The revenue of Societe Generale Ghana Plc (SOGEGH) grew by 10.6%y/y (versus 25.0%y/y in 2019) to GHS686.04 million in FY2020. Revenue was mainly driven by 14.4%y/y rise in interest income to GHS519.46 million despite a 3.1%y/y contraction in the loan book to GHS2.56 billion as the bank tightened its credit conditions in the midst of the coronavirus pandemic. The bank ramped up its holdings of risks free government securities (debt instruments), which jumped by 414.5%y/y to GHS427.59 million in FY2020. Noninterest revenue remained flat in 2020 as the pandemic hit hard on the bank’s other income, which includes exchange gain, rent/hiring fees, postages and insurance fees received.

The bank’s decision to tighten its credit conditions in the midst of the covid-19 pandemic helped to improve its asset quality. The Non-Performing Loans ratio went down to 6.7% in FY2020 from 8.8% in FY2019. SOGEGH also managed to sustain an ongoing improvement in its Cost of Risk (CoR) to help preserve margins. The CoR dropped to 1.3% in FY2020 from 2.1% in FY2019 on the back of 39.3%y/y decline in impairment charges to GHS33.35 million in FY2020. Going forward, we believe that the bank is positioned to grow its loan book into target sectors when economic conditions improve, especially given that its loan-to-asset and loan-to-deposit ratios dropped significantly to 50.1% and 73.6% respectively in FY2020 from 59.5% and 83.4% in FY2019.

SOGEGH’s management also managed to preserve further margins via sustained improvement in its operating efficiency. The bank kept operating expenses growth low at 6.0%y/y (versus 16.2%y/y in FY2019) to GHS293.97 million in FY2020. The slowdown in the growth of operating expenses helped to achieve a 90bps drop in the cost-to-income ratio to 53.6% in FY2020 from 54.5% last year.

Profit before tax rose by 25.4%y/y to GHS221.63 million in FY2021 on the back of the improvement in asset quality and lower cost-to-income achieved during the period. However, owing to a higher effective tax rate of 30.4% in FY2020 (versus 27.3% FY2019), profit after tax grew by 20.0%y/y to GHS154.21 million in FY2020.