Culled–Proshare

April 26, 2017/FBNQuest Research

Event: GT Bank reports Q1 2017 results
Implications: Positive reaction from the market expected; results running ahead of full year PBT guidance of N168bn
Positives: Net interest income (and PBT) growth of over 60% y/y; results were ahead of our forecasts
Negatives: No major negatives

GT Bank’s Q1 2017 results which have just been published show that the bank’s full year PBT target of N168bn can be achieved. Q1 2017 PBT of N50bn grew by 64% y/y while PAT more than doubled to N41bn, thanks to a positive result on the other comprehensive income line of N568m (compared with a sizeable loss of –N5.3bn a year earlier).

The main driver behind the strong y/y growth in earnings was a solid performance in net interest income: it grew by 62% y/y to N66bn. In contrast, non-interest income (which had boosted the bank’s results through most of 2016 on the back of fx-related gains) was up only 5% y/y. Although loan loss provisions of N3.8bn and opex of N32bn both grew y/y, by 13% and 24% respectively, these increases were not sufficient to make any material impact on the results.

Sequentially, the non-interest income result stood out because the Q4 result had been negatively impacted by reversals of fx gains and one-offs. As such, PBT grew by more than 100% q/q while the PAT grew by over 220% q/q.

The results came in well ahead of our expectations: both PBT and PAT were 17-18% ahead of our forecasts because of the strong net interest income result which surprised positively by 15%.

The only other notable positive surprise was loan loss provisions. GT booked 16% less in provisions than we had forecast. Having said that, given the volatility that is inherent on this line, and that this is only the first quarter of the year, we would not make too much of this variance. Non-interest income and opex were close to our forecasts.

Management had surprised the market after the Q4 2016 results with a guidance of N168bn in PBT for 2017. To put this into context, GT had just delivered N165bn for full year 2016 at the time, thanks largely to one-off fx-related gains. As such, the guidance seemed a stretch.

Management stressed that its large exposure to fixed income instruments gave it confidence and that the guidance was not aggressive. The results today vindicate management. As such, we would expect to see upgrades to earnings for consensus such that full year PBT forecasts move to at least N168bn. We suspect that the average will settle above N170bn.

We would expect a positive reaction from the market to these results. Year-to-date, GT shares have gained 5.5%, outperforming the ASI by 10.1%.

Our estimates are under review. We rate GT Bank shares Outperform.

GT Bank Q1 2017 results: actual vs. FBNQuest Research estimates (N millions)