FY25 earnings up 19% despite lower margins on strong credit growth

#themes: credit growth, NIM

Event: Afreximbank reported 19% growth in earnings driven by: 

(a) 19% increase in interest-earning assets which helped offset a 32bps decline in NIM to 5.0% leading to a 5% growth in NII,

(b) a USD 82mn swing in FV gains and trading income (8% of profit), and,

(c) marginal 4% decline in credit losses. 

Credit growth and quality: Net loans increased by 16% following a very strong Q4 (USD 5.6bn jump) after a decline in the first three quarters – largely short-term trade facilities. The NPL ratio remained low at 2.4% (FY24: 2.3%) while stage 3 coverage inclusive of suspended interest stands at 94% from 100% in FY24. Importantly, the bank noted that it reached a resolution on the USD 750m loan owed by Ghana without sharing details on any restructuring or amounts written off.

Vs. our guidance: Total assets were 1% lower than our estimates, net loans 3% lower while earnings were 7% ahead due to better FV gains and trading income than anticipated. 

Main positives: Despite raising USD 300mn in additional capital during the year (4.2% of capital), the EPS and DPS still grew due to strong earnings profile. The asset quality also remained low in a year when trade tariffs created a lot of uncertainty for many African nations. Lastly, the bank was able to further diversify its sources of funding at a time when dollar funding costs remain sticky. The portion of funding from the Middle East and Asia has increased from 28% in 2023 to 36% in September 2025. 

Valuation: Our valuation range for Afreximbank is between US$7.0 and US$9.5. It continues to trade at less than 0.4x P/B and offers a compelling dividend yield of 15% which we expect to increase over the coming years as the bank is on its lower end of its DPR (30%-35) so earnings growth will likely translate to DPS growth.

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