GTBank Q4 2018 Results Highlight: Uninspiring Quarter-on-Quarter Performance although Positive Year-on-Year

March 7, 2019/InvestmentOne Report 

  • Net interest income of N51.8billion, down 170bps q/q; down 9.3% y/y

·         Non-interest income of N28.6billion, down 15.6% q/q, down 3.8% y/y

  • Profit before tax of N51.9billion, down 4.8% q/q; up 7.5% y/y
  • Profit after tax of N43.1billion, down 7.7% q/q; up 10bps y/y 

GT Bank published its Q4 2018 results late yesterday, revealing a 170bps q/q moderation in net interest income and a 15.6% q/q decline in non-interest income. These, combined with some impairment charges of c.N3.1billion in Q4 2018 from a write back of c.N245million recorded in Q3 2018 led to a 4.8% and 7.7% q/q decline in PBT and PAT to c.N52.0billion and N43.1billion respectively.

Topline Performance 

Unlike Zenith Bank, GT Bank posted a 9.8% y/y decrease in net interest income on the back of a 4.8% y/y increase in interest expense and a decline in interest income. This was largely expected due to the lower interest rate environment witnessed in 2018 and the general lack of credit growth due to the weak economic condition of the country. Thus, as net loans declined 13% y/y and Cost of Funds (CoF) remained relatively flat at 3.1%, the bank’s Net Interest Margin declined 120bps to 9.2%.

However, Non-interest income came in strong at N125.8billion, increasing 40.3% y/y. This was attributable to the 23.9% y/y boost in net fee and commission income, as well as the 168.9% and 116.8% y/y increases in FX trading gains and net gains on assets held for trading to N19.3billion and 24.6billion respectively. Also reflective of the bank’s commitment to improving and diversifying revenue was the increase in customer deposits by 10.3% y/y to N2.3trillion.  

Lower Impairments and Effective Cost Control Lift Bottom line 

Reflective of improvements in asset quality was the 59.7% y/y weakening in impairment charges to N4.9billion. This is also supported by the moderation in Cost of Risk (CoR) to 0.3% in FY 18 from 0.9% in FY 17.

Similarly, Non-Performing Loans ratio (NPL) moderated 40bps y/y to 7.3% despite the decline in net loan book.

Furthermore, management was able to curtail operating expenses, as opex remained relatively flat y/y but down 21.6% q/q. However, cost-to-income was down 10bps y/y to 36.6%, largely due to the higher growth in revenue in FY 2018 relative to opex.

The aforesaid were responsible for the 9.1% and 10.0% y/y increases in PBT and PAT to N215.6 billion (beating management’s HY 2018 PBT Guidance of N205billion by 5%) and N184.6billion respectively, compared to Zenith Bank’s PBT and PAT of N231.7billion and N193.4billion respectively.

Overall, GT’s results were fairly decent. The bank continues to show dominance in terms of operational efficiency, with Return on Average Equity (ROAE) and Return on Average Assets (ROAA) printing at 30.9% and 5.6% respectively. Capital Adequacy ratio (CAR) came in at 23.4% despite the 7.0% decline in equity due to the implementation of IFRS 9 during the period under review.

Finally, the bank declared a final dividend of N2.45k (Closure date: 8th April 2019), indicating a total FY18 dividend of NGN2.75 (interim: N0.30k). This implies a final dividend yield of 6.5% (versus 11% for Zenith Bank) based on yesterday’s closing price of N37.95.

Going forward, we recap our views on banks’ earnings coming under pressure in 2019 as a result of their inability to grow their loan books aggressively as the economy continues to underperform, and trading income might be lower albeit subject to an upside risk of currency devaluation.

However, we believe that the bank, would look to more private sector lending in 2019 with the outlook for interest rates in 2019 looking glummer with the recent surge in FX inflows. The bank also remains attractive valuation wise, with an upside potential of 28.9% according to the Bloomberg consensus, with a TP of N49.0 and 1-yr forward P/B ratio of 2.4x.

GUARANTY TRUST BANK PLC Q4 2018/FY 2018 (YE: DEC) (N millions)



Q4 2018



FY 2018


Interest Income






Interest Expense






Net Interest Income






Non-interest income






Profit before provisions






Loan Impairment charges






Operating Expenses


















Tax rate












Source: Company financials, Investment One Financial Services Research


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