Share analysis: Société Générale Ghana – finance

The Bank

Société Générale Ghana, a strong local bank, is one of the leading financial institutions in Ghana. It operates 37 fully networked branches, agencies and outlets across the country and serves a wide range of corporate customers, individuals and small and medium-sized enterprises.

The bank was incorporated on February 7, 1975 as a limited liability company with the name Security Guarantee Trust Limited and was solely owned by the Social Security and National Insurance Trust (SSNIT). In February 1976, SSNIT changed the bank’s name to Social Security Bank Limited (SSB) and was subsequently granted a license by the Bank of Ghana to operate as a bank. In May 1994, it merged with the National Savings and Credit Bank but retained the name SSB. SSB went public in October 1995 and was listed on the Ghana Stock Exchange. In May 2003 Société Générale, one of the largest banks in the world, acquired a controlling interest in SSB and changed the name to SG-SSB. In March 2013, SG-SSB was rebranded as Société Générale Ghana (SOGEGH) to achieve greater convergence with the Société Générale group. The mission of SOGEGH is to create a preferred banking institution which employs professionalism, team spirit and innovation to provide quality services that best satisfy it’s customers’ needs.

The bank’s strategy is sustainable growth with lower risk. In view of this, the bank continued with the implementation of it’s Ambition 2015 initiative, which is focused on client service, operational efficiency and communication and effective collaboration with the Ghana Investment Promotion Centre. These activities led to the cleaning up of the credit portfolio, shoring up of the team, renewed orientations and re-aligning business processes to be more responsive to customer needs and the implementation of new banking products. The bank strives to continue to further enhance customer service and maintain leadership in innovation, capture growth through business development and increased synergies, and deliver sustainable profitability coupled with strict cost discipline and enhanced risk management in an effort to increase shareholder value in 2015. The bank’s profit after tax grew by 36.98% to GHS49.8m ($13.8m) in 2014 from GHS36.4m ($10.1m) in the previous year, and this performance is reflected in the share price which grew steadily to an average of GHS0.91 ($0.25) and ended the year at GHS1.00 ($0.28) from GHS0.80 ($0.22) at the end of 2013. Over the same period the bank’s shareholder’s funds increased by 15.02% from GHS193m ($53.6m) to GHS222m ($61.6m).

Development Strategy

The bank will open three branches in the Airport, East Legon and Ashaiman districts in 2015. In addition, the bank seeks to grow more deposits and to make the bank’s services more accessible to clients. The objective is to capture a significant percentage of the growing bankable population year on year through offering excellent services that focus on building lifetime relationships; demonstrating total business control by improving procedures and managing the risk inherent in banking and making service delivery efficient; developing staff through training and enhancing the communication of products.

Forecast

With strong promotion campaigns and competitive pricing to boost deposits, we estimate that deposits will increase 21.7%. Nearly 60% of revenue-growth initiatives are operational in nature and include projects related to operational efficiency, cost reduction and others. This suggests the bank is getting serious about efficiency, scale and profitability. We estimate revenue to grow marginally to about 49.9% in 2015 compared with the FY14 figure of 49%. The EBITDA is expected to rise 46.1%. We expect net income to increase by 31.4% in FY15 over the FY14 figure of 41.6%.