FX revaluation losses dampen net earnings, but core revenue growth was robust
Muyiwa Oni
#themes: Guarantee portfolio growth, FX losses
Action/Event: InfraCredit published FY2025 results showing an 86% y/y decline in net profit, driven by foreign exchange losses of N9bn. When we adjust net profit for the FX loss, net profit is up 72%, reflecting the robust growth in gross revenue, driven by strong growth in guarantee fee income and interest income growth. Gross earnings and adjusted net income were in line with our expectations, as we didn't factor in the downside from the appreciation in the currency. We forecast net profit growth of 67% to N16.6bn in FY26e.
Guarantee fee income increased by 44.5% y/y to N7.1bn, ahead of our expectations of N6.1bn. The strong growth in guarantee fee income was driven by mandate fees which increased by 115%, guarantee fees up 35% and monitoring fees up 30%.We forecast guarantee fee income growth of 15% in FY26e to N8.18bn, driven by our expectations of increased growth in the guarantee portfolio.
Interest income increased by 36% to N29,6bn, reflecting the elevated interest rate environment during the year. Interest income from treasury bills was up 20x, while investment income from eurobonds was flat. We forecast a 9% decline in interest income in FY26e, reflecting our expectations of further moderation in interest rates, as inflation continues to decline.
Guarantee portfolio increased by 24% during the year, to N272.8bn, as the firm added names such as Craneburg EKSG, First Electric, CeeSolar, Pirano, Ashipa and Sosai to its Guarantee portfolio book. We forecast 23% growth in the Guarantee portfolio in 2026e to N327.4bn, driven by the improving macro and increased demand for infrastructure across sectors such as energy, logistics and agriculture.
Asset quality remains robust, as the firm currently has an excess of collateral over outstanding value of the guarantee at N1.139tn, an 82% increase from N625bn in 2024.
LCY proportion of assets increasing as NGN stabilises: Foreign currency assets declined to 66% of total assets from 87% in 2024, as the firm adjusts it balance sheet to reflect a more stable Naira. This should result in lower FX losses in FY26e. Historically, foreign currency assets accounted for c.85% of total assets of the firm.
Valuation: We maintain our price range of N3.4 at the lower band to N4.0 at the higher band.
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