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Equities research analysts at CardinalStone Partners Limited have projected a potential upside of 47% for Ecobank Transnational Incorporated (ETI) based on anticipated growth in earnings per share and consistent dividend payments in 2023.
Following a surge in the stock market on Monday, the Pan African lender (Ticker: ETI) surpassed N310 billion with a price per share of N16.9, distributed across more than 18.349 billion outstanding shares.
In their latest update on the banking industry, CardinalStone expects the group’s earnings per share to reach $1.3 in the 2023 financial year, surpassing its actual performance in 2022.
With an estimated 9.7% increase in gross earnings, analysts predict that Ecobank Group’s annual profit will reach $471.7 million, reflecting a growth of 28.6337% compared to the $366.7 million recorded in 2022.
Despite the anticipated growth, analysts estimate that dividend payments will remain relatively stable until 2024.
Over the past few years, ETI has successfully optimized costs, achieving a cost-to-income ratio of 56.4%, the lowest in a decade. The bank has also reduced its non-performing loans ratio from 8.2% in 2015 to 5.2% in 2022.
To lower funding costs amid interest rates in its key African market, the group has expanded its low-cost deposit base, with current accounts and savings accounts (CASA) accounting for 82.0% of customer deposits in 2022, up from 68.9% in 2015.
“This achievement was driven by initiatives focused on a strengthened risk and control framework, stable funding leveraging brand recognition and relationships, and investments in technology,” stated CardinalStone.
Looking ahead, the investment firm sees significant opportunities for Ecobank as it benefits from intra-Africa linkages such as the African Continental Free Trade Area (AfCFTA) and the Pan-African Payment and Settlement System (PAPSS). With a diverse regional presence, the bank is poised for accretive opportunities.
“While we await the bank’s future strategic roadmap, which management intends to communicate in H2:2023, in the near term, the bank has expressed a strong commitment to executing important short-term initiatives to drive growth and returns,” noted the update.
CardinalStone analysts have set a target price of N23.23, indicating a potential capital appreciation of 47.0%. The firm added that ETI’s current price-to-book (PB) ratio of 0.6x compares favorably to select peers in Europe, the Middle East, and Africa (EMEA) with a PB ratio of 1.0x.
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