CAL Bank reported FY 19 net profit of GHS153mn, up 13% yoy and 5% below with our forecast. The positive performance was mainly driven by higher net interest income (up 23% yoy) despite a 20% yoy dip in non-interest income.
We reiterate our Buy recommendation (TP: GHS1.70, 83% ETR), supported by the bank’s impressive balance sheet growth, which is in turn supported by strong CAR. CAL trades at 0.6x 2020f PB, a 40% discount to Ghana peers.
- Revenues rose by 16% yoy, driven by a 23% yoy increase in net interest income attributable to loan book expansion.
- Cost/Income ratio fell by 1ppt to 44% despite a 16% yoy increase in operating expenses (attributable to increased salaries on the back of the higher minimum wage).
- Loans were up 18% qoq, due to increased lending from industrial and construction sectors which grew by 131% and 102% yoy respectively and account for c40% of loan book.
- Non-interest income was down 20% yoy due to lower trading income and higher fee expenses from transactions costs on medium term borrowings.
- Deposits were down 2% qoq, as the bank seems to have abandoned its cheaper agency banking deposits opting for alternative funding such as inter-bank borrowing (up 108% qoq) and other borrowings.
- NPL ratio rose by 0.9ppts qoq mostly attributed to defaults in some major construction sector loans, which currently account for 33% of loan book.
Going forward, the focus seems to be on strengthening the core banking business and continued investment in technology infrastructure to improve operational efficiencies.
|GHSmn||FY 19||FY 18||yoy||9M 19||qoq|
Net interest income
Net attributable profit
Cost of funds
Going forward, focus seems to be on strengthening the core banking business and continued investment in technology infrastructure to improve operational efficiencies