GTB released Q3 results grew by 11% to N46.64bn

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The bank’s gross earnings for the quarter stood at NGN110.59 billion — 16% above similar period last year, but 6% lower compared to the previous quarter. Interest income declined in the quarter by 7% q/q, as against the marginal growth recorded in Q2. The uptick in fixed income yields (Q2-18: 12.97% vs. Q3-18: 13.25%) is yet to impact, as interest earned on investment securities was down 6% during the quarter. While interest on customer loans in the Q3 declined by 4% q/q, amidst the continued decline in the bank’s loan book. Coupled with an increased interest expense (+3% y/y, flat q/q) in the quarter, net interest income was lower by 9% q/q and 12% y/y, while NIM printed at 9.03% — 147 bps lower than 10.5% recorded in FY-17.

Meanwhile, growth in non-interest income for the quarter turned negative, as NIR dropped 6% q/q (Q2-18: +31%q/q), while it surged 169% on a y/y basis. The q/q decline was largely on the back of 14% decline in other income. Meanwhile net fees & commission income rose 4% q/q, but the disappointing performance in Q2 muted the growth, leading to a flat y/y performance in the 9M-2018 result.

On the positive, loan recoveries in the quarter led to a net gain in loan impairment charges, even as the bank’s loan book (-2% q/q) continued to contract. Cost of risk in the 9M-18 accounts stood at 0.12%, compared to the 0.76% recorded in FY-17. Also, NPL ratio decreased to 5.57% vs. 7.66%. It is also worth stating that the continued decline in loans (-12% YtD), coupled with sustained increase in deposits (+9%), has contributed to the decline in loan-to-deposit ratio to 48.21% vs. 58.91% in FY-17.

Total operating expenses was lower by 12% q/q, amidst absence of AMCON charges in the quarter which had been deducted in H1. However, in the 9-months accounts, total opex is up 13% y/y, while cost-to-income ratio stands at stands at 38% (vs. 9M-2017: 36% and FY-17: 37%).

Overall, the bank’s performance in the Q3-18 period was impressive, with top and bottom lines posting 16% and 11% y/y growth, respectively. The NGN142.2bn net profit reported as at 9M-18, on an annualized basis, is above consensus’ estimate for the full year by 7%. The bank’s stock closed positive in today’s trading session, but has lost 10% YtD. We do not expect negative reaction to the bank’s result in tomorrow’s session.

GTB remains among our top picks, with a TP of NGN52.45 – 42% above today’s closing price of NGN37.

Income Statement (N’bn) 9M’18 9M’17 y/y Q3’18 Q2’18 Q3’17 Q3’18 q/q Q3’18 y/y
Gross earnings     337.22     309.16 9%         110.59   117.66     95.70 -6% 16%
Interest income     237.55     248.27 -4%           75.66     81.11     82.39 -7% -8%
Interest expense     (66.90)     (58.70) 14%         (22.95)   (22.87)   (22.36) 0% 3%
Net interest income     170.64     189.57 -10%           52.71     58.24     60.03 -9% -12%
Fee and commision income       40.35       39.68 2%           12.99     12.13     15.96 7% -19%
fee and commision expense       (2.51)       (1.70) 48%           (1.06)     (0.71)     (0.73) 50% 45%
Net fee and commision income       37.84       37.98 0%           11.93     11.42     15.23 4% -22%
Non-interest income       97.17       59.19 64%           33.86     35.84     12.58 -6% 169%
Total Operating Income     267.81     248.75 8%           86.57     94.08     72.61 -8% 19%
Loan impairment charges       (1.74)       (8.36) -79%             0.30     (0.39)     (1.14) -175% -126%
Total Operating Expenses   (101.83)     (90.36) 13%         (32.26)   (36.68)   (22.54) -12% 43%
Profit before Income tax     164.25     150.03 9%           54.61     57.01     48.93 -4% 12%
Income tax expense     (22.02)     (24.45) -10%           (7.97)     (6.10)     (7.03) 31% 13%
 Profit after Tax     142.22     125.58 13%           46.64     50.91     41.90 -8% 11%

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