In brief
- Core Earnings Remain Under Pressure SCB reported a 30.3% y/y decline in PAT to GHS354.3mn, missing our forecast by 15.0%, as a 30.1% decline in net interest income and weak fee income weighed on performance. Higher operating costs further pressured profitability, while impairment write-backs provided insufficient support to offset the decline in core earnings.
- Balance Sheet Contraction Signals a Strategic Shift: Total assets declined 11.7% y/y, reflecting a 17.5% contraction in customer deposits and a near-halving of the investment securities portfolio. The planned exit from Wealth and Retail Banking and redeployment of proceeds into Corporate and Investment Banking (CIB) signal a transition towards a leaner, specialised business model. While strategically coherent, we expect the transition to weigh on near-term earnings visibility.
- Earnings Recovery Remains Dependent on the CIB Pivot: We expect funded income to remain constrained by the smaller balance sheet and modest loan book, although the bank’s strong low-cost deposit base (CASA of 80.0%) should cushion funding costs. Trading income should remain the principal support for non-funded income, but the exit from retail banking could further weaken fee generation. A sustained earnings recovery will depend on successful execution of the CIB strategy, improved transaction banking and trade finance revenues, and tighter cost management.
- SELL – Valuation Remains Stretched: Our weighted average fair value has been revised downwards by 26.3% to GHS31.45 per share (previously GHS46.29), implying a 55.0% downside to the current market price of GHS69.87. The revision reflects the higher risk-free rate, weaker 9M2026 earnings and lower forward earnings estimates as the bank transitions to a CIB-focused model. At a TTM P/E of 14.5x and P/B of 3.8x, the stock continues to trade well above our estimated fair value.