Performance: Growth drivers still in the green

• Profit after tax grew by 20.6% y/y to GHS 468.8m

• This was driven mainly by a by 33.7% y/y growth in non-funded income as fees and commissions as well as trading income grew by 57.9% y/y and 35.0% y/y respectively

• Funded income was little changed at GHS 1.2bn (+2.0% y/y) as loan book growth remained muted

• Consequently, NIMs contracted by 154bp y/y to 9.6%

• Impairment charges on financial assets fell by 18.9% y/y with the bank’s NPL ratio declining marginally by 27bps q/q to 13.6% at the end of 3Q2021

• The cost-to-income ratio improved by 164bp y/y to 43.4% with ROaE little changed at 26.6%

Outlook: Upside is constrained but ROaE will improve to support valuation

• We remain bullish on EGH and anticipate double-digit growth in earnings at the end of FY2021 supported by strong growth in non-funded income

• We are beginning to see green shoots in risk-asset creation and we expect funded income to see much improvement in 2022 as the bank responds positively to the recovery in economic activity. Notably, EGH’s net loans to customer deposit ratio stood at 37.0% at the end of 9M2021, signaling much room for credit expansion

• We are also excited to see asset quality improve consistently over the last few quarters despite the challenging operating environment

• The above notwithstanding, we are turning cautious about the bank’s valuation given the impact of rising risk-free interest rates on cost of equity. At an ROaE of 26.6% versus an average cost of equity (CoE) of 25%, EGH’s upside may be constrained

Valuation: Under Review

• While ROaE may not be significantly above CoE, we expect loan book growth to lead to higher RoAE post 1H2022

• Consequently, at a P/B of 0.9x, we still see significant upside for long-term investors