In brief
- EGH’s strong 1H2025 earnings highlight growing resilience in fee-based income: Profit rose 18.7% y/y to GHS 763.5mn, driven by a 76.4% increase in non-interest revenue and a 29.0% drop in impairment charges. This reflects EGH’s strategic pivot toward non-funded income to offset compressed margins from rising interest expense.
- Modest cost growth and improved efficiency to support margin defence: Operating expenses rose by only 4.6% y/y, helping reduce the cost-to-income ratio to 43.4%. This was aided by easing inflation and currency strength, reinforcing EGH’s operational discipline in a margin-constrained environment..
- Digital scale and Pan-African connectivity to drive medium-term growth optionality: We anticipate EGH’s integrated position within the Ecobank Group enables it to capture intra-African trade flows, especially as AfCFTA gains traction. Coupled with digital transaction growth, we see a pipeline of scalable revenue opportunities emerging.
- FX tailwinds and improved liquidity will unlock lending potential: Cedi appreciation has eased CRR constraints, freeing up deployable liquidity. We expect EGH to tactically expand lending in high-yield, lower-risk segments, supporting a gradual recovery in funded income and balance sheet growth.
1H2025 Earnings Update
Ecobank Ghana (EGH) published its 1H2025 results on 31 July 2025, reporting an 18.7% y/y rise in net profit to GHS 763.5mn. The performance was driven by a 76.4% y/y surge in non-interest revenue, underpinned by strong trading gains and a 365.3% rise in other operating income, alongside a 29.0% decline in impairment charges and muted cost growth (+4.6% y/y). These gains helped to offset the impact of a 15.6% y/y decline in net interest income, which came under pressure from a 61.8% y/y jump in interest expense as the bank borrowed to meet CRR requirements. As a result, net interest margins compressed by 125bps to 7.1%. Despite margin pressure, pre-impairment income rose by 6.6% y/y to GHS 2.4bn, reflecting the strength of non-funded income streams. EGH’s performance aligns with an emerging industry trend in which banks are leaning more on trading and fee-based income to counter balance sheet constraints and narrower spreads. Operating efficiency also improved slightly, with the cost-to-income ratio easing by 85bps y/y to 43.4%, supported by moderating inflation and Cedi appreciation. However, topline momentum remains crucial to sustaining these gains, particularly in an environment where funded income is under strain. Balance sheet metrics were mixed. Net loans and advances declined by 1.0% y/y to GHS 9.6bn, and customer deposits contracted by 8.6% y/y to GHS 29.0bn, reflecting the translation effect of a stronger Cedi on foreign currency balances. Investment securities also fell by 14.5% y/y due to interest rate declines and divestment from treasuries to meet CRR requirements. These contractions suggest a cautious stance amid macro and credit risks. Still, the overall balance sheet expanded modestly, supported by retained earnings. Overall, we view EGH’s 1H2025 performance as resilient, but underlying pressures persist. In our view, the bank must act decisively to address the contraction in deposits and the shrinking loan book if it is to sustain earnings momentum in the coming periods.
Near-term Outlook: Fee Income to Drive Resilience While Lending Optionality Emerges
- We believe EGH will continue to lean heavily on non-funded income to drive revenue growth. The bank delivered a 76.4% y/y increase in non-interest income in 1H2025, supported by strong trading gains and a 365.3% rise in other operating income. With economic activity and digital transaction volumes picking up, we anticipate further upside in transaction banking and FX-related services, helping to counterbalance weak interest margins.
- We expect a gradual return to risk asset growth in 2H2025, reversing the 13.7% y/y contraction in net loans observed in June. The improving macro backdrop, particularly Cedi stability, disinflation, and rising economic activity supports this view. While management has taken a deliberate pause to clean up the loan book and reduce FX-linked exposures, we believe the enhanced asset quality and reduced impairment burden create room to scale up credit growth prudently.
- Although net loans declined by 1.0% year-on-year in the first half of 2025, EGH holds significant liquidity, with 44.0% of total assets in cash and equivalents. In our view, this gives the bank capacity to expand lending in a measured and strategic manner. Management has signaled plans to accelerate loan growth, supported by recent changes to the cash reserve ratio framework that now match reserve requirements with the currency mix of deposits. We expect the bank to focus on high-yield, relatively lower-risk areas such as small business lending and trade finance. Furthermore, we believe the recent 300bps cut in the policy rate to 25.0% reduces borrowing costs and creates a more favourable environment for increased credit demand..
Deposit Recovery is a Key Priority
- EGH’s customer deposits declined by 8.6% year-on-year in the first half of 2025, reflecting a combination of factors, including the translation impact of an appreciating cedi on foreign currency deposits and the bank’s liquidity reallocation to meet cash reserve ratio obligations. In our view, reversing this contraction is essential to restoring balance sheet momentum and positioning the bank for sustained credit growth. The anticipated return of the government to the domestic bond market in the second half of the year could heighten competition for deposits, particularly as higher-yielding government securities attract institutional liquidity. We believe EGH will prioritise rebuilding its deposit base by deepening its retail footprint and strengthening transaction banking capabilities. We anticipate greater focus on stable, low-cost funding, especially current and savings accounts to improve funding mix, defend interest margins, and enable the bank to deploy liquidity more productively in lending. As such, we forecast customer deposit to record a 27.0% grow in the near-term.
Cost Containment to Support Earnings Stability
- Operating expenses rose by a modest 4.6% year-on-year in the first half of 2025, allowing EGH to lower its cost-to-income ratio to 43.4 percent, despite pressure on interest income. We anticipate that easing inflation which we projected to average 16.3% for the year will provide additional relief on general operating costs, including utilities, logistics, and wage pressures. The appreciation of the cedi also reduces the local currency cost of foreign-denominated expenses such as software licenses, IT support, and professional services. In our view, these macro tailwinds create room for further gains in operational efficiency. We therefore expect cost-to-income ratio to remain below 50.0% in the near- term.
Asset Quality Likely to Improve
- We anticipate further declines in impairment charges following the 29.0% y/y drop in 1H2025. EGH is tightening credit underwriting, and the improving macro backdrop will provide a tailwind. We expect the falling inflation and a more stable cedi to reduce borrower stress and lower credit risk. In our view, these factors should support continued asset quality improvement through 2H2025.
Key risks
- In our opinion, EGH’s earnings resilience and strong liquidity underpin a defensible valuation. However, topline momentum remains constrained by interest margin compression and balance sheet contraction. We believe key risks include continued deposit attrition, weak loan growth, and the potential crowding-out impact of government bond issuance.
Valuation: BUY
- Our BUY rating is based on our weighted average fair value of GHS 11.4 per share, representing a upside of 29.9%, using the weighted average prices from our dividend discount (DDM), residual income (RI) and relative valuation models. We see near-term upside for EGH given its robust fundamentals and promising outlook, and therefore recommend a BUY rating.
- EGH is trading at a TTM P/E of 1.6x and P/B of 0.47x against our estimated forward P/B of 0.57x, emphasizing the stock’s attractive valuation.