Performance: Growth drivers remained unchanged

• In line with our projections, profit after tax increased by 420bps y/y to GHS 222.9m
• Growth in earnings was driven mainly by robust growth in non-interest revenue which increased by 66.6% y/y to GHS 276m. Net trading income constituted 70% of non-interest revenue
• Net interest income fell by 10.2% y/y to 469.5m on account of double-digit growth in interest expense coupled with muted growth in interest income. Notably, customer deposits grew by 24.0% y/y to GHS 5.2b, compared to the 13.0% y/y growth recorded in 2020
• Impairment loss on financial assets fell by 510bps to GHS 82.4m. The bank’s NPL ratio fell to 11.2% from 13.5% a year ago
• CAL successfully contained operating costs, with the bank’s cost-to-income ratio improving by 236bps y/y to 43.7%

Outlook: More room for growth

• We expect non-funded income to remain the key growth driver as the trade book benefits from the volatility in the fixed income and currency markets
• Loan book growth is expected to remain largely muted for 1H2022 given the unfavourable credit environment. However, this is likely to change in 9M2022 as low loan-to-deposit ratios force banks to improve on credit growth
• Increased economic activity and strong commodities price outlook particularly for oil and gas is likely to support credit expansion especially to the bulk oil distributors in 2H2022
• Consequently, we are optimistic about a pick-up in funded income growth but maintain a cautious outlook for asset quality as risk levels remain elevated
• Regarding distributable earnings, we are pleasantly surprised to see a 40% dividend pay-out ratio given recent history.  That notwithstanding, due to the unfavourable credit environment and high capital levels, it was only a matter of time before dividends surged
• In our opinion, we expect two main themes to drive growth in 2022; 1) a recovery in credit growth post 1H2022 as the economy expands and low LDRs forces credit expansion or 2) Higher dividend payments to normalise capital levels. Either way, both are expected to maximise shareholder value

Valuation: Under Review 

• CAL is trading at a P/B of 0.4x and we expect to re-initiate coverage in March 2022