In brief
- Solid Earnings Momentum with Margin and Impairment Tailwinds: SOGEGH reported a 46.1% y/y surge in PAT to GHS 245.1mn in 1H2025, supported by a 16.0% rise in net interest income and a reversal of impairment charges (GHS 40.2mn gain). Net interest margin improved to 10.4%, and cost containment remained strong with only a 1.9% rise in opex. However, non-interest income fell sharply due to FX losses despite strong trading gains.
- Balance Sheet Rebalancing Reflects Risk Caution: Net loans declined by 13.7% y/y to GHS 3.8bn as management focused on loan book clean-up and adjusted for Cedi appreciation. Investment securities grew 68.7% y/y, indicating a temporary tilt towards safer assets. LDR dropped to 67.0%, though capital adequacy improved to 22.7%, providing flexibility for renewed credit expansion in 2H2025.
- Outlook Positive, Macro Tailwinds and Digital Upside Support Growth: We expect lending to gradually rebound in 2H2025 as disinflation, stable currency, and lower policy rates revive credit demand, particularly among SMEs and retail clients. SOGEGH’s strong capital and improving asset quality support this shift. Digital growth is also expected to enhance fee income, partially offsetting pressure from non-core income streams.
- Strategic Uncertainty a Key Watchpoint: The ongoing Group-level divestiture remains a material risk. A shift in ownership could alter SOGEGH’s focus on credit-led growth, potentially dampening interest income if the business pivots toward securities. While continued listing is assumed, the lack of clarity warrants close monitoring as any shift could affect long-term valuation and strategy.
1H2025 Earnings Update
Societe Generale Ghana PLC (SOGEGH) published its 1H2025 results on 28 July 2025 with solid earnings growth, underpinned by broad-based income gains and a reversal in impairment charges. Profit-after-tax rose by 46.1% y/y to GHS 245.1mn, with earnings per share climbing to GHS 0.69p (+46.8% y/y). Net interest income surged by 16.0% y/y to GHS 615.3mn, supported by a 13.7% y/y increase in interest income, which translated into a 1.0pp uplift in net interest margin (NIM) to 10.4%. Non-funded income, however, came under pressure, falling by 64.1% y/y to GHS 49.0mn despite a strong 209.8% y/y jump in net trading income to GHS 65.3mn. We believe the sharp rebound in net trading income was driven by strategic positioning in foreign currency, allowing management to benefit from the Cedi’s sharp appreciation together with active fixed income trading in 1H2025. That said, the decline in overall non-funded income is largely attributed to a steep -269.4% y/y drop in other operating income, which swung to a loss of GHS 70.7mn due to foreign exchange losses from the Cedi’s strength. This reversal effectively offset the gains from net trading income. On the cost side, operating expenses remained contained, rising modestly by 1.9% y/y to GHS 326.7mn, supported by easing inflation and Cedi appreciation. As a result, cost-to-income ratio ticked up marginally by 1.1pp to 49.2%. Impairments improved significantly, swinging to a gain of GHS 40.2mn from a loss of GHS 83.5mn in the prior year, marking a 148.1% y/y turnaround. Despite the strong momentum in net interest income, we noted a 13.7% y/y (20.8% q/q) contraction in net loans and advances to GHS 3.8bn. This was accompanied by a 68.7% y/y (+62.2% q/q) increase in investment securities to GHS 2.3bn, pointing to a shift in risk appetite towards loan book clean-up. We also attribute part of the contraction in the loan book to the impact of the Cedi’s appreciation on foreign currency exposures. Accordingly, the net loan-to-deposit ratio (LDR) declined to 67.0% in June 2025, down from 74.8% in March 2025, though still positioning SOGEGH near the 15.0% lower-bound of the CRR directive. Asset quality improved on a year-on-year basis, with the NPL ratio falling by 3.3pp to 17.9%, although quarter-on-quarter movement showed a marginal uptick of 0.4pp. Capital resilience strengthened, with the Capital Adequacy Ratio (CAR) improving to 22.7%, up 6.0pp y/y (+2.3pp q/q), positioning the bank well for a potential return to risk asset expansion in the near term. We maintain our view that SOGEGH remains a stable income play, supported by improving profitability and strong capital protection. While the ongoing moderation in risk appetite may constrain near-term valuation upside, we see room for a faster return to risk asset growth, backed by a robust capital buffer and waning yields on investment securities. Nonetheless, we continue to flag the potential Group-level sale decision as a key risk to monitor, though no update has yet been provided by the bank.
Near-term Outlook: Earnings Momentum Faces Rebalancing Act Amid Shifting Macros
- We anticipate continued growth in net interest income on the back of rising loan demand and a recovering credit cycle. With inflation declining and policy rates easing, borrowing appetite is likely to rebound, especially across SMEs and retail segments. SOGEGH’s strong capital buffer (CAR: 22.7%) positions it well to selectively re-accelerate loan disbursements after a cautious 1H2025 marked by loan book contraction. That said, we believe net interest margins could plateau or edge down in 2H2025, as asset yields adjust more slowly to falling rates.
- 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.
- We expect non-funded income to stage a partial recovery in 2H2025. With digital activity likely to pick up on the back of economic expansion and increasing mobile transactions, we foresee stronger fee-based income. However, the FX-driven volatility that weighed on other operating income in 1H2025 may persist if Cedi strength continues, albeit to a lesser extent. We believe management will seek to rebalance trading exposures to avoid further mark-to-market shocks, but scope for major uplift remains constrained.
Cost Containment to Persist
- We believe SOGEGH will continue to benefit from the disinflationary environment, which should keep operating expenses in check. The muted 1.9% y/y rise in operating expenses in 1H2025 reflects strong discipline, and we see further room for efficiency gains, particularly through digital cost leverage as volumes grow. The cost-to-income ratio may hold around the current 49.0% – 50.0% range, though top-line softness from non-interest revenue may exert mild upward pressure.
Investment Allocation May Pivot Back Toward Lending but Will Remain Crucial for Liquidity Management
- With government set to return to the bond market, we expect banks including SOGEGH to reassess asset allocation between investment securities and loans. Given waning yields on Treasury securities, and a more supportive credit environment, we believe the 2H2025 tilt will gradually favor higher-yielding private sector lending. Nonetheless, investment securities may still serve as a liquidity buffer, particularly in the early part of the half.
Key risks
- While the stock offers earnings visibility and capital strength, the upside may be tempered in the near term by ongoing weakness in non-funded income and uncertainty surrounding the Group’s potential exit decision. The lack of clarity on this strategic overhang could constrain valuation re-rating despite improving fundamentals.
Valuation: BUY
- Our BUY rating is based on our weighted average fair value of GHS 2.73 per share, representing an upside of 36.6%, using the weighted average prices from our dividend discount (DDM), residual income (RI) and relative valuation models. We see strong near-term upside for SOGEGH, supported by robust fundamentals and a constructive outlook, and therefore assign a BUY rating.
- SOGEGH is trading at a TTM P/E of 2.3x and P/B of 0.53x.