
CEO of GTBank, Segun Agbaje
The released Q2 2018 result of Guarantee Trust Bank Plc at the floor of the Nigerian Stock Exchange (NSE) has further shown growth in EPS by 20.63% y/y and 13.97% q/q, to NGN1.73. Annualized, the H1-2018 EPS beats Bloomberg’s polled estimate of NGN5.91 for FY-2018 by 10%. Impressive growth in the NIR (+31.95% y/y, +30.53% q/q) salvaged the top line performance, as it outweighed the continued decline in the interest income. At the bottom line, reduction in the provision for impairment (-89.67% y/y, -76.06% q/q), as well as a close to flattish opex (+1.72% y/y, +11.55% q/q) growth, gave a boost to the bank’s earnings.
Compressed asset yield, and increased CoF, translate to poor performing NIM: Interest income in Q2 (-0.82% q/q, +0.41%) remained suppressed by the lower interest rate environment in the quarter, as well as the continued contraction in the loan book ( -13.25% y/y, -10.77% ytd), while interest expense (+24.50% y/y, +8.46% q/q) was higher, following increased interest on customer deposits (+38.43% y/y, +3.13% q/q), amidst growth in total deposits (+2.48% q/q, +10.02% y/y) during the period.
As a result, NII (-8.15% y/y, -2.43% q/q) was lower. On our estimates, the annualized asset yield in H1 was lower by 100 bps at 12.5% (vs. FY 2017’s 13.50%), while annualized CoF was flat YtD, at 3.3%, resulting in NIM compression (YtD: -107 bps) to 9.09%.
Impressive NIR in Q2: NIR sustained its growth sustained during the quarter, driven by improved performance on the net trading income (+499.31% y/y, +45.68% q/q), other income (+0.12% y/y, +116.44%), as well as fees and commission income (+20.90% y/y, -20.31% q/q) lines. A surge in foreign exchange gain to NGN6.0 billion, from a loss of NGN21.18 million in Q2 last year, led to the growth in net trading income, while the upturn in other income was attributable to a jump in dividend income from NGN107 million in Q2-2017, to NGN2.68 billion in the current quarter.
While fees & commission income impressed on a year-on year basis (+20.90%), it dropped by 20.31% q/q. The y/y growth was as a result of the increases in E-business income (+21%) and Commission on foreign exchange deals (+397.97%).
Improvement in asset quality: GUARANTY’s annualized CoR in H1 improved by 65 bps YtD to 0.11%, amidst decline in impairment provision (-71.83% y/y) in the half year, as well as the continued contraction in the loan book (-13.25% y/y, -10.77% YtD).
Further decline CAR: GUARANTY’s CAR dropped to 21.89% in H1-18, from 24.57% in Q1-18 and 25.50% in FY-17, following increased deduction for IFRS 9 initial adjustment (unlike in ZENITH’s case, which was a reduction) to NGN148.63 billion, as against NGN134.88 billion reported in Q1-18.
Industry analysts who reviewed the result averred a positive view of GUARANTY’s Q2-18 performance. Together with the higher declared dividend of 30 kobo (2016: 25 kobo) – yielding 0.77% on yesterday’s closing price – experts expect the bank’s stock will attract investor interest in today’s trading session.