Performance: Profit growth rebounds on NIM recovery

• Profit after tax rose by 7.6% y/y to GHS 350.1m on account of a strong rebound in net interest income and a slight reduction in impairment charges
• Net interest income increased by 31.6% y/y driven by a 33.1% y/y rise in interest income, notwithstanding the 42.5% y/y increase in interest expense. Consequently, net interest margin (NIM) improved marginally to 6.7% from 6.3% a year ago
• Non-funded income slipped 1.6% y/y on account of a 33.4% y/y dip in net trading income
• Net impairment charge declined by 9.5% to GHS 101.6m.  EGH’s NPL ratio (Per BoG) improved to 10.92% from 13.86% in 1H2021
• EGH’s cost-to-income ratio rose by 6.34pp to 46.0% as rising inflation impacted the bank’s operations

Outlook: Set for more gains

• As anticipated, EGH’s funded income recovered from the slump we saw in 1Q2021, driven by credit growth and higher rates on investment securities
• In line with our expectation, credit growth moderated in 2Q2022 relative to 1Q2022 as rising inflation impacted economic activity. We expect credit growth to slow down further given the persistent high inflation, yet, we foresee EGH’s NIM improving as the bank takes advantage of rising rates on government securities
• Contrary to our expectation, growth in EGH’s non-funded income declined due to a contraction in net trading income. We expect fees and commission income to register more growth on the back of rising credit-related fees from lending and trade financing. This should partially offset further slowdown in income from EGH’s trading desk should that materialize
• Given the current high inflationary environment, we expect operating expenses to remain elevated in the near-term
• The bank’s asset quality metrics somewhat point to improvement in credit risk despite the prevailing headwinds. Impairment charges on financial assets have declined slightly on a year-on-year basis both in 1Q2022 and 2Q2022.  EGH’s NPL ratio (Per BoG and IFRS) have declined amidst increased lending
• Overall, we expect EGH’s bottom-line to record gains, riding on further improvement in topline performance

Valuation: Under Review 

• EGH is trading at a P/B of 0.8x and we intend to re-initiate coverage in 2H2022