2023 has underscored the importance of ETI's geographically diverse model. The group navigated major currency devaluation and macroeconomic frailties in some regions of operations to report strong H1'23 earnings. Despite the political situation in Niger and other legacy issues like the weak debt profile in some markets, we expect the bank's earnings to remain resilient, buoyed by higher yields and a strong ability to reprice credit assets, 50.0% of which matures in less than a year.
In FY'23, we expect ETI's earnings to be upheld by higher yields and improved non-interest revenue (NIR), with the former likely to reflect better deposit margins and the latter likely to ride enhanced payments solutions and foreign currency (FCY) sales in Nigeria, CESA and UEMOA, especially within its corporate and commercial banking segments.
In addition, the bank holds a huge proportion of its loan portfolio in relatively stable West African CFA franc (c.53.0%) and USD (c.26.0%), which should shield its interest-earning income from the undue impact of currency gyrations in some regions. We attribute the FX pressures to reforms in Nigeria, low import cover in Malawi, fiscal-linked drags in Ghana, and hyperinflation in Zimbabwe and South Sudan. Yet, aided by the patterns in H1, we believe that gains from the mentioned earnings enablers should mask the pressures on these fronts.
Elsewhere, despite the rising geo-political tensions in Niger, the bank remained optimistic about its operations, citing its track record during war periods in Mali, Burkina Faso, and Gambia. ETI is also confident that its deep-rooted relationships in Niger will be supportive while noting that the related operation is only c.1.8% of total asset size and c.1.5% of gross loan.