FY24 earnings up 29% driven by loan growth and NIM expansion

#themes: NIM, asset quality

Event: Afreximbank released their FY24 results reporting a 29% rise in profits to USD 974mn and a 19% increase in EPS driven by a 25% increase in NII and benefitting from the elevated interest rate environment as well as a slower increase in operating costs and loan provisions. PPOP increased by 27%. 

NIM expansion: The bank’s NIM increased by 60bps to 5.4% as the asset yield’s 80 bps rise to 9.1% outpaced the COF’s 40bps rise to 4.6%.  

Positive jaws: Total operating income increased by 26% to USD 2.0bn while operating expenses accelerated by 21%, registering positive jaws for the third year running, leading to a 74bps decline in the cost to income ratio to 18.3%.

The balance sheet expanded by 5.4% to USD 35.3bn driven by 8.5% growth in the loan book to USD 29.0bn and a 51% increase in investment securities to USD 0.9bn. Total interest earning assets increased by 4.9% as the decline in cash and cash equivalents of 17% weighed on the overall growth. The earning asset mix now stands at 98.1% from 98.5% in FY23.

Interest bearing liabilities increased by 3% to USD 27.7bn as an 11% increase in borrowings due to banks and a doubling in money market deposits more than offset the 19% and 8% YoY declines in customer deposits and debt securities, respectively. Borrowings due to banks now account for 50% - the highest year-end level since 2015.

Asset quality remains exceptional with the NPL ratio improving to 2.3% from 2.5%. Stage 3 loans increased by 4% while gross loans increased by 10%. We particularly like the increase in stage 3 IFRS provisioning to 81% from 52% in FY23. Inclusive of stage 3 loans suspended interest, total coverage increased to c.100% from 89% in FY23. Cost of risk was largely unchanged at 2.2%.

Dividend: The bank recommended a first and final dividend of USD 300mn (31% DPR; FY23 – 35%) and a special dividend of USD 50mn (total dividend: USD 350mn). This translates into a DPS of USD 0.35 for the listed DRs and using the outstanding shares as of FY24. This in turn translates into a yield of 12.7% against the market price of USD 2.80 as of 28^th March 2025.

Upshot: The results were impressive (earnings were ahead of our expectations), especially in light of a tough macroeconomic environment and elevated interest rates that could easily have led to asset quality deterioration. We note a drop in the bank’s liquid assets – which we expect to improve as rates slowly decline and the bank resumes issuance of debt securities. We still expect double-digit credit and earnings growth in FY25E but recent tariff increases and global trade disruptions may weaken growth outcomes.

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