multi-factor linear regression P/B model and improving market-implied alignment. Despite trailing our earnings forecast by 6.0%, EGH delivered resilient FY2025 performance, with profit growth supported by strong trading income and a sharp decline in impairment charges. However, core performance weakened, as net interest income contracted significantly amid margin compression from lower interest income, rising funding costs, and cedi appreciation, resulting in a modest decline in total operating income. Cost discipline provided some support, while asset quality improved with a reduction in Non-Performing Loans ratio (NPLs). Balance sheet dynamics were mixed, with solid loan growth offset by a decline in deposits, pointing to funding mix pressures, although a balanced LCY/FCY mix and cedi appreciation supported liquidity and improved the loan-to-deposit ratio. Capital buffers strengthened, providing capacity for future growth. Structurally, digital initiatives such as EcobankPay continue to offer scalable, low-cost avenues for income diversification, while the bank’s corporate franchise, backed by the ETI Group, remains well-positioned to capture regional flows and cross-border opportunities. We expect medium-term profitability to remain supported by non-interest income growth, digital adoption, and disciplined cost management, although elevated NPLs and persistent margin pressure remain key constraints.