In brief
- Strong Earnings and Revenue Growth: SOGEGH reported a 45.2% y/y surge in after-tax profit to GHS 136.6mn, driven by a 13.0% rise in net interest income and improved impairment performance (GHS 28.9mn gain vs. GHS 36.4mn loss in 1Q2024). Pre-impairment income grew modestly by 2.6% y/y to GHS 347.5mn.
- Asset Mix and Tactical Treasury Shift: On a year-on-year basis, the bank reduced investment securities by 42.7% to GHS 1.4bn, reallocating toward loans and cash equivalents. However, treasury investments rose 78.8% q/q due to tactical positioning in high-yield OMO bills.
. - Loan Growth and Efficiency Gains: Loans and advances increased 23.6% y/y to GHS 4.8bn, with a loan-to-deposit ratio of 74.8%. Operating expenses rose just 6.0% y/y—well below inflation—keeping the cost-to-income ratio under 50%, reflecting strong cost control.
- Stronger Balance Sheet and Risk Metrics: The capital adequacy ratio improved to 20.4%, while the NPL ratio declined by 5.1 percentage points y/y to 17.5%, indicating improved asset quality and a healthier risk profile.
Societe Generale Ghana Plc (SOGEGH) published its unaudited 1Q2025 financial results on 29 April 2025, showing a solid start to the year with strong revenue growth and profitability. Net interest income rose by 13.0% y/y to GHS 305.0mn, driven by a 12.6% increase in interest income, fueled by the bank’s expanding loan portfolio. Net interest margin (NIM) edged up to 4.9% (+0.3%). Although fees and commission grew by 34.1% y/y to GHS 23.4mn and net trading income surged 77.6% y/y to GHS 15.9mn, non-interest income fell by 38.4% y/y to GHS 42.4mn, impacted by a sharp 92.6% y/y drop in other operating income. As a result, pre-impairment income showed a modest 2.6% y/y growth to GHS 347.5mn. SOGEGH saw a 1.8-fold improvement in impairment performance, recording a GHS 28.9mn gain in 1Q2025 compared to a GHS 36.4mn loss in the same period last year, reflecting success in debt recoveries. Operating expenses were well-controlled at GHS 163.8mn, rising just 6.0% y/y, well below the 1Q2025 average inflation rate of 23.0%. This kept the cost-to-income ratio below 50.0%, demonstrating effective cost discipline and a focus on operational efficiency. As a result, after-tax profit surged by 45.2% y/y to GHS 136.6mn. On the balance sheet, investment securities declined by 42.7% y/y to GHS 1.4bn, as SOGEGH redirected focus toward loans and cash equivalents. However, q/q, investment securities rose by 78.8%, driven by a tactical move to capitalize on high-yield OMO bills. This shift signals a short-term strategy, with the long-term objective of reducing reliance on government securities. Loans and advances grew by 23.6% y/y to GHS 4.8bn, with a loan-to-deposit ratio of 74.8%. The capital adequacy ratio improved to 20.4%, while the NPL ratio fell by 5.1pp y/y to 17.5%. Overall, SOGEGH’s strong 1Q2025 performance reflects positive earnings momentum, improved asset quality, and solid balance sheet growth.
Outlook: Positioned for resilient growth amid easing macro pressures
- Looking ahead, we remain confident in SOGEGH’s FY2025 performance. We expect the bank to continue expanding its loan portfolio, albeit cautiously, as it navigates a high credit risk environment and rising NPLs across the industry. This measured posture mirrors peer banks, many of which are adopting conservative credit growth strategies in response to elevated credit risks. While private sector lending is likely to remain SOGEGH’s core revenue driver, we anticipate opportunistic allocations to short-term OMO bills to capture elevated yields, currently 28%, in line with sector-wide positioning.
- with average inflation projected by the IMF to ease toward 17.2% (IC Insights: 18.4%) by year-end 2025 (from 23.0% in 1Q2025), we expect SOGEGH to stay on course with the cost discipline demonstrated in 1Q2025. The bank’s ability to keep operating expense growth well below inflation underscores a solid cost management culture. We expect this trend to persist, with the cost-to-income ratio remaining below 50.0%, consistent with tier-one peers prioritizing efficiency gains to defend margins.
- Despite a 38.4% decline in non-interest income, the 34.1% y/y growth in fees and commissions is encouraging. We expect SOGEGH to continue promoting digital adoption, leveraging Ghana’s rising smartphone penetration, to deepen customer engagement, grow deposits, and expand fee-based income. Like its peers, we expect SOGEGH to ramp up self-service and mobile banking initiatives to enhance non-funded revenue. We believe that moderating inflation and an expected GDP growth of around 4.5% in 2025 will support consumer activity and help reverse declines in non-funded income.
Key risks
- Credit risk, liquidity risk, macroeconomic risk, changes in regulatory and tax policy environment, and strategic decision of shareholders.
Valuation: Under Review
- SOGEGH is trading at a P/B of 0.4x and we intend to release our rating on the stock soon.