Abbey Mortgage Bank Plc has announced a substantial increase in pre-tax profits for Q3 2025, reporting N670 million, a 63.24% year-on-year growth. While these figures appear robust on the surface, a closer examination reveals concerning trends that could undermine investor confidence.
Surging Expenses a Worrying Sign
The bank’s Q3 report highlights a significant surge in interest expenses, which climbed by 74.72% to N4.13 billion. This sharp increase far outpaces the 27.55% growth in net interest income, signaling a worrying rise in funding costs. This surge indicates the bank is paying more to attract deposits, squeezing its profit margins . In a competitive environment, Abbey Mortgage’s reliance on increasingly expensive deposits may not be sustainable.
Investor Confidence vs. Underlying Weaknesses
Despite the bank’s claims of “improving and strong operations” and a 127% year-to-date share price gain investors should be wary of these underlying weaknesses. While the share price suggests growing confidence, the reality is more complex. The bank’s aggressive pursuit of growth, reflected in a 47.99% increase in customer deposits, comes at a steep price. This rapid deposit growth is fueling the surge in interest expenses, raising questions about the long-term viability of this strategy.
Diversification or Distraction?
Abbey Mortgage is keen to highlight the 187.5% increase in fee and commission income, suggesting a diversification beyond core lending. However, this may be a distraction from the core issue: the bank’s struggle to manage its interest expenses effectively. Investors should question whether this diversification is a genuine strategic shift or a reactive measure to compensate for weaknesses in its primary business.
Asset Growth Masking Deeper Problems?
The bank’s total assets expanded by 32.16% to N111.35 billion, which might seem positive at first glance. However, this growth is heavily reliant on the surge in customer deposits, creating a potential vulnerability. If deposit growth slows or reverses, the bank could face significant challenges in maintaining its asset base and profitability.
Rising Inflation and Interest Rate Pressures
The broader economic context adds further cause for concern. With inflation remaining stubbornly high , and the potential for further interest rate hikes, Abbey Mortgage’s funding costs are likely to continue rising. This could further erode its profit margins and undermine its ability to deliver sustainable returns to investors.
While Abbey Mortgage Bank’s Q3 2025 results show impressive headline growth, a deeper analysis reveals worrying trends. The surge in interest expenses, the reliance on expensive deposits, and the broader economic pressures all point to potential challenges ahead. Investors should approach Abbey Mortgage with caution, carefully considering the risks before buying into the hype.
