Rating Summary:
We update our rating on Standard Chartered Bank Ghana PLC (SCB) to “SELL”, following an upward revision of our fair value to GHS 59.94 per share. This remains below the current market price of GHS 79.41, implying a downside of 24.5%. The upward adjustment reflects a lower risk-free rate of 11.55%, down from 15.6% at 9M2025, driven by compressed yields on restructured domestic bonds. We have transitioned from 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 these methodological refinements and the higher fair value estimate, the stock remains overvalued relative to underlying fundamentals. SCB’s FY2025 earnings edged our forecast by 4.6%, but the quality of earnings remains weak, driven largely by trading income, impairment gains and lower taxes rather than core operations. Net interest income declined by 28.5% y/y, while the balance sheet remained defensive, with loan book contraction amid elevated NPLs and a continued tilt toward government securities. That said, we acknowledge SCB’s strong underlying franchise, solid capital position, and capacity for earnings recovery as core conditions normalise. However, at current levels, valuation appears stretched, and our SELL recommendation reflects an opportunity to take advantage of the strong technical momentum in the market, rather than a deterioration in long-term fundamentals.
Standard Chartered Bank Ghana Plc FY2025 Results : Boosted Earnings, But Fundamentals Still Trail
