Rating Summary:
We maintain our “BUY” rating on GCB Bank PLC (“GCB”), following an upward revision of our fair value to GHS 50.8 per share, reflecting sustained earnings strength, and improved asset quality. Given the market price of GHS 41.2, this implies an upside of 23.3%. The upward adjustment reflects a lower risk-free rate of 12.8%, down from 15.6% at 9M2025, driven by compressed yields on restructured domestic bonds. We have transitioned from the capital asset pricing model (CAPM) to a Build-Up approach, using the average of 3-year and 5-year bond yields plus a 5.0% risk premium, given the lack of statistical robustness in observed equity betas. We also refined our relative valuation by narrowing the peer group to a more comparable subset, enhancing the integrity of our multi-factor linear regression P/B model and improving market-implied alignment. Despite slightly trailing our earnings forecast by 1.7%, GCB’s FY2025 performance was stellar, posting a 71.6% y/y jump in earnings, underpinned by strong topline growth, a 40.9% y/y expansion in total income, margin resilience, and a sharp moderation in credit costs. Efficiency gains were also notable, with the cost-to-income ratio improving to 47.2%, while asset quality strengthened materially as cost of risk declined to 1.2% and the non-performing loan ratio (NPL) edged closer to the regulatory threshold of 10.0%. We believe the bank remains well-positioned to extend its performance into 2026, supported by strong capital buffers, improving balance sheet utilisation, and capacity to grow risk assets, as it expands into higher-yielding quality assets despite softer Treasury yields.
GCB FY2025 Results: No Wobbles, GCB Closes FY2025 on Rock-Solid Form
