Performance: Growth in funded income drives profitability

• Profit after tax grew by 5.8% y/y to GHS 581.9m, driven mainly by a 12.9% increase in net interest income
• Notably, funded income increased on account of a 11.8% decline in interest expense and a 9.4% y/y increase in interest income
• Non-interest revenue growth slowed to 3.4% y/y on account of a decline in net trading income and other operating income
• Impairment charges on financial assets increased by 12.9% y/y to GHS 203.5m. The bank’s NPL ratio increased by 6.7pp y/y to 13.0%
• EGH’s cost-to-income ratio improved by 1.72pp y/y to 46.2% with ROaE rising by 125pp to 22.7%

Outlook: Credit growth set to propel earnings

• EGH’s credit portfolio increased significantly in 4Q2021 with net loans and advances rising by GHS 963.8m q/q, exceeding our expectations
• Like other banks under our coverage universe, we expect to see double-digit growth in EGH’s loan book, riding on the continued increase in economic activity
• Consequently, we expect growth in funded income to improve in tandem with loan book expansion and propel FY2022 earnings
• Contrary to our expectations, non-funded income trailed our estimates. Looking ahead, we expect non-interest revenue to improve in 2022 supported by an increase in credit-related fees from credit expansion as well an increase in income from forex trading as import and export trade continue to rise
• We remain concerned about the rise in the stock of non-performing loans over the year. Overall, we expect the bank’s operating income to remain robust to absorb higher cost of risk which has trended above 3.0% over the last 3 years.

Valuation: Under Review 

• EGH is trading at a P/B of 0.9x and we intend to re-initiate coverage in the coming months