Guaranty Trust Bank Holding Company’s (GTCO) 9M 2021 unaudited numbers showed a 14.5% y/y decline in Interest Income mainly on the back of a fall in yields on investment securities. Q/q, however, Interest Income grew marginally, up 4.8% in Q3 compared to Q2. Net Loans and advances to Customers grew marginally, up 4.5% in 9M (with most of the growth in Q3) compared with December 2020. Similarly, Interest Expense declined 16.6% y/y but increased 17.0% in Q3 compared with Q2. Customer Deposits were up 6.7% in September relative to December 2020. Overall, Net Interest Income was down 14.1% y/y but was up 2.3% in Q3 compared to Q2.
Net Fee and Commission Income grew significantly, up 58.4% y/y. Q/q, however, Net Fee and Commission declined, down 32.7% in Q3 compared with Q2. We note Q2 saw significant growth in Net Fees and Commission. While all the Fee lines grew y/y, the major drivers were a 36.5% y/y increase in Account Maintenance Charges, 34.3% increase in credit related fees, 91.0% y/y rise in E-business Income, 140.6% y/y increase in account services, maintenance and anciliary banking charges. We note the strong growth in E-banking Income, which implies increasing transaction volumes to make up for the regulatory induced decline in E-banking fees.
regulatory induced decline in E-banking fees.
| 9M 2021 (Nm) |
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Source: Company’s Financials, CSL Research.
Other Income (Net gains on financial instruments held at FVTPL, Other Income and Net Impairment on other financial assets) declined 0.8% y/y but grew significantly within the quarter, up 58.7% in Q3 compared with Q2 mainly on the back of an 84.8% rise in foreign exchange trading gains in Q3.
OPEX grew 10.1% y/y but declined 30.6% in Q3 compared with Q2. We attribute the q/q decline to the fact that AMCON charge was not taken in Q3. The y/y growth in Opex, coupled with a 2.8% y/y decline in Total Operating Income led to a deterioration in the bank’s cost to income ratio ex-provisions to 43.9% in 9M 2021 compared with 38.8% in 9M 2020.
Impairment Charge of N5.99bn was down 40.9% y/y, bringing 9M 2021 annualised cost of risk (COR) to 0.4% compared with 1.2% reported for FY 2020. With NPL ratio of 5.9% and coverage ratio of 146.7% (H1 2021), the bank’s asset quality remains sturdy in our view.
Overall, PBT was down 9.2% y/y but grew 49.5% q/q, while Net Profit declined 9.1% y/y to N129.4bn in 9M 2021 amid a flat tax rate, bringing 9M 2021 annualised ROAE to 20.8% compared with 26.8% for FY 2020.
We have a Buy recommendation on the stock with a target price target of N47.74/s. Current Price N28.5/s. Our estimates are being reviewed.
Source: CSL Research
