Rating Summary:
We update our rating on CalBank Plc (“CAL”) to “HOLD”, with fair value nudging down to GHS 0.86 per share against a current market price of GHS 0.79, and an 8.7% upside. The revision stems from a higher risk-free rate of 13.01%, tracking the yield on the recently issued long-term bond. We also moved away from CAPM in favour of a steadier framework, the 7-year bond yield plus a 5.0% risk premium as observed equity betas no longer held up statistically. On the relative valuation side, a tighter peer group has sharpened our multi-factor P/B regression and brought it closer to market-implied pricing. CAL’s improved Capital Adequacy Ratio, following the recent capital injection, puts the bank on a firmer footing and points toward sustainable year-on-year profitability. Although the numbers support the positive earnings outlook, our optimism comes with caveats.
Two constraints stand between CAL and genuine value creation:
We update our rating on CalBank Plc (“CAL”) to “HOLD”, with fair value nudging down to GHS 0.86 per share against a current market price of GHS 0.79, and an 8.7% upside. The revision stems from a higher risk-free rate of 13.01%, tracking the yield on the recently issued long-term bond. We also moved away from CAPM in favour of a steadier framework, the 7-year bond yield plus a 5.0% risk premium as observed equity betas no longer held up statistically. On the relative valuation side, a tighter peer group has sharpened our multi-factor P/B regression and brought it closer to market-implied pricing. CAL’s improved Capital Adequacy Ratio, following the recent capital injection, puts the bank on a firmer footing and points toward sustainable year-on-year profitability. Although the numbers support the positive earnings outlook, our optimism comes with caveats.
Two constraints stand between CAL and genuine value creation:
- Retained earnings remain negative, capping internal capital generation and keeping dividends off the table for now.
- Loan growth is still subdued and needs to pick up meaningfully to unlock further value
These factors suggest that while earnings have improved, core lending activity remains subdued, and this will weigh on the strength and sustainability of future earnings. We expect Earnings Per Share (EPS) to remain stretched, given the enlarged share base following the 4Q2025 capital raise with dividend distribution highly unlikely over the next two to three years. Having steadied the ship, management’s tone on the banks near-term performance is positive, but we hold a more cautious view. The bank has stabilised, but it is not yet operating at the level of its peers. A full recovery will require a rebuild of earnings capacity and a return to positive retained earnings.