Ecobank Ghana Limited (GSE:EGH) has reclaimed its position as the biggest bank in Ghana with total assets of GHS10.05bn, buoyed by 20.0%y/y growth in customer deposits to GHS7.23bn in 1H2018. This is above GCB Bank’s total assets of GHS9.93bn in 1H2018.

Ecobank’s revenue recovered by a modest 5.3%y/y (versus a decline of 4.4% in 1H2017) to GHS687.87mn on the back of significant increased in earning assets, which helped to cushion the adverse impact of low interest rates on revenue. Loans rose by 15.6%y/y to GHS3.98bn while investment securities jumped by 124.5%y/y to GHS2.91bn in 1H2018. The growth in earning assets were mainly funded by 20.8%y/y rise in deposits to GHS7.23bn in 1H2018, which confirms that the bank’s digital migration strategy is working.

While Ecobank’s asset quality worsened on a y/y basis from 11.7% to 13.7%, there was an improvement on a q/q basis. The bank’s NPL ratio dropped from 20.0% in December 2017 to 19.1% in March 2018 and 13.7% in June 2018. The bank’s margins were buoyed by a drop in the cost of risk from 2.7% in 1H2017 to 1.7% in 1H2018. The cost of risk also improved from 6.5% in December 2017 to 1.7% 1H2018.

However, Ecobank’s operating efficiency worsened despite the introduction of cost control measures that helped to limit the growth of operating expenses to 5.5%y/y in 1H2018. The low revenue growth elevated the cost-to-income ratio to 50.2% in 1H2018 from 48.8% in 1H2017. While the Ecobank’s migration to digital banking could support an improvement in operating efficiency in the future, the bank’s significant holdings of low yielding government securities (29% of assets) could threaten interest income in the future as Ghanaian authorities drive the economy towards a low interest regime.

The modest recovery in revenue plus the improvement in the cost of risk helped earnings to recover by 10.9%y/y (versus decline of 32.9%y/y in 1H2017) to GHS157.37mn in 1H2018.