Strong Earnings Momentum and Deposit Growth Support Positive Outlook for Abbey Mortgage Bank Plc Q2/H1 Result

Abbey Mortgage Bank Plc delivered a solid H1 2025 performance, with double-digit growth in revenue and profitability metrics, driven largely by increased interest income and cost control. While rising deposits and expanding total assets signal growing investor and customer confidence, declining loan book size raises questions about asset deployment efficiency. Nonetheless, the bank appears to be on a solid growth trajectory, supported by positive interest rate dynamics and rising financial inclusion in Nigeria.

Catalysts

• Growing Deposit Base: Customer deposits surged 45.4% YoY to ₦78.36 billion, indicating increasing customer trust and providing a strong base for future loan growth.
• Interest Rate Environment: The current high interest rate environment in Nigeria is favoring net interest margins for lenders like Abbey Mortgage Bank.
• Digitalization and Mortgage Market Expansion: Rising urbanization and mortgage awareness could support long-term growth in home financing and structured lending.

Assumptions

• Revenue Growth: Gross earnings could reach ₦20–25 billion by 2030, assuming sustained deposit growth and moderate loan book recovery, with a 10–12% CAGR.
• Earnings Outlook: Net profit could exceed ₦2 billion within five years, as interest income grows, costs are streamlined, and technology enhances scale.
• Asset Base Expansion: With asset growth at 31% YoY (to ₦110.2 billion), the bank could reach ₦200 billion in assets in 5–6 years, depending on capital adequacy and regulatory support.

Risks

• Loan Book Contraction: Loans and advances dropped 20% YoY to ₦9.6 billion, suggesting lower credit disbursement or aggressive repayments. If sustained, this may hinder interest income growth.
• Asset Utilization Risk: Despite rising deposits, weak loan growth may reduce interest yield and risk lower net interest margins in the long term.
• Regulatory Risks: Mortgage-focused banks are sensitive to CBN policy shifts, particularly regarding loan-to-deposit ratio targets and liquidity requirements.
• Competition: Fintechs and other digital lenders may erode market share if Abbey fails to digitize aggressively or innovate in mortgage products.

Valuation Outlook

• 3-Year Outlook: If the loan book stabilizes and NIMs remain healthy, earnings may grow at 15–18% CAGR, with P/E potentially expanding from ~6x to ~8x.
• 5-Year Outlook: ROE and profit margins could improve if deposit utilization increases, pushing valuation multiples toward 1.0x book value (currently ~₦9.43 billion equity base).
• 10-Year Outlook: If Abbey executes a digital lending scale-up, it could emerge as a leading retail mortgage bank in Nigeria, with assets >₦300 billion and sustained profitability.