Share analysis: CAL Bank – finance

The Bank

CAL Bank is a Ghanaian bank that provides a broad range of banking and financial products and services to large corporations, small and medium-sized enterprises, public-sector institutions and retail customers through a network of 24 branches across the country. The products and services include business loans, payment and account services, deposits, trade finance, consumer banking services, leases, mortgages and investment banking. In November 2004, CAL Bank was officially listed on the Ghana Stock Exchange.

The bank has grown significantly since it went public. It now has a network of about 95 ATMs and its branches have increased to 24. The bank offers tailored domestic-banking solutions, electronic banking and fuel debit cards, as well as general insurance and life insurance products. The bank’s domestic-banking offerings include cash collection services, draft for Canadian visa applicants, salary processing, standing-orders solutions and utility bill payment options. The bank’s electronic banking solutions include electronic alerts, the E-zwich system, SMS banking, the CAL Visa Electron card, CALN et and cash-in ATMs. The bank’s fuel debit cards include post-paid and pre-paid fuel cards.

The bank plans to continue growing its franchise by implementing the following strategies: increasing branches; expanding mobile banking platforms and ATM networks; developing human capital capabilities through recruitment and training, and aligning these with growth in key strategic areas; reaching new customer segments; and making acquisitions to accelerate the bank’s network growth. In 2015 the bank added three more branches in Osu, East Legon and Tema Community 25, in line with its expansion plans.

The bank’s deposits for FY2014 increased by 68.7% to GHS1.35bn ($374.6m) from GHS799.2m ($221.8m). The shareholders’ fund has also increased by 39.2% within the same period. Total assets have grown by 63% from GHS1.66bn ($461m) to GHS2.7bn ($749.3m) in FY2014. There was improvement in the non-performing loans ratio, which fell from 7.9% to 6.2%, and the bank maintained a relatively high capital ratio of 22.2%, well above the regulatory requirement of 10% in FY14, as a result of subordinated term debt, which is allowed as capital for capital adequacy purposes.

Development Strategy

The bank plans to continue developing and expanding its market presence through the use of superior technology to deliver high-quality services to its clients; an amplification in the use of alternative delivery systems through the expansion of its branch and mini-branch system; the expansion of mobile banking platforms and growing its ATM network to increase the bank’s footprint across the market; greater focus on the development of human capital capabilities and profitable acquisitions to accelerate the bank’s network growth and facilitate entry into new customer segments. Plans are in place to add new branches, to total 30 overall across the whole of the country, by the end of 2015.

Forecast

Expansion of the bank’s franchise coupled with improving revenue will enhance revenue growth by 47.0% in 2015 and we expect EBITDA to rise by 50.5% over the 2014 figure. In 2015, we estimate net income to increase by 59.4% due to the bank’s aggressive strategy in mobilising deposits, which have risen by 68.7% in 2014. This strategy is intended to bring in funds to FY2014 enhance the bank’s activities to boost overall profitability. We believe the customer-centric marketing strategies, improved services to clients combined with a continuous focus on trade finance and other segments should boost profitability. We think the investment in new systems to operate more effectively should also yield significant growth in earnings.