Abbey Mortgage Bank Plc has announced a 23% increase in profit after tax (PAT) to N1.07 billion for the year ended December 31, 2024.
Key Highlights:
- Interest Income: 66% surge to N11.95 billion, driven by increased lending activities.
- Interest Expenses: 85% increase to N8.56 billion, reflecting higher funding costs.
- Net Interest Income: N3.4 billion, up from N2.57 billion in the prior year.
- Operating Income: N3.88 billion, an improvement from N3.19 billion in 2023.
- Operating Expenses: N2.56 billion, driven by higher personnel costs and depreciation charges.
Financial Performance:
- Earnings Per Share (EPS): 11 kobo, up from 9 kobo in the previous year.
- Total Assets: 46% expansion to N84.25 billion, driven by increased customer deposits.
- Customer Deposits: N53.9 billion, up from N40.05 billion in the prior year.
- Loans and Advances: N12.07 billion, down from N14.14 billion, reflecting a cautious lending approach.
Equity and Retained Earnings:
- Equity Base: N9.23 billion, up from N8.57 billion, supported by retained earnings and statutory reserves.
Abbey Mortgage Bank Plc: A Shift in Strategy Raises Questions About Its Future Direction
Abbey Mortgage Bank Plc has emerged as the best-performing mortgage stock on the Nigerian Exchange (NGX), with a 20% year-to-date (YTD) gain as of March 20, 2025, building on a 35% return in 2024. This impressive performance has led to a 291% rally in five years, from N0.92 in 2019 to N3.60. However, a closer examination of the bank's financials reveals a significant shift in its income composition, raising questions about its strategic direction.
Key Highlights:
- Impressive Financial Performance: Abbey Mortgage Bank's gross earnings surged by 58% to N12.4 billion in 2024, driven by a 65% increase in interest income.
- Shift in Income Composition: Only 22% of interest income came from loans and advances, while 78% originated from short-term funds and investment securities.
- Decline in Mortgage Lending: Loans and advances declined by 15% year-on-year to N12.046 billion, with mortgage lending shrinking significantly from N12.59 billion in 2023 to N8.53 billion in 2024.
- Increased Focus on Financial Investments: Financial assets ballooned, with due from banks and financial institutions nearly doubling to N24.92 billion, and investments in securities at amortized cost surging to N41.75 billion.
Questions About Strategic Direction:
The bank's growing focus on short-term investments raises questions about its strategic direction and capital base. With shareholders' funds at just N9 billion and total assets of N83 billion, Abbey's financial position appears relatively modest for a mortgage bank. This shift may indicate a strategic response to high default rates among developers and mortgage customers, but it also raises concerns about the bank's identity as a mortgage lender.
Investor Takeaways:
- Valuation: The stock looks expensive with a P/E of 30x and a P/B of 3.89, but strong EPS growth and a reasonable PEG ratio suggest it's not entirely overvalued.
- Stability: Abbey's low beta of 0.66 makes it a relatively stable investment.
- Sustainability: Investors should scrutinize whether Abbey's growth is sustainable or merely a strategic shift.
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