HFC share price could inch up in the short term

On the Ghana Stock Exchange

HFC Bank managed to build on its 2017 successful operations by recording improvements in earnings report for the HY-2017 period. The soon –to-be re-branded Republic Bank of Ghana reported a Pre-Tax Profit growth of 44.99%; from GHS 16,081,000 in HY-2016 to GHS 23,316,000 in HY-2017. This was largely supported by operational efficiency and efficient utilisation of company assets to the advantage of the bank’s revenue generation capability.

Interest Income grew by 19.10%; from GHS 128,989,000 in HY-2016 to GHS 153,628,000 in HY-2017. Interest Expense equally went up by 11.46% to close the mid year at GHS 72,521,000. Operating Profit recorded during the period under review went up by 17.40% compared to same period in the prior year. Improvement in Operating Profit margins was on the back of a 28.98% growth in Net Interest Income which went up from GHS 56,223,000 in HY-2016 to GHS 72,521,000 in HY-2017. Net Fees and Commission Income declined by 8.34%; to GHS 12,574,000 in HY-2017 as a result of dips in income from commissions. Net Trading Income equally dropped in value by 8.64% for the period under review to GHS 5,765,000. This reflects the continuous dip in trade profits of HFC bank as a result of operational difficulty with trade partners.

Net Impairment loss on financial assets rose by 21.1%; from GHS 1,000,000 in HY-2016 to GHS 1,211,000 in HY-2017. Personnel expenses however declined marginally by approximately 2%; from GHS 39,489,000 in HY-2016 to GHS 38,708,000 in HY-2017. This rightly reflects a cost cutting measure adopted by the bank as a result of the low levels of income recorded from the bank’s activities in prior years.  At the end of the six months period, Profit after Tax increased by 59.30%; from GHS 14,281,000 in HY-2016 to GHS22,749,000 in HY-2017.

Return on Assets (ROA) of the bank increased from 0.86% in HY-2016 to 1.22% in HY-2017. Return on Equity (ROE) equally went up to reflect the improvement in the company fundamentals. ROE rose from 7.36% in HY-2016 to 13.90% in HY-2017. Improvement in the ROA indicates efficient use of available assets to generate appreciable returns to shareholders at the same time creating value for individual shareholders. Cost-to-Income of the bank improved over the period under review albeit marginally. Cost-to-Income fell from 80.39% in HY-2016 to 75.78% in HY-2017. This show less costs was incurred in generating income for the bank.  The size of the bank’s loan book decreased by 14.08%; during the period under review whereas the levels of deposits from customers rose by 17.23% to GHS 1.554,017,000 in HY-2017.  Borrowings on the books of accounts fell by 16.65% to GHS 17,452,000 in HY-2017.

 

GN Analysts expect that the MTN mobile money deposit taking venture HFC bank has signed onto will improve the liquidity levels of the bank. HFC could witness complete turnaround of the bank’s profits on the back of the on-going restructuring of operational lines which will subsequently impact the share performance of the equity. GN Analysts recommend a HOLD of HFC shares as the current status remains unstable. The YTD capital gains on the share are currently pegged at 13.33%. Gains on the stock could shoot up in the short term as the stock gains attraction on the local bourse.

Trading activity on the bourse ended with 6 gainers (ACCESS, CAL, EGL, ETI, UNIL and SCB) and 2 losers (PBC and GCB) yesterday. SOGEGH topped the trading chart in terms of volume as 130,000 shares worth GHS 97,500.00 changed hands. Returns on the Composite and Financial Stock Index pegged at 36.51% and 38.24% respectively.

 

On the Ghana Alternative Market (GAX)

Trading activity on the Alternative Market was hushed yesterday as no shares changed hands.

HORDS currently lead record capital gains on the GAX, appreciating by 25% from 2016 year open.

 

On the Currency market

The Cedi LOST marginally to the EURO and the British Pound but GAINED to the USD on the inter-bank market yesterday. The local currency exchanged at a mid-rate of GHS 4.3854 to the USD, GHS 5.6593 to the GBP and GHS 5.1773 to the EURO.

The GCFM Cedi index, a measure of the holistic performance of the Cedi on the inter-bank market now records a year-to-date depreciation of 8.78%.

 

By GN Research

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